Upholstery Shop Overhead: What It Costs to Run Your Shop Per Hour

Shops that don't include overhead in their labor rate lose $8 to $15 on every production hour. That loss is invisible. The job looks profitable because the labor rate covers the work and the fabric markup covers materials. But the rent, insurance, utilities, and equipment payments are coming out of the same revenue that was supposed to generate profit. Overhead isn't a business expense separate from your pricing. It's a cost that every paying job has to recover. If it's not in your rate, you're paying it out of margin you didn't plan to spend.

Calculating overhead per production hour takes about thirty minutes to do once. The number it produces belongs in every job price you ever quote. Without it, your pricing is guesswork. With it, you know exactly what each hour of production costs you before a single dollar of profit.

TL;DR

This guide covers the specific techniques, measurements, and decisions that determine quality outcomes in upholstery work.
Planning and preparation before cutting begins is the most reliable way to avoid costly errors on any upholstery job.
Fabric selection, yardage calculation, and structural assessment are the three decisions that most affect the final result.
Experienced upholsterers develop consistent workflows that ensure quality and efficiency across every job type they handle.
Documenting job details, material specifications, and client approvals protects both the shop and the client.
The right tools, materials, and techniques for each job type make a measurable difference in quality and profitability.

What Counts as Overhead

Overhead is every fixed cost that runs whether you're producing jobs or not. It's not variable costs (fabric, thread, trim) and it's not your labor cost. It's the cost of the business existing.

Rent or mortgage payment on your shop space. If you work from home, allocate the portion of home space dedicated to the business (square footage percentage of rent or mortgage).

Utilities: Electric, gas, water. Average your last 12 months. Upholstery shops with compressors and lighting have real utility costs.

Insurance: General liability, business property, vehicle if used for business. Monthly premium amounts.

Equipment payments: Any financed equipment (staple guns, compressors, cutting tables, sewing machines). Monthly payment amounts.

Software and subscriptions: Shop management software, accounting software, any recurring business subscriptions.

Vehicle costs: If you use a vehicle for client pickups and deliveries, a portion of vehicle costs (mileage or actual cost allocation) belongs here.

Phone and internet: Business line or business portion of personal phone, internet for the shop.

Marketing: Any consistent monthly marketing spend (Google Ads, website hosting, etc.).

Other fixed monthly costs: Professional fees, equipment maintenance on a monthly basis, any other consistent expenses.

The Overhead Per Hour Calculation

Once you've totaled your monthly fixed costs:

Step 1: Total all monthly fixed costs. Example: $3,800/month.

Step 2: Calculate your monthly production hours. Hours actually spent on billable work, not total time in the shop. A solo operator working 40 hours per week typically spends 28 to 32 hours on billable production (the rest is admin, client communication, supply runs, cleaning). Monthly production hours: approximately 120 to 130.

Step 3: Divide: $3,800 / 125 production hours = $30.40/hour overhead rate.

That $30.40 is the minimum that every production hour must recover in revenue before you've paid yourself anything or generated any profit. It has to be in your labor rate.

Typical Overhead Ranges

Monthly overhead by shop type:

Home-based solo operator: $800 to $1,800/month (minimal lease, shared utilities, basic insurance)

Solo operator, leased shop space (500 to 1,000 sq ft): $2,000 to $3,500/month

Two-person shop, leased space (1,000 to 2,000 sq ft): $3,500 to $6,000/month

Established shop with employees, commercial lease (2,000+ sq ft): $6,000 to $12,000+/month

At 120 production hours per month, the overhead rate per hour ranges from roughly $7 (home-based) to $100+ (large commercial lease with employees). The difference in required labor rate to hit the same profit margin at each overhead level is substantial. This is why copying a competitor's labor rate (without knowing their overhead structure) is unreliable.

Building Overhead Into Your Labor Rate

Your labor rate covers three things: overhead, your labor cost, and profit. The formula:

Overhead per hour + cost of your hour + profit per hour = correct labor rate

Example for a mid-size solo shop:

Overhead: $28/hour
Your labor cost (what you'd pay an employee to do this, as a cost baseline): $25/hour
Target profit: $20/hour
Labor rate: $73/hour

That $73 is what each production hour needs to generate to cover overhead, pay you, and produce the margin that funds business growth and sustainability. Use the upholstery labor rate calculator to work through this with your numbers.

For the relationship between overhead, labor rate, and job pricing, the upholstery shop bookkeeping guide covers how to track these numbers month-to-month.

Frequently Asked Questions

How do I calculate overhead for my upholstery shop?

Add up all fixed monthly costs: rent, utilities, insurance, equipment payments, software, vehicle allocation, phone, and any other consistent expenses. Divide the total by your monthly production hours (billable work hours, not total shop hours). The result is your overhead per production hour. That number goes into your labor rate as a floor that every hour must cover. Recalculate when your fixed costs change. A new lease, new equipment, or additional insurance changes the number and therefore changes what you need to charge.

What costs count as overhead in upholstery?

Overhead is every fixed cost that runs regardless of whether you're producing jobs. Rent or shop mortgage, utilities, insurance, equipment financing payments, software subscriptions, vehicle costs for business use, and consistent marketing spend all count. Variable costs (fabric, thread, batting, foam) are not overhead; they're materials recovered through markup. Your labor cost is not overhead in the traditional sense; it's added separately to get to your total labor rate. The distinction matters because overhead is the cost that's invisible in job pricing unless you explicitly calculate it.

Why does overhead affect my upholstery pricing?

Every hour you spend on production has to recover the cost of the business running during that hour, not just your labor. If your shop costs $3,500/month to operate and you produce 120 hours of billable work monthly, each hour of production needs to generate $29 just to keep the lights on. If your labor rate doesn't include that $29, every job runs at a loss on overhead even if the labor and materials are correctly priced. This is the single most common cause of shops that feel busy but aren't making money. The work covers materials and labor but nothing is left for the fixed costs.

What are the most common mistakes to avoid in this type of work?

The most common mistakes are underestimating material requirements, starting work before the frame is fully assessed and repaired, and skipping the centering and alignment checks before cutting. Each of these is far more expensive to correct after cutting has begun than to prevent at the planning stage. Taking an extra 15-30 minutes at the assessment and planning stage pays dividends throughout the job.

How do I get the best results from a professional upholsterer?

Come to the consultation with clear measurements, photos of the piece, and an idea of the room's color scheme and intended use. Be specific about how the piece will be used: high traffic, pets, children, or outdoor exposure all affect fabric recommendations. Provide fabric samples or accept guidance on appropriate options for your use case. Approve the proof carefully and ask to see the fabric on the piece before final installation if you are uncertain about a pattern or color choice.

When should I consult a professional rather than doing the work myself?

Consult a professional when the piece has structural issues beyond simple fabric replacement, when the piece has significant financial or sentimental value, or when the fabric or technique (tufting, pattern matching, hand-tacking) requires skills you have not developed. A professional assessment before you begin is free at most shops and can prevent costly mistakes on a piece worth preserving.

Sources

National Upholstery Association
Association of Master Upholsterers and Soft Furnishers (AMUSF)
Upholstered Furniture Action Council (UFAC)
Furniture Today (trade publication)

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