What is Overhead?

Overhead refers to the ongoing business expenses that are not directly attributable to the creation of a product or service. These are the costs required to keep the business running, regardless of its production level. Overheads are a major component of a company's operating expenses.

For Startups: Managing overhead is key to controlling the burn rate. Common overheads for a startup include office rent, utilities, salaries of administrative staff (like HR and finance), software subscriptions, and legal fees. Keeping overheads low is a hallmark of a capital-efficient startup.

In Manufacturing: In a manufacturing context, factory overheads (like factory rent and machinery maintenance) are allocated to the cost of goods sold, while administrative overheads are treated as operating expenses.

Example: A startup's monthly office rent of ₹1 Lakh is a primary overhead cost.