Overhead describes things that are above your head or the ongoing costs of running something.

When you look up at birds flying overhead, you're watching them pass above you through the sky. An overhead storage bin on an airplane sits above the passengers' seats. Overhead lights hang from the ceiling and shine down on a room.

In business, overhead means the regular expenses that keep an operation running, separate from making or selling specific products. A bakery's overhead includes rent for the shop, electricity to keep the lights on, and insurance, whether they sell ten cupcakes or a thousand. These costs stay relatively steady month after month. A lemonade stand's overhead might just be the cost of the table and pitcher, while a restaurant's overhead includes rent, utilities, staff salaries, and equipment maintenance.

Understanding overhead matters because it shows why businesses need to make enough money to cover these constant expenses before they can earn a profit. When someone says a business has “high overhead,” they mean it costs a lot just to keep the doors open each day, even before selling anything.