Thursday’s 6pm ET Zoom Session is titled, “Profitability”

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    Sarah Al-Tekreeti

    Hi Michael,

    I’m a bit confused, does the billing amount of each member to the client here represents the billing rate after multiplying it by the net multiplier or before? I’m assuming after multiplying by the net multiplier.

    Thanks

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    Michael Ermann

    After multiplying

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    Yonatan Nigen

    Answer:

    Profit per typical 3-person team:

    Licensed architect team lead: $115/hr

    Not-yet-licensed “architectural designer”: $85/hr

    Support staff: $65/hr

    Total; $265/hr

    (the net multiplier is already incorporated- It's the billable rate, not the hourly salary)

    265 X 0.68 = $180.20

    (the utilization rate)

    $180.20 billed per team per hour

    52 weeks X 40 Hours/Week = 2,080 Hours

    (very typical equation for questions; know that 2080 is the amount of hours worked in a year unless otherwise notified in the question's information. For example, there was a question that stated an employee worked 2,000 hours a year, it was not a typo; they actually only worked 2000 hours/year. Every employee is different, but it's typically 2,080 hours)

    180.20 X 2,080= 

    $374,816 Anualy

    6 New teams so:

    6 X 374,816=

    $2,248,896

    To calculate 20% profit:

    0.2 X 2,248,896=

    449,779.20

    Final Answer: $449,779.20

     

    Did I get it Right?

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