Profit Goal
So I just finished watching Pluralsight's Financial Plan: Part 2 and the portion on achieving profit is contradictory to AHPP 15th Edition Chapter 7.2; page 415.
In AHPP, to achieve a profit at a targeted percentage, they divide the break even rate by its compliment percentage to establish an hourly billing rate with profit. Example: break even rate= $46.00/hr and the firm would like to include a profit at a targeted percentage of 20%. To achieve that, they divided 46/.8= $57.50. To check the math, $57.50x20%= $11.50+$46.00= $57.50.
Pluralsight takes the break even rate and multiplies by 15% and then adds that number onto the break even rate. $46.00x20%= $9.2+ $46.00= $55.20.
Am I missing something here? It seems like an easy concept but both approaches make sense mathematically, but give different results. I am taking PcM Monday morning, so I hope someone can chime in prior.
Thanks!

Hi Cullen,
This line seems to have a contradiction: "Pluralsight takes the break even rate and multiplies by 15% and then adds that number onto the break even rate. $46.00x20%= $9.2+ $46.00= $55.20."
You say my course has a 15% rate, but then you multiply it by a 20% rate. Your math isn't wrong after the error but the value seems to be disjointed. Likewise, I am trying to find that specific example in my course and I do not see it. There is no $46 anywhere in my course. Could you please screen capture where you found that so I can try to identify where your confusion is coming from?
Thanks Cullen. I hope I can clarify this for you.
Kevin Griendling, AIA

Cullen,
I am running some numbers on this one regardless the AHPP and I do indeed see the issue. I think the question is whether or not profit is defined by a percentage OVER the base charge, or a percentage OF the base charge. I have always considered profit to be a conservative estimate and therefore thought a percentage OF the base charge. That is why I consider (($46 x .2) + $46) to be a 20% profit. I think this is profoundly interesting as a mathematical exercise and I will find a result for you definitively in the future, but for your exam on Monday I suggest you go with AHPP calculation of using a divisor of $46/.8.
If there is a finding otherwise, I will revise my course ASAP. Thanks for alerting me to the conflict. I am fascinated! Cheers!
Kevin Griendling, AIA

Hi Kevin,
You are right, you're course uses different numbers but I was trying to relate the two. With that in mind, I used the AHPP numbers as a basis to show both approached to profit. Also, it was late last night and it looks like I typed the percent in incorrectly....
I too find this topic interesting. Prior to the AHPP I would use your method and it took me some hard thinking to understand the AHPP method. But after discussions with peers I understand why the AHPP approach makes sense. For the exam I will follow the AHPP.
Attached is a screenshot of your course I was referencing. I cant screen shot my AHPP cause its hard bound.

Thanks Cullen. I will hotfix this in my course as soon as I can.
Good luck tomorrow. It sounds like you are very well prepared!
Kevin Griendling, AIA

Hi Prajakta,
The course can be found here: https://www.pluralsight.com/courses/arevol1practicemgmt
It is a subscription service similar to other online resources, but you should be able to preview the course trailer there.
They don't allow "promotion" on the boards, but since you asked...
Enjoy! I hope you find it as helpful as others have.
Kevin Griendling, AIA
(edited to remove subcomment to NCARB)

Hello again all!
I want to revisit this thread real fast to make sure others who stumble upon it have it correct on test day. I've updated my course to show it in the following way:
Profit percentage should be of the final percentage of the billable amount. A 25% profit means the staffing rate (rate + indirect expense) equates to 75% of the billing rate.
Hopefully this updated diagram helps you and all of the others remember!
Thank you Cullen for calling that one to my attention.
Good luck,
Kevin Griendling, AIA

Hi Kathryn,
We are crossing boundaries here into what should be posted on other boards, but I'll give you the general answer. Then we can maybe strike up a conversation over there. My PA course should publish any day now, as it has been in the publication queue for quite some time. I have not done the other courses yet, but I just received everything I need to begin preparing my PPD course so that is going to come up in a few months. Check back in with me then, depending on your testing schedule.
On the subject of outlines, unfortunately PcM and PjM may be the only ones that fit neatly into one couple page document, unless I was to make a matrix of all of the book indexes similar to those you see flying around for MEEB (PPD reference). Maybe I will eventually.
In the interim, I suggest you get cozy at home for an evening of perusing the indexes first, then the chapter intros, and then the headlines (of whatever exam you have scheduled next). Continually cross reference the subject matter with the NCARB ARE 5.0 Handbook and you'll have a great idea of what areas you need to study.
Here is an image of what a couple of my PA books looked like at the end of the day during my planning stages:
The glass of wine is my benchmark reward for getting through them all. I do advise having some fun as well. This is a very long process.
Cheers!
Kevin Griendling, AIA
p.s. You'll notice space planning basics is rather sparse. I find PUDS and SPDH to be the most valuable resources on that exam. If you start a thread on that board, I will replicate the response.

Kevin ,
Thank you for the response. You're kind of a hero to all of us. It's definitely been a struggle with the lack of study info that is out for 5.0.
I will have to search around for the MEEB index that you mentioned. The handbook barley touches on the depth of the questions that they ask you on the exams.
I get that they must keep the exams very hard to keep credibility, but some of the specific questions, you can't really ever study for. I focused on studying the concepts for these exams + equations and still failed.
Anyways, I'll try to keep an eye out for when your study guides come out.
Thanks,
Katthryn
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