why decrease principle billable rate will increase firm profit?

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    Haytham Abdelrahman Abdelall

    From table 7.13, the principal billing rate is adjusted by rounding it down (reduce its billing rate) and round up the other technical stuff. Usually principal will spent less direct hours in the project comparing w technical stuff and we only charge for direct hours through direct hours multiplier (DSE).

    Is this make sense ?

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    David Dante

    Sort of.

    your playing a numbers game.

    it really doesn’t matter how much you raise the billing rate. Profit depends on time vs. money. If you don’t complete the work before you run out money then no profit.

    so padding a balance sheet doesn’t help.

    decrease billable rate to be competitive 

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    Gang Chen

    Agreed with David, the bottom line is you need to know how to manage the project. If you charged the client 1 million dollars for a project, but spent 1.2 million dollars finishing it, you have lost 200k.

    Another issue is supply and demand, the lower the price, the stronger the demand. Like Haytham mentioned, lowering the principal’s billing rate will make the price seems lower and more competitive, but the principal’s billing hours are far fewer than project managers, etc. You will probably end up making more money by lowering the principal’s billing rate.

    Gang Chen, Author, Architect, LEED AP BD+C (GreenExamEducation.com)

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