Direct salaries ($335 000 « 0.65) $218,000 Indirect expenses. Indirect salanes (6395000 « 0.35) $117,000 Payroll taxes and bonofts 101,000 Otfce expenses 123,000 Total indirect expenses $341,000 Total direct salaries + indirect expenses ‘$559,000 Proft goa! @ 25% of revenues 140,000 ‘Not revenue goal ‘$699,000 Step 3: Calculate Net Multipliers ‘The net stp is to caludatethe planed DSE mutors fer each major tem in theresa prof plan. Dude each major am by to det slay expense amount ay shown, Te reauts forte tuna Rm shown ju below Aw uticaln obo rcvenee he nececsuybeckeoren maior becauee {here are mee inet our and fewer ret hore, wnch resus a ower pot arg Topayfordrectsatry expenses $218,000. $216 000 100 Topayforindect expenses 241,000 $218,000 1.56, quai tof’ breakeven muir 256 To acd proft 140,000 $218,000 064 quate planed nt mute 320 Step 4: Use the Net Multiplier to Set Minimum Hourly Billing Rates Using the sample fms 3.20 net multiplier yields the houty bing rates shown (at 2.080 hours in 2 year, rounded to the nearest dolar). These are the minimum rates needed to meet the proft pan, ‘Actual rates charged may als retlect the value of the services and market considerations. Principal (@ $110,000) $5288 «32 = $t69mour Rogistorad architect (@ $75,000) $36.06 « 32 = $116mhour Technical stat (@ $55,000) $26.44 «3.2 $85inour Cercaladministative staff (@ $40,000) $1923 « 32 Se2mour Step 5: Set Project Profit Goals “To mot ts prof plan, tis fm needs to st asi 20 porcnt of ts net revues. When a project ‘comes in, 20 percent off the top ofthe netfee must be set aside as untouchable, The project must be ‘done for ne money left ithe prof plan is to be met. Step 6: Use Actual Net Multiplier Earned to Monitor Financial Performance “This can be done quickly, easiy, with reasonable accuracy, and without accountants. The only information needed i + Net revenue earned (derived trom fees invoiced) + Diroct salary expense (project hours at hourly salary rate as recorded on te sheets) Following is @ sample current project analysis using the break-even multiple established as this firm's ‘al in Slop 3. Al fgures except multiples are rounded tothe nearest $100. ‘The break-even multiplier is the only variable factor in this analysis. it should be recalculated periodically using accrua-based nancial informaton (you wil probably need your accountant fr this). Inthe meantime, check your utilization rao. itis holding about as planned, your break-even probably hasn't changed much—unless, of course, some lage indirect expense has come up unexpectedly.