- Design and Engineering consulting firms create project and business budgets based upon a Labor Multiplier Factor. Taking into account that information:
What would expect your annual salary to be upon graduation? Convert that salary into an hourly rate (base on 2080 work hours annually)
Now, what do you believe is a reasonable hourly rate at which your company will charge for your services, i.e. what rate (dollars) will the company bill out your services at?
What factors did you consider/take into account when you determined your billing rate?
What is a reasonable utilization rate for a staff engineer after graduating from college? Does it change one month, to 6 months, to 1 year after graduation?
2/ If your business is expected to have annual revenue of $9,385,000, Direct Labor Costs of $2,950,000, and achieve a Profit of 16%, answering the following:
What would your total costs (i.e., total expenses) be?
What would your Breakeven Multipler be?
What would your Target Multiplier be?
What is the difference between the Breakeven Multiplier and Labor Multiplier Factor (also known as the Target Multiplier)?
3/ Download the Sample P&L spreadsheet for the next tasks.
Click on the ‘Exercise ‘ tab and complete exercises 1A, and 1B. Record your answers below and provide a explanation on your method (Hint: this is based on calculating the Breakeven Multiplier and using that multiplier to calculate the billing rate).
Gross Revenue and Breakeven Labor Multiplier for Exercise 1A:
Gross Revenue and Breakeven Labor Multiplier for Exercise 1B:
4/ Complete the tasks outlined on the Exercise 2 tab. Record your answers below and provide a explanation on your method and what your outcome tells you.
Utilization Rate for Staff Engineers and CAD Operator, Earnings before taxes, Gross Profit, and Average Labor Multiplier for Exercise 2
Click on the Exercise 3 tab and complete. Record your answers below and provide a explanation on your method and what your outcome tells you.
5/ Show Utilization Rate for all positions. Write down Gross Profit, and Average Labor Multiplier for Exercise 3.