Billing Rates While there are (valid) arguments around the concepts of billable hours, billing rates, and “selling time” – the multiple of a person’s cost that a firm is able to record as revenue remains a fundamental concept to the design firm and its profit-producing machine. An individual’s billing rate is typically determined by applying a multiple to their hourly cost. That multiple comes from the expense profile of the firm and its profit ambitions, tempered by the fact that firms operate inside of a competitive ecosystem. Billing Rate = [ Direct labor cost + (direct labor cost x OH rate) ] / (1 – Profit %)
Hourly Rate or Billing Rate
Profit
Direct Labor
Overhead (Indirect Labor and Other Expenses)
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