Net Revenue Per Employee

I’m going through the Lectures, Slide page 89 LV16: firm Financials: profit-Loss Statement.

The Formula for Net Revenue Per Employee is Net Operating Revenue / # of employees.

Thus far this makes rings true to my understanding. However in the example on the lecture it shows a NOR of $1,500,000 and 8 employees including:

  • Principal A, Architect A, Architect B, Designer A, Designer B Designer C, Office manager and Receptionist, for a total of 8 employees. However if you consider your office manager and receptionist and employee for this equation you would get an inaccurate figure. ie. if you take $1,500,000 / 8 = 187,500. If all employees that work on billiable projects ie those who generate revenue you would only have 6 employees * 187500 which would leave you short $375,000 revenue compared to your NOR because your Office Manager and Receptionist are typically never going to generate revenue) Thus these salaries or employee figures should only be included in overhead pools rather than calculations for employees in Net Revenue formulas.

Will the actual tests lead to this inaccurate account as well?

Reference 11:27 time in firm Financials: Profit-Loss Statement