Hey Team,
We had a question come up about ‘Net Service Revenue’ vs. ‘Net Operating Revenue’
It’s confusing, because those terms are so similar! I did a deep dive into it and ‘Net Service Revenue’ is the ‘net fee’ determined by subtracting the consultant fees from the gross fee of the project. It is the amount of money your firm is making on a project. You might use this value when looking at and evaluating the project budget. If you subtract the direct expenses and any contingencies from the ‘Net Service Revenue’ the resulting value is the project labor budget, or the amount of the fee which you can spend on direct project labor.
‘Net Operating Revenue’ sounds very similar at first. It is the net dollars the firm retains after deducting all consultant fees and expenses and all reimbursable project related expenses. So while
The main difference here is that ‘Net Service Revenue’ is the project fee less consultant fee and expenses per a single project.
The ‘Net Operating Revenue’ is all projects’ fees less all consultant fees and expenses across the entire firm.
You will want to look at the ‘Net Service Revenue’ if you are evaluating the financial success of a project.
You will want to look at the ‘Net Operating Revenue’ if you are evaluating the financial success of a firm.
*Fun fact: while the reimbursable are not included in the Net Operating Revenue, any markups on the reimbursable are included as these dollars are revenue for the firm.
Hope this helps!
-Darion