Alvarez & Marsal When A&M says you can collect estimated 40 to 50% of revenue generated from billable hours based on your performance rating, what does that mean? How much is the avg. billable hourly rate for a Manager that the 40-50% is based off of? Or is it 40-50% of base? Alvarez & Marsal
That just seems like the typical loaded cost of an employee with projects sold at 50% margin.
Chief
If you bill 1,600 hrs in a year at a bill rate of $400/ hr
1600*400*0.5 or 0.4
You can take home 256 K to 320 K in bonus on top of your base. The range depends on your performance rating. That’s the calculation based on your statement.
Your base is treated similar to a sales draw, so it needs to be backed out of the bonus amount per the comp formula. It’s not money on top of it.
This is probably only relevant for top performers. Using a bad example the idea is if your billable hours bring in $100k of revenue then you should be able to collect $40-50k in compensation.
On its face that makes sense but, especially for larger firms with huge infrastructure, the revenue has to cover the costs of non revenue generating headcount and other investments. So if you bring in $100k, that revenue has to cover your cost plus the cost of other resources that aren’t bringing in revenue (HR, IT, other non client facing or non revenue generating roles, etc.). If not, then the firm won’t be able to afford any non revenue generating services which could hamper innovation, investments into new products or services, etc.
Rule of thumb that I always heard is that you should be bringing in revenue that amounts to 3-4x your salary in order for your role to cover all internal costs. If you’re a rainmaker that’s bringing in like 20x your cost or something then you are probably in a position to negotiate a significant comp raise
Which group is this? 40-50% is senior director level in my group. Manager is 27-33%