Project Management · Module 1 · Week 1 Reference
Module 1 · Week 1 · Interactive Reference Guide
How Weston & Sampson makes money — the machine every project runs inside, and the reason the firm runs on forecasts.
The one idea
A consulting firm runs on forecasts. Before you can pursue work well, you have to understand the machine your projects run inside — how the firm turns its people's time into revenue, and revenue into profit.
We have almost nothing to sell but our people's time. Everything else is how well we plan it, price it, and protect it.
Part 1 · Where the dollar goes
Before any number means anything, know what becomes of a dollar from the moment a client pays it.
Picture the firm's economics as a waterfall. The shape is the same for every consulting firm — learn it first. At the top is gross revenue: the total a client pays. But not all of it is ours to keep, or even to measure ourselves against. Two kinds of dollars pass straight through.
Direct (subconsultant) expenses are fees we pay to other firms who perform part of the work. Reimbursable expenses — travel, printing, permits — are repaid by the client at cost. Strip both out; we never really earned them, we only handled them.
What remains is net service revenue: the money the firm makes with its own labor. That is the number that matters.
Profit is not a number we add on top. It is what is left after the waterfall runs its course.
Take an illustrative $100M of net service revenue. Here is how Stage 2 consumes it. Hover or tap a band.
Part 2 · What an hour costs
A billing rate is not a measure of what someone is worth. It is the firm's whole economic model, divided down to a single hour.
Start with the person's wage. Load it with the firm's overhead. Then add the profit the firm exists to earn. Move the sliders and watch the rate build, one layer at a time.
Illustrative defaults: a $90,000 direct-labor cost, O = 1.60, 14% target.
At these defaults, a wage of about $43/hr becomes roughly $112 at break-even — where the hour pays for itself and earns nothing — and about $131 at target, where it finally carries profit. The multiplier the firm measures across all its work now sits inside a single rate.
Part 3 · The metrics
The waterfall gives us four numbers. Combine them in pairs and they reveal how well the firm is actually run.
Learn each definition. The illustrative value is shown in green.
How effectively the firm turns production labor into revenue — how many revenue dollars each billable wage dollar generates. Illustrative: $100M ÷ $33M = 3.03. Break-even ≈ 2.60; target ≈ 2.95.
The share of labor dollars that are billable rather than spent on meetings, proposals, and admin. Illustrative: $33M ÷ $53M = 62%. No firm reaches 100% — the question is how close.
Dollars of non-revenue cost carried for every dollar of billable wage — the weight each productive hour lifts. Illustrative: $53M ÷ $33M = 1.60.
Combine how well we convert production labor into revenue (the multiplier) with how much of our labor is production labor (utilization), and you get the single measure of how well the whole firm turns labor into revenue. Move the two levers:
Part 4 · Why we forecast
Now connect the model to your job. The firm makes its biggest decisions — which projects to chase, how to staff them, when to hire — before the work exists. It decides on a forecast.
That forecast has a name: weighted revenue. Each opportunity's expected revenue is multiplied by its probability of winning; summed across every pursuit, it becomes the firm's backlog — its read on the future, and the basis for how many people it needs and when. Move the sliders and watch the weighted backlog form.
We make today's decisions on tomorrow's forecast. Pursuit is where we build that forecast — or quietly break it.
Part 5 · Quick check
Three short questions. Answer, then reveal.
Answered 0 of 3.
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