DEFINITION

Net revenue after deducting consultant fees and expenses, all reimbursable and non-reimbursable project expenses.

FORMULA

NOR = Gross Revenue - Consultant Fees - Project Related expenses

RELATED TERMS

Net Service Revenue
This is your operating revenue for one specific project.

Gross
An amount with no deductions. Similar concept to Gross Floor Area. It’s the largest value, usually the starting point before you start subtracting fees, taxes, project costs, non-usable floor area, etc.

Net
The usable amount. Similar in concept to Net Floor Area. It’s what you are left with after substracting required costs from the Gross.

INSIGHT

This is the dollar amount you have to actually operate your business. Start with Gross Revenue, the total sum of money you are receiving. Subtract what you owe to your consultants and subtract all the expenses related to your projects, i.e. printing, travel, fees, etc. The amount left over is your Net Operating Revenue.

PROBLEM

Your firm has just signed contracts for three projects for the upcoming quarter. A school in a nearby state in your region with a cost of construction of $25,000,000, a recreation center with a cost of construction of $3,750,000 and a restaurant with a cost of construction of $1,500,000.

Your fee for the school is 5%, for the rec center 6% and for the restaurant 7%. Your contract with your consultants stipulates they receive 30% of the design fee.

Project costs for the school are expected to be $175,000 with an additional $50,000 of reimbursable expenses. Project costs for the rec center will be $50,000 with an additional $15,000 of reimbursable expenses and project costs for the restaurant will be $75,000 plus $25,000 in reimbursable expenses. Your firm will spend $50,000 in marketing to publicize your involvement with the school project. Your contract for design allows you to add a 10% markup to all reimbursable expenses.

1. What is your Gross Revenue?
2. What is your Net Operating Revenue?

SOLUTION

Marketing costs come out of your Net Operating Revenue. You do not subtract this from your Gross. The other line items are all included. Make sure to keep your track of your units.