This is to ensure that we focus on quality, not quantity, and that we are able to take enough care to each client.
We've also worked out that this is really the minimum required to cover the overheads of actually even having a project on our books.
This is also based on our calculations in regards to pricing:
S*B*A = Final Price
S = Salary cost- Based on Estimated days required for the project
B = Business Overhead Cost as a multiplier of Salaries. This includes everything required to run Mäd, including office facilities, insurance, software, depreciation on assets, management and operations costs. This generally runs to an additional 70% of each team member’s salary.
A = Agency Markup on Total Cost. This is our profit that we use to reinvest and grow Mäd. We currently set this at 25% of revenue.
So as an example, if we pay a staff member $1,000/month, we have an additional $700 overhead cost to have them work at Mäd, and their project billing will be:
$1,000 * 1.7 * 1.25 = $2,125/month
This gives us an approximate 20-25% net margin at the end of year, which we believe is enough profit for a healthy long-term business, and also fair to our customers.