Cost and Revenue – How WFM affects it. Part – 2

This article is must read for any Outsource Vendor management team and outsourced WFM team. 
Client side WFM team may also find it useful to see the things that have to be concidered in an outsource WFM team as well but this is more FYI for them.
In the last blog I had mentioned, that in the business world, Revenue is the most important thing and a sole reason why businesses exists.
Two important parts of Profit is the cost and the revenue.
The previous blog spoke about how WFM is involved in cost parameters of a contact centre.
For those who missed the previous blog, please click on the link below.
In this blog, let’s see how Revenue is calculated along with different billing/pricing models.
Note: Revenue Models, Pricing Models, Billing Models and Commercials means the same with just different names.

Just to quickly recap, below are the different parts of cost structure.
  • Agent Salary
  • Support Staff Salary
  • IT Costs
  • Miscellaneous Costs
Once we have all the details about cost, we can calculate expected Gross Margin/Profit.

Each company has its own agenda for the Profit expectations. It depends upon Geography, Current Market Status, Competition etc.
I’ve attached the file at the end which shows simple calculations of cost and different billing models.

Be sure to check that file out.
I’ve taken an example of 20% as Profit.
Considering that, let’s look at each billing model along with revenue.
  • Per FTE per Month
This is the most simplest calculation and a very famous billing model.
Below is the calculation
Cost – $194887.34
Expected Profit – 20%
Required Revenue – $233864.81
No. of FTE – 150
Per FTE Rate = Required Revenue/No. of FTE
i.e. Per FTE Rate = $233864.81/150
Per FTE Rate = $1559.10

Here, there could be two options considered where one is considering shrinkage and the other excluding shrinkage.

  • Per Seat Per Month
After Per FTE model, this is the next most easiest model.
Below is the calculation
Cost – $194887.34
Expected Profit – 20%
Required Revenue – $233864.81
No. of FTE – 150
No. of seats Required – 125
Per Seat Rate = Required Revenue/No. of Seat
i.e. Per Seat Rate = $233864.81/125
Per Seat Rate = $1870.92

In this method, the seat utilisation plays a very major role and the way we schedule agents is the deciding factor.
  • Per Hour
This is yet another simple calculation as shown below.
No. of FTE – 150
Hours per Month – 176
Cost – $194887.34
Expected Profit – 20%
Required Revenue – $233864.81
Per Hour = Revenue/(FTExHours)
i.e. Per Hour = Revenue/(150×176)
Per Hour = $8.86

Even in this method, there could be two options of with and without shrinkage.
Apart from the above mentioned billing models, there are other models too which will be explained in the next blog.
Thanks for reading☺
Stay Tuned!!
Disclaimer: The attached sheet and the explanation is only for illustration purpose and doesn’t represent any client or company.

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