Utilization rates show how much of your team’s time is being spent on billable tasks, as well as how productive each team member is. Ultimately, these figures enable team leaders to measure billing efficiency and determine if you are pricing your projects correctly to cover your costs and make a profit.
That sweet spot, according to Gartner analyst Robert Handler, is between 70-80% utilization of a team member’s scheduled time. If team members are spending more than 80% of their time on billable tasks, they are less productive than they need be, and ultimately costing your agency time and money.
Formula
Total billable hours ÷ Total available working hours x 100
For Example
If a designer on your team works 8 hours a day, 5 days a week, then their availability is set to 40 hours per week. If 34 of those hours are considered billable, while 6 are left for other tasks (like administrative work), the calculation you make is 34 / 40 x 100 = 85. The designer’s utilization rate is 85%.
It’s important to note that utilization rates should be used as a baseline that can be tweaked according to your agency’s unique needs