What is the industry standard for billable utilization?
That being said, a common benchmark for billable utilization is around 70-75%. This means that resources or employees are expected to spend about 70-75% of their working hours on billable client work. However, it is important to note that the ideal billable utilization rate can vary for different firms and industries.
Many organizations aim for utilization rates around 80% and will measure billable utilization against a 2,000 hour per year target when benchmarking themselves against the market.
The billable utilisation should be positioned between 70%-80%. Above 90 to 95% your company starts running human risks such as burn outs, employee turnover and quality deterioration.
While a good utilization rate is often considered to be above 65%, and the perfect one - above 75%, there is not a single number that would fit all the industries. The exact desired utilization rate depends on different factors - here are a few of them.
Between 75% and 90% is a reasonable benchmark utilization rate for people in production roles at many creative agencies. That said, the ideal utilization rate will be different for each business. A relatively high utilization rate signifies that a company is making money.
Using no more than 30% of your credit limits is a guideline — and using less is better for your score.
To state a billable hour example, suppose the contract of a ten-hour project states that 80% of the total working hours will be considered billable. In this case, the client will pay the consultant eight hours even if they have spent ten chargeable hours.
KPI #1 – UTILIZATION. Determining the utilization rate of employees in a firm is a fundamental measurement that has powerful effects on how a business is run. It is defined as the amount of an employee's available time that's used for productive, billable work, (i.e., direct project work).
By dividing the resource costs, overhead and profit margin by the total available hours and billable rate, you can calculate the ideal utilization rate – which is the optimal utilization rate for a company to reach the desired profit margin.
The utilization factor or use factor is the ratio of the time that a piece of equipment is in use to the total time that it could be in use. It is often averaged over time in the definition such that the ratio becomes the amount of energy used divided by the maximum possible to be used.
What is a good utilization rate for professional services?
However, a common industry benchmark for billable utilization rate in professional services firms is around 70-75%. It is important to note that a higher billable utilization rate generally indicates better resource management, improved profitability, and efficiency.
With this in mind, the optimal level of resource utilization for professional services firms is generally considered to be in the 70-80% range (i.e., 4 out of 5 days a week are spent on billable tasks).
Benchmarking is a vital process for businesses that want to stay competitive and maintain a strong market presence. By comparing your business's performance against industry standards, you can identify areas where improvement is needed, recognize best practices, and set realistic goals for growth.
It shows how much of the available capacity or resources of a service are being used by patients or clients. Calculating the utilization rate can help healthcare managers plan, budget, improve, and evaluate their services.
Your expected billing rate depends on the industry and your client's expectations. On average, that typically means billing around 30 hours out of 40 working hours a week. For some high-performing fields, that number may be even higher.
Here are the simple, traditional definitions: Billability is the % of hours billable to clients. Utilization is the % of hours doing productive work.
The Billable Ratio is the ratio of billable hours to non-billable hours. The Ratio is calculated for each staff member and for the overall organization.
How do you calculate capacity utilization? Capacity utilization is calculated using a formula: the rate of capacity utilization is equal to the ratio of the actual level of output over the maximum level of output multiplied by a hundred percent. That is, capacity utilization rate = actual output/optimal output.
This little gem of a metric helps to understand just how optimized your resources are. Essentially, it's a measure of how many resources are being used, compared to how much is available. And it tells if you're making the most of what you've got.
Burnout can negatively affect the customer experience as well as your company culture. In most cases, the higher your employee utilization rate is, the better. In professional services, 80% is considered the optimal employee utilization rate. For consulting firms, best-in-class employee utilization hovers around 75%.
What is the normal capacity utilization?
A rate of 85% is considered the optimal rate for most companies. The capacity utilization rate is used by companies that manufacture physical products and not services because it is easier to quantify goods than services.
You can calculate the utilization rate by dividing billable hours worked by the number of hours worked in a day.
This means you should take care not to spend more than 30% of your available credit at any given time. For instance, let's say you had a $5,000 monthly credit limit on your credit card. According to the 30% rule, you'd want to be sure you didn't spend more than $1,500 per month, or 30%.
Companies are not operating at their full potential if the capacity utilization rate is less than 100%. Operations are over capacity when rates are higher than 100%. For the majority of business and economic processes, a capacity utilization rate between 85% and 100% is considered appropriate.
The billable utilization formula explained
The basic formula is Total billable hours ÷ Total available working hours x 100. To unpack this, let's take an example of a developer who works eight hours a day, five days a week. Their availability is set to 40 hours per week.
