Most agencies track revenue but ignore utilization. Here's the formula, benchmarks by role and agency type, and how to use it without burning out your team.
Most agency owners can tell you their revenue. Very few can tell you their utilization rate. That's like driving a car and only watching the speedometer - ignoring the fuel gauge.
You might be profitable this month. But are you leaving money on the table? Are you overstaffed? About to burn out your team? Without tracking utilization, you're flying blind.
I see this all the time. An agency hits $200K/month in revenue and the owner thinks everything's great. Then I ask: "What's your team's utilization rate?" Blank stare.
Here's why that matters: Your utilization rate tells you if you're making money efficiently or just making money accidentally.
What Utilization Rate Actually Is (And Why Most Agencies Calculate It Wrong)
Billable utilization rate is the percentage of available working hours that your team actually bills to clients.
Simple, right?
Here's where most agencies screw it up: they calculate it based on a 40-hour week.
That's wrong.
Your team doesn't have 40 billable hours per week. They have meetings. They answer emails. They take lunch. They do internal projects. They attend training.
A realistic baseline is 32-35 billable hours available per week for individual contributors. Not 40.
If you calculate utilization assuming 40 hours available, you'll think you're at 70% when you're really at 85%. That's dangerous because it makes you think you have capacity when you don't.
The Formula (Explained Simply)
Billable Utilization Rate = (Billable Hours / Available Hours) × 100
Billable Hours = Time logged to client work that you can invoice
Available Hours = Total working hours minus known non-billable time (meetings, admin, PTO, holidays)
Example 1: Individual Contributor
Sarah is a mid-level designer. Let's calculate her utilization for January:
- Working days in January: 22 days
- Hours per day: 8 hours
- Total hours: 176 hours
- Company all-hands meeting: 2 hours/week × 4 weeks = 8 hours
- Team meetings: 3 hours/week × 4 weeks = 12 hours
- Internal projects: 1 hour/week × 4 weeks = 4 hours
- PTO: 1 day = 8 hours
Available hours: 176 - 8 - 12 - 4 - 8 = 144 hours
Sarah logged 122 billable hours in January.
Utilization: (122 / 144) × 100 = 84.7%
That's healthy.
Example 2: The Wrong Way
If you calculated Sarah's utilization against the full 176 hours (the wrong way), you'd get:
(122 / 176) × 100 = 69.3%
You'd think she has tons of capacity. You'd pile on more work. She'd burn out. Don't do this.
Example 3: Leadership
Tom is a Creative Director. He has:
- Weekly 1-on-1s with 4 direct reports: 4 hours/week
- Strategy meetings with founders: 3 hours/week
- Client calls (billable): varies
- Team leadership and mentoring: 8 hours/week
- Actual design work (billable): varies
In January, Tom logged 48 billable hours out of 144 available hours.
Utilization: (48 / 144) × 100 = 33.3%
Is that bad? No. That's exactly right for a Creative Director. More on this below.
Benchmarks by Role
Here's what healthy utilization looks like across different roles. These are based on hundreds of agencies I've seen and industry standards.
| Role Level |
Target Utilization |
Notes |
| Junior Staff |
85-90% |
Should be heads-down on client work most of the time |
| Mid-Level Staff |
80-85% |
Some mentoring, still primarily billable |
| Senior Staff |
75-85% |
Mix of deep work and guiding others |
| Team Leads |
65-75% |
Split between doing and managing |
| Managers |
50-60% |
More time in meetings, strategic work |
| Directors |
30-40% |
Primarily leadership, strategy, client relationships |
| Partners/Owners |
10-20% |
Business development, vision, some client work |
Critical point: If your Creative Director is at 80% utilization, they're not directing anything. They're just an expensive designer.
If your junior developers are at 50% utilization, you're hemorrhaging money.
Benchmarks by Agency Type
Different types of agencies have different utilization profiles:
Marketing Agencies (70-80% average)
- Account managers: 60-70% (lots of client communication)
- Strategists: 65-75% (research time isn't always billable)
- Designers: 80-85%
- Copywriters: 80-85%
- Paid media specialists: 75-80% (platform management time)
Development Shops (75-85% average)
- Junior devs: 85-90%
- Mid-level devs: 80-85%
- Senior devs: 75-80%
- Tech leads: 60-70%
- DevOps: 70-75%
Why higher? Code is more easily billable. Less subjective. Fewer revision cycles.
Creative Agencies (65-75% average)
- Designers: 80-85%
- Art directors: 70-75%
- Creative directors: 30-40%
- Motion designers: 80-85%
- Copywriters: 75-80%
Why lower overall? More iteration. More collaborative time. More pitching and spec work.
Management Consulting (60-70% average)
- Analysts: 80-85%
- Consultants: 70-75%
- Senior consultants: 60-70%
- Partners: 15-25%
Why lower? Significant BD time. Travel time often non-billable. Research and prep time.
What Happens at Different Utilization Levels
Let me walk you through what each range actually looks like in practice.
Below 60%: Bleeding Money
What it looks like:
- People are "busy" but not billing
- Lots of internal projects that never ship
- Long meetings about meetings
- Team complains they're overwhelmed (but hours tell a different story)
What it means: You're either overstaffed, underpriced, or have a sales problem. Maybe all three.
Real example: I worked with a 12-person creative agency at 52% utilization. They felt busy. But 6 of those people could be cut without affecting client delivery. The owner was horrified. But the math was clear.
60-70%: Breaking Even (Maybe)
What it looks like:
- Profitable some months, not others
- Can't figure out why finances are inconsistent
- Team has capacity but you're not sure how much
- New projects feel chaotic
What it means: You're in the danger zone. Not efficient enough to build a cushion, but busy enough to think you're doing okay.
Fix: Audit non-billable time. Cut internal projects. Get stricter about scope creep. Raise prices.
70-80%: Healthy
What it looks like:
- Consistent profitability
- Team has breathing room
- Can handle unexpected work or team member out sick
- Time for training and development
- Can actually work ON the business
What it means: This is the sweet spot for most agencies. Efficient but sustainable.
Pro tip: Don't try to optimize beyond this unless you're sure you want to sacrifice resilience for efficiency.
80-90%: Efficient But Fragile
What it looks like:
- Great margins
- Very little slack in the system
- One person out sick = scramble mode
- Team working hard
- No time for innovation or improvement
What it means: You're running hot. This works short-term. It's not sustainable long-term.
Risk: When you lose someone or win a big project, you have no capacity buffer. You'll miss deadlines or burn people out.
90%+: Burnout Incoming
What it looks like:
- Everyone's maxed out
- Quality starts slipping
- Team turnover increases
- "We're so busy" becomes the culture
- Firefighting is the norm
What it means: You're making money today and destroying the business tomorrow.
Fix immediately: Hire, raise prices, or turn away work. Pick one. Don't wait.
How to Improve Utilization WITHOUT Burning Out Your Team
Most agencies hear "improve utilization" and think it means "make people work more hours."
Wrong.
Here's how to improve utilization the right way:
1. Reduce Non-Billable Meetings
Audit your meeting schedule. I guarantee you have meetings that could be emails or async updates.
Example: One agency I worked with had a 90-minute weekly "all-hands" where they read project updates. I made them cancel it and do async updates in Slack instead. That freed up 6 hours per week × 15 people = 90 hours/week of available time.
2. Bill for Work You're Currently Not Billing For
You're probably doing work you should be billing for but aren't.
Common examples:
- Client communication and email time
- Revisions beyond scope
- "Quick calls" that aren't tracked
- Project management time
- Strategic advice
Fix: Start tracking ALL time. Then review what should be billable. Adjust your contracts and pricing.
3. Reduce Context Switching
Every time someone switches between projects, they lose time. Studies show it takes 23 minutes to fully refocus after an interruption.
Better: Block time. "Client A" days. "Client B" days. Not "Client A morning, Client B afternoon, Client C for an hour."
One agency example: Went from averaging 4 projects per person per day to 2 projects per day. Utilization went from 68% to 79% without anyone working more hours. They were just focused.
4. Improve Your Scoping
Bad scopes kill utilization. You spend time doing work you can't bill for because it's "out of scope" but the client expects it.
Fix: Get better at scoping. Use historical data. Add buffers. Charge for scope creep.
5. Fire Bad Clients
You know the ones. They never approve work the first time. They want 47 revisions. They have unclear decision-making.
These clients destroy utilization. You do work. It doesn't get approved. You can't bill for it. You redo it.
Be ruthless: Calculate the true cost of your difficult clients. Then decide if the revenue is worth it. (Hint: it usually isn't.)
6. Automate and Systematize
Every repeated task should have a system or template.
Examples:
- Client onboarding checklist
- Project kickoff templates
- Standard design systems
- Code boilerplates
- Reporting templates
Why it matters: If you waste 2 hours per project on setup that could be templated, that's 2 hours × 50 projects/year = 100 hours of billable time lost.
Capacity Planning: Using Utilization to Know When to Hire
This is where utilization becomes truly powerful.
Let's say your team's target utilization is 75%. Right now you're at 82% and you've got 3 new client proposals out.
Should you hire?
Here's the math:
Current state:
- 8 people
- 32 available hours/week each
- 256 total available hours/week
- At 82% utilization: 210 billable hours/week
New clients would add:
- Client A: 20 hours/week
- Client B: 15 hours/week
- Client C: 25 hours/week
- Total: 60 hours/week
New utilization if you win all three:
(210 + 60) / 256 = 105%
That's impossible. You'd need to hire.
How many people?
60 hours needed ÷ 32 hours available per person ÷ 0.75 target utilization = 2.5 people
Round up. Hire 3 people.
But wait - you might not win all three deals. Let's say you historically close 50% of proposals.
Expected new hours: 60 × 0.5 = 30 hours/week
(210 + 30) / 256 = 93.75%
Still too high for sustained health. Hire 1 person now. If you win more than expected, hire the second person.
This is how you use utilization for workforce planning. Not guessing. Math.
Real Scenario: An Agency With 8 People at $2M Revenue
Let me walk you through a real example (numbers changed slightly, but this is based on an actual agency).
The agency:
- 8 team members
- $2M annual revenue
- Blended rate: $150/hour
- Current average utilization: 64%
The math:
Total billable hours per year:
$2M ÷ $150/hour = 13,333 hours
Available hours per year:
- 8 people × 32 hours/week × 48 weeks (accounting for holidays/PTO) = 12,288 hours
Wait. That doesn't work. They billed 13,333 hours but only had 12,288 available?
Here's what was really happening:
- The owner and Creative Director were billing 60-70 hours/week
- They weren't tracking their time as "over capacity"
- They were burning out
- Junior staff were at 55% utilization
The fix:
- Reallocate work: Move tasks from owner/director to junior staff
- Raise prices: Blended rate from $150 to $175/hour
- Hire one mid-level person: Add 1,536 available hours/year
- Target 75% utilization
New math:
Available hours: (8 + 1) × 32 hours/week × 48 weeks = 13,824 hours
At 75% utilization: 10,368 billable hours
At $175/hour: 10,368 × $175 = $1,814,400
"Wait, that's less revenue than before!"
But:
- Owner and director aren't working 60-70 hour weeks anymore
- Team is healthier
- Quality is better
- Client retention will improve
- Owner can actually do business development
Year 2 projection with proper capacity:
- Win 2 more clients because owner has time for sales
- Revenue: $2.2M
- Sustainable: Yes
- Owner's sanity: Intact
That's the power of tracking utilization.
Common Mistakes to Avoid
Mistake 1: Comparing Yourself to the Wrong Benchmark
A junior designer at 85% utilization is healthy. A Creative Director at 85% utilization is a problem.
Don't compare across roles. Compare roles to their appropriate benchmarks.
Mistake 2: Optimizing for 100%
You don't want 100% utilization. You want sustainable utilization.
100% means:
- No time for training
- No time for improvement
- No buffer for emergencies
- No time to work ON the business
- Burnout
Mistake 3: Only Looking at Company-Wide Averages
Your company average might be 75% (healthy!) while:
- Junior staff are at 55% (bad)
- Senior staff are at 95% (also bad)
Drill down by role and individual. The average can hide critical problems.
Mistake 4: Not Tracking Utilization Weekly
Monthly utilization reports are too slow. By the time you see a problem, it's been happening for 4 weeks.
Track weekly. Spot trends early. Adjust quickly.
Mistake 5: Treating All Hours Equally
120 hours of focused, high-value work is worth more than 120 hours of scattered, low-value tasks.
Utilization is a quantity metric. Track quality separately through client feedback, revision rates, and margin per project.
Setting Up Your Utilization Tracking System
Here's exactly how to implement this:
Week 1: Set Up Time Tracking
Tool options:
- Harvest (easiest)
- Toggl Track (good for smaller teams)
- Clockify (free option)
- Forecast (best for capacity planning)
Requirements:
- Easy to use (or people won't do it)
- Integrates with your project management tool
- Can separate billable vs. non-billable time
- Can report by person, role, and project
Make it a non-negotiable: Everyone tracks time. Every day. No exceptions.
Week 2: Establish Baselines
Calculate available hours for each role:
- Total working hours
- Minus recurring meetings
- Minus average admin time
- Minus average internal project time
Set target utilization by role (use the benchmarks above as a starting point).
Week 3: Start Measuring
Create a weekly dashboard:
- Current utilization by person
- Target utilization by person
- Variance (current - target)
- Trend (up or down from last week)
Share it with the team. Transparency matters.
Week 4: Identify and Fix Problems
Look for:
- People consistently below target (why?)
- People consistently above target (burnout risk)
- Projects with unusually low utilization (scope problems?)
- Time logged as "general admin" or "miscellaneous" (what is this really?)
Take action immediately. Don't wait.
FAQ
What's a good target utilization for my agency overall?
70-75% is the sweet spot for most agencies. It balances profitability with sustainability.
If you're below 70%, you likely have a staffing, pricing, or sales problem. If you're above 80%, you're running too hot for long-term health.
Should I include business development time in utilization calculations?
No. BD time should be tracked separately. It's important, but it's not billable utilization.
That said, track it. If your owner is spending 40 hours/week on BD and closing nothing, that's a problem. But it's a different problem than utilization.
How do I handle utilization for retainer clients?
Track it the same way. You have X hours included in the retainer. Track actual hours used against it.
If you're consistently delivering more hours than the retainer covers, you're underpriced. If you're consistently delivering fewer hours, the client might churn (they're not getting value).
What if my team resists time tracking?
Make it easy and explain why.
Easy = one-click timers, mobile apps, Slack integrations.
Why = "This helps us make sure you're not overworked and helps us price projects correctly so we can pay you more."
Don't make it punitive. Time tracking is a business tool, not a performance review weapon.
If someone still resists after you've made it easy and explained it? That's a culture problem, not a tracking problem.
Should I track utilization for contractors and freelancers?
Yes, but separately from full-time staff.
Contractors often have higher target utilization (80-85%) because you're typically using them for specific, focused work - not ongoing capacity.
How do I handle utilization during slow periods?
Don't panic immediately. Seasonal fluctuations are normal.
But: If utilization is low for more than 4-6 weeks, you have a pipeline problem. Fix it by:
- Ramping up BD
- Doing internal projects that add value (new service offerings, marketing, systems)
- Training and upskilling
Don't just sit around hoping clients appear.
What's the relationship between utilization and profitability?
Direct but not linear.
Generally: higher utilization = higher profitability, up to a point.
But a 90% utilized team at $100/hour is less profitable than a 75% utilized team at $150/hour.
Focus on both: efficient utilization at strong rates.
Stop Guessing. Start Measuring.
Here's what you should do this week:
Monday: Set up time tracking if you don't have it already.
Tuesday: Calculate available hours for each team member.
Wednesday: Calculate current utilization by person and role.
Thursday: Compare to benchmarks. Identify who's too high, who's too low.
Friday: Make one change to improve utilization (better scoping, fewer meetings, reallocate work, etc.).
Next Monday: Do it again.
Most agencies operate on gut feel. "We're busy." "We're slow." "We need to hire."
The agencies that win track the numbers. They know their utilization. They plan capacity mathematically. They make decisions based on data.
You can't improve what you don't measure.
Start measuring utilization this week. In 90 days, you'll have better margins, a healthier team, and actual data to make hiring and pricing decisions.
Need Help Fixing Your Agency Operations?
If you're looking at your utilization numbers and realizing you need to rebuild your operations from scratch, I can help.
I work with agency owners to build systems for capacity planning, financial operations, and scaling without chaos.
Book a free 30-minute call and we'll figure out if your utilization problem is a symptom of deeper operational issues - and how to fix them.
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