Utilization Rate 101: The Agency Metric That Predicts Profit
If you cannot measure it, you cannot improve it
Peter Drucker once wrote
Every agency leader knows time is money, yet the average digital agency bills only 60 percent of employee hours (Hubspot The Agency Pricing & Financials Reports). Those missing hours silently drain profit and blur capacity planning.
A five‑point lift in utilization often pushes operating margin into double digits (Parakeeto Benchmarks 2024). In this long‑form guide you will learn:
- Plain‑language definitions and formulas
- Real‑world benchmarks for different roles
- A step‑by‑step method to track utilization weekly
- Five levers that improve utilization without burning out your team
- A free template you can copy to your Google Sheets
- Ways Remotinio automates the process while preserving team trust
Throughout, you will find links to related resources, both Remotinio’s existing articles and outside studies, so you can dive deeper.
What Is Utilization Rate?
Utilization rate is the percentage of an employee’s available hours that are spent on billable, revenue‑generating client work.
Formula
Utilization Rate (%) = (Billable Hours ÷ Total Available Hours) × 100
Example
A designer logs 32 billable hours out of a 40‑hour week
→ 32 ÷ 40 = 0.80 → 80 percent utilization
Billable versus overall utilization
- Billable utilization counts only client‑facing hours.
- Overall (productive) utilization also includes important non‑billable work like internal marketing, training, or new‑business planning.
Pick one method, stay consistent, and label non‑billable tasks clearly. If you need a refresher on task‑level time tracking, read How to Track Time in our Help Center.
Why Utilization Predicts Profit Better Than Any Other Metric
Direct impact on margin
A 40‑person agency averaging 60 percent utilization leaves the equivalent of eight salaries unbilled each week. Moving that to 70 percent can add hundreds of thousands of dollars in annual profit.Early warning on capacity problems
When utilization dips for one discipline (for example DevOps) it often signals scope creep or idle time. Managers can re‑scope or reassign before invoices and deadlines slip.Sharper pricing
Historical utilization shows the actual cost of delivering every service line. That insight eliminates guesswork when quoting retainers or flat‑fee projects.Healthier teams
Sustained over‑utilization (above 90 percent) drives burnout; under‑utilization bores high performers. Finding the sweet spot improves retention, a pattern also highlighted in the Asana Anatomy of Work 2023 report.
For a deeper cultural take on trust and output over “butts in seats,” see our piece The Remote Work Identity Crisis.
Industry Benchmarks and Targets
| Role type | Healthy weekly billable utilization | Typical variance |
|---|---|---|
| Designers & developers | 75 – 85 percent | Higher during crunch weeks |
| Project managers | 60 – 70 percent | Balance admin & client time |
| Leadership & strategy | 30 – 50 percent | Preserve space for biz‑dev |
Sources: Parakeeto Benchmarks 2024, Hubspot The Agency Pricing & Financials Reports, independent US survey panels (500+ agencies).
Top‑quartile agencies average 78 percent billable utilization across producers while holding weekly overtime below five hours.
Quick sanity check
Are you under 60 percent? Something is leaking, usually over‑servicing or internal busy‑work.
Over 90 percent for weeks on end? Expect burnout, turnover, or quality drops.
How to Calculate Utilization Step by Step
- Define available hours
Most teams start with 40 hours weekly, subtract planned PTO and company holidays. - Log billable hours in real time
Waiting until Friday evening to reconstruct the week always introduces gaps. With Remotinio you simply choose the project or granular sub‑project (down to a single task) and daily add the time entry in seconds, keeping logs accurate without breaking your flow. - Separate non‑billable but valuable work
Use clear tags such as Internal Marketing, Training, or R&D. This transparency helps defend non‑billable initiatives while keeping client work visible. - Run the formula every Friday
Short cycles spotlight red flags early. You can re‑balance workloads on Monday instead of scrambling at month‑end. - Track trends monthly and quarterly
One bad week happens, sustained dips signal systemic issues like scope creep or process bottlenecks. Our Help article on Generate Insights explains reporting to help avoid that.
Root Causes of Low Utilization (and Fixes)
| Symptom | Likely cause | Fast fix |
|---|---|---|
| Designers >10 h of untracked time | Time entry friction | Use a lightweight timer, remind daily |
| PMs <50 % billable | Scope creep or excess meetings | Tighten meeting policy, push back on client extras |
| Leadership 0 % billable | Sales bottleneck or role confusion | Assign small advisory blocks to stay close to delivery |
| Whole team dips after new hire | Onboarding soak time | Budget training hours, set expectation runway |
Download Your Utilization‑Calculator Template
Prefer to start in a spreadsheet? Make a copy of our Google Sheets.
Get the Utilization Calculator
Columns included
| Column | Purpose |
|---|---|
| Employee | Name or initials |
| Week Beginning | ISO date (Monday) |
| Billable Hours | Client project time |
| Non‑billable Hours | Internal tasks |
| Total Available Hours | Usually 40 minus PTO |
| Utilization % | Auto‑calculated |
Once you are comfortable, graduate to a live dashboard, with many more reporting options.
Five Proven Ways to Improve Utilization Without Burning Out Your Team
- Track time by granular task, not project lump‑sum
Granularity highlights underestimated phases, allowing PMs to re‑scope. - Hold a 10‑minute Friday utilization review
Ops leads scan the dashboard, flag roles under 55 percent or above 90 percent, then re‑allocate work for Monday. - Cap internal work
Give internal initiatives, for example agency marketing, a fixed budget such as 15 percent of total hours, protecting but containing it. - Forecast two weeks ahead
Use forward‑booked billable hours to see gaps early, fill them with quick‑win tasks or proactive outreach. - Leverage historical data
Compare estimate versus actual hours for similar past jobs; adjust future quotes upward where hidden effort appears. Our Ultimate Guide to Time Tracking for Freelancers has a template that adapts nicely.
Common Pitfalls and Myths
| Myth | Reality |
|---|---|
| “Higher utilization is always better.” | Sustained levels above 90 percent cause burnout, quality slips, rehiring costs. |
| “Monthly calculation is enough.” | Waiting a month lets budget overruns grow unchecked. Weekly cadence is safer. |
| “Tracking time kills creativity.” | A trust‑based tool like Remotinio captures hours without screenshots or key logging, so creatives focus on deliverables not surveillance. |
Turning Insight Into Action with Remotinio
Spreadsheets help you start, however live data beats static sheets.
- Real‑time dashboards show utilization by person, role, project, and client.
- Automatic variance alerts flag when a project hits 80 percent of budgeted hours, days before overruns appear.
- Trust‑first design means no screenshots or keystroke logging, which keeps morale high and entries accurate.
Case snapshot
A 25‑person UX studio raised billable utilization from 64 to 72 percent in six weeks after switching from manual sheets to Remotinio, adding about $18 000 in monthly revenue—no overtime required.
Frequently Asked Questions
What is a good utilization rate for a creative agency?
Designers and developers usually aim for 75 – 85 percent billable utilization; project managers 60 – 70 percent; leadership 30 – 50 percent.
How often should we review utilization?
Weekly check‑ins let you rebalance workloads before small variances snowball into missed deadlines.
Will higher utilization burn out my team?
Not if you keep sustained levels below 90 percent, provide recovery weeks, and track capacity by individual, not just company average.
Can we track utilization without software?
Yes, start with the free Google Sheet template above, then switch to Remotinio when you need simple tracking for your whole team and flexible reporting.
Ready to watch utilization in real time, not two weeks after the fact? Start a free 14‑day Remotinio trial, no credit card required.