Agency utilization rate: the number that says you're full

What's an agency utilization rate, and how do you work it out?

A Journal of Accountancy column from 2016, in its CPA Insider newsletter, describes utilization as "billed hours divided by total hours worked". For an agency team, that means the share of all the hours people work that go to client work you bill. The magazine marks the column as a 2016 archive item that may be out of date, and the column talks about firms, not agencies.

To work out your own rate:

1. Pick a period. A week or a month works. Use the same period every time.
2. Add up the billed hours. Count only the hours that go to client work you bill.
3. Add up all the hours worked. Include meetings, sales, admin and training.
4. Divide. Divide the billed hours by all the hours worked. Multiply by 100 to read it as a percent.
5. Track it over time. Work it out for each person and for the whole team, and write it down each period.

The rate is only as good as the hours behind it. If people don't log their time, the number can't tell you much. For tracking hours, see agency time tracking.

Look at the trend, not one week. A single busy week says little. A rate that climbs week after week says more of the team's time is going to client work. To see if people are full, also compare each person's total hours with the hours they have in a week.

How does resource capacity planning use utilization?

The rate, tracked week to week, shows when the team is close to full, so you can plan the coming weeks before work slips. Capacity planning takes that number and asks what's coming next.

1. Look at the rate for each person. Find who keeps running highest.
2. Look at what's booked. Compare next month's client work to the hours your team has.
3. Spot the squeeze early. If people are already near full and more work is coming, plan now.
4. Pick a move. Move dates, cut scope or add help.

Don't push the rate as a target on its own. The same column warns that a firm that focuses too much on chargeability and utilization will almost surely give its people a reason to stretch out their work, or to record hours that add no value. Use the number to plan, not to judge people.

Bringing the rate down starts with next week's plan. For the weekly resource plan, see weekly resource management.

When the rate runs too high for too long, adding help is one way out. To compare the ways to add help, see Which way to add hands fits my agency, and what does each cost?

DeskTeam360 is one kind of help. On Entrepreneur, $1,497 a month buys 1 task at a time. For 2 tasks at a time, Marketer is $2,994, and Agency runs 3 for $4,491. On each plan you work with a North American account manager, who's paired with a team leader. Under them are 2 technical Virtual Assistants, 2 developers and 2 designers, and the founder holds 2 weekly group calls. It's the same team, working in one office.