What billability percentage should you actually target?
Two firms both report 78% utilization. One is thriving, one is about to lose someone. Both numbers are honest — and that's the problem with utilization as usually measured.
Two consultancies report 78% utilization this quarter.
The first is in good shape. Its people take their holiday, there's room in the week for a proposal and a bit of learning, and nobody is quietly drowning. The second is a month away from losing its best developer, who has not taken a day off since March and has started declining internal meetings because there is no room for them.
Both numbers are honest. Neither firm is fudging anything. They are simply not measuring the same thing — and until you know which one you are computing, the number cannot tell you whether your business is working.
The denominator is the whole argument
Everyone agrees the numerator is billable hours. Almost nobody agrees on the denominator, and that is where the number goes wrong.
Ask five agency owners what they divide by and you will get five answers: contracted hours, hours actually worked, hours available after holiday, a flat 40 a week, or 2,080 a year regardless of what happened. Each is defensible. They produce numbers that differ by fifteen points or more for identical work.
So "our utilization is 78%" is not yet a fact. It is a fact plus an unstated assumption, and the assumption is doing most of the work.
Two numbers, and you need both
Rather than argue for one definition, track two. They answer different questions, and the failure mode of most firms is using one number to answer both.
Capacity utilization — billable hours divided by total paid hours, including holiday, public holidays, and sick leave.
This is the business-health number. You pay for those hours whether or not anyone bills them, so they belong in the denominator. It is what your pricing has to cover, and it is the number to hold against your rate card.
Availability utilization — billable hours divided by the hours someone was actually available, after holiday and leave come out.
This is the person number. It tells you how a specific week was spent by someone who was there to spend it. It's the fair basis for a conversation with an individual, because it doesn't penalise someone for taking the leave you want them to take.
The gap between the two is roughly your leave burden. For a firm with 25 days' holiday plus public holidays, expect five to eight points. If your two numbers are closer than that, someone is working through their holiday — and that is worth knowing before they tell you in a resignation.
- Billable — 1,250 hours (60%)
- Non-billable, available — 630 hours (30%) · sales, proposals, internal work, learning
- Leave — 200 hours (10%) · holiday, public holidays, sick
- Capacity utilization — Billable + Non-billable, available + Leave · 1,250 ÷ 2,080 = 60%
- Availability utilization — Billable + Non-billable, available · 1,250 ÷ 1,880 = 66%
Same person, same billable hours, two honest answers.
What good actually looks like
The figure quoted most often is 75–80%. It comes largely from big consulting firms with dedicated sales teams, staffed bench management, and someone whose entire job is keeping people booked. If you're a 12-person agency where the people delivering the work also win it, that benchmark is not from your business.
For a small professional-services firm, our position:
- Capacity utilization of 60–70% is healthy for someone whose primary job is delivery. That leaves genuine room for sales, proposals, internal work, learning, and holiday actually taken.
- Owners and leads land nearer 40–55%, and should. Their unbilled time is where the next quarter's work comes from.
- Sustained capacity utilization above 80% is a warning, not a trophy. It means there is no slack in the system, and a business with no slack cannot absorb a sick week, a slipped deadline, or a client who suddenly needs more.
These are reasoned positions, not survey data — they follow from the arithmetic of a working week once you put holiday, sales and internal time back into the denominator where they belong. Your sensible range depends on your mix, and the trend matters more than the absolute.
The thing to watch is the direction. A firm drifting from 62% to 71% over three quarters is either getting better at selling or quietly eating its own margin for recovery. Which one it is shows up in retention long before it shows up in revenue.
What one point is worth
The reason to care is that the number converts directly into money.
Take ten billable people, a blended rate of $150 an hour, and 2,080 paid hours each per year. That is 20,800 paid hours, so one point of capacity utilization is 208 hours — about $31,000 a year.
At 60% that firm bills roughly $1.87M. At 64% it bills $2.00M. Four points is $124,800, from the same ten people, the same clients, and no extra hours worked. Those four points are not found by pushing anyone harder. They are found in hours that were worked and never captured.
Which brings us to the part that undermines every number above.
Your utilization figure is only as good as your timesheets
Most timesheets in small firms are written on Friday afternoon from memory. That process has a consistent bias, and it runs one way.
Nobody reconstructing a week rounds up. Faced with "was that call ninety minutes or two hours," you write ninety, because you would rather under-bill than defend a number you're unsure of. Do that across five people and fifty small uncertainties a week, and you lose a few percent of real billable time — permanently, and invisibly, because the hours were never written down to be missed.
A few percent is the same few percent that was worth $124,800 a page ago.
So before you set a utilization target, check whether the number you're targeting is measured or remembered. If it's remembered, you are optimising a figure that is already understating you — and the fastest available improvement is not working more hours. It is capturing the ones already worked.
Where to start
- Pick your denominators and write them down. Both of them. Most disagreements about utilization are disagreements about definitions that nobody has stated.
- Compute both numbers for last quarter. The gap tells you your real leave burden, and whether people are taking the holiday you think they are.
- Look at the trend, not the target. One quarter tells you almost nothing. Three tells you which direction the business is going.
- Then fix the measurement, because until hours are captured close to when they're worked, every number above is an estimate wearing a decimal point.
The firms that get this right are rarely the ones with the most aggressive targets. They are the ones who know which number they're quoting, and trust that it's real.
Disclosure: we build Timsio, a time-tracking and invoicing tool that drafts timesheets from your calendar so hours are captured close to when they're worked. That's the bias to read this with. The definitions and the arithmetic above hold whatever you use to track time — including a spreadsheet.