Agency utilisation rate
Utilisation is the share of a person's available hours that your agency bills to clients. Divide billable hours by available hours, where available means contracted hours less holiday, sickness, training and internal work. The number is worth having only when every person books time the same way, every week.
Written for founder-led UK agencies of roughly £500k–£2M, ten to forty people. Utilisation is the lever founders reach for first and the one most likely to be measured wrongly.
How to calculate it honestly
Two agencies can report the same utilisation and mean different things, because the denominator is a choice. Decide what counts as available, write it down once, and apply it to everyone. The definition matters more than the number.
| Term | Definition to use | The common mistake |
|---|---|---|
| Billable hours | Hours booked to a client job that you can invoice or that sit inside an agreed retainer. | Counting hours worked on a client that exceed the fee. Those are cost, not utilisation. |
| Available hours | Contracted hours less holiday, sickness, training and time set aside for internal work. | Using contracted hours flat, which inflates capacity by a quarter or more. |
| Utilisation | Billable divided by available, per person, per week. | Reporting it monthly and as an agency average, which hides the two people carrying everyone. |
| Target | The rate each grade must hit to cover its loaded cost, its share of overhead and your intended margin. | Borrowing a figure from a benchmark report written for a different cost base. |
Derive your own target
A published industry average cannot tell you what your agency needs, because it reflects someone else's salaries, day rates, overhead and mix of grades. Build the target from your own numbers in four steps, and it will survive an argument with your finance lead.
Load the cost
Salary plus employer costs, plus the tools and licences that person needs. This is what an hour of their time costs before any overhead.
Add the overhead share
Total overhead divided across the billable team. Premises, management time, new business, finance, software everyone uses.
Add the margin you price for
The margin you intend to keep, not the one you ended up with last year.
Solve for hours
At your day rate for that grade, how many billable hours cover all three? Express it against available hours and you have a target with a reason behind it.
Run this per grade. A junior and a director will land on different targets, and an agency-wide figure applied to both will overwork one and under-price the other.
Four levers that move it
Time booked weekly, not monthly
Hours recorded at month end are reconstructed rather than remembered. The reconstruction always favours billable, which is why the number looks better than the bank balance.
Internal work given a budget
Pitching, marketing your own agency, internal projects. Give each a budget in hours and they stop being the place unbilled time quietly goes.
Work at the grade it was priced at
A director delivering mid-weight work raises their utilisation and destroys the margin. Utilisation on its own will applaud the substitution.
Capacity planned twelve weeks out
Utilisation is an outcome of resourcing decisions made weeks earlier. Set it against the pipeline, covered in winning work you cannot staff.
Why utilisation alone will mislead you
A fully utilised agency can lose money on every job. Utilisation counts whether people were busy on client work. It says nothing about whether that work was priced correctly or delivered inside its fee. Read it alongside margin per job, or it will tell you to celebrate a bad quarter.
Pair it with project and retainer margin. The two together answer the question founders actually care about: are the right people busy on work that earns. One agency at 85% utilisation and one at 70% can post the same profit, and the difference is pricing.
Common questions
What is a good utilisation rate for an agency?
The right target is the one your own cost base demands: loaded salary cost, plus a share of overhead, plus the margin you price for, expressed as billable hours at your day rate. Grades differ, so a director and a mid-weight should carry different targets. An industry average reflects a different salary bill and a different rate card, so it cannot tell you whether you are underperforming.
Should billable hours include work we could not invoice?
No. Hours delivered beyond the fee are cost, and counting them as billable hides the over-servicing you most need to see. Track them separately as unbilled scope, give the figure an owner, and review it weekly. That one split usually explains a gap between strong utilisation and weak profit.
How do we get people to book time weekly?
Set a deadline, attach a number to missing it, and make the weekly margin review depend on the data. Timesheets get filled when something visible breaks without them. They get ignored when they feed a report nobody uses, which is the state in most agencies that have tried and given up.
Should account managers and strategists carry a utilisation target?
Anyone whose time is priced into client work carries one. People in new business, finance or leadership sit in overhead and should be measured on their own outcomes instead. Putting a utilisation target on a role you have deliberately kept off client work produces distorted behaviour and worse numbers.
Related reading: Fractional COO for agencies · Agency project and retainer margin · Agency overhead ratio · We won the work and can't staff it
Check the number you are running on
Bring your current utilisation figure and how you calculate it. Most agencies find the definition is the problem before the performance is.
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