When you sell time, utilization is everything.
Whether or not your firm bills by the hour, your ability to manage and maximize the time of your people is the single most important factor impacting project delivery, profitability, and growth. Utilization rate—also called chargeability—is often misunderstood, yet it’s the leading indicator of whether your organization is operating efficiently and profitably. Unlike other metrics, utilization is the one that directly drives every other.
That’s because utilization is the cause in the cause-and-effect chain. When organization-wide utilization is high, your effective bill rate and operating efficiency improve—driving revenue and profit per employee higher. When it’s low, inefficiencies compound, making it difficult to grow sustainably, retain top talent, or maintain margin. Utilization is more than even just a profitability metric—it’s a signal for when to hire, when to sell more work, and how efficiently your organization actually operates.
In software, we call this the "one metric that [#section-one]matters."[#section-one]
Know Your Numbers
The formula for utilization is simple:
Utilization Rate (%) = (Billable Hours / Capacity) x 100
- Billable Hours: The number of hours worked that can be charged to a project or client.
- Capacity: The total number of working hours available in a given period (typically excluding holidays and PTO).
For example, if a full-time employee works 40 hours per week, and 30 of those hours are billable, their utilization rate would be:
(30 ÷ 40) x 100 = 75%
To calculate this at the team or firm level, sum all billable hours across the group and divide by the total available hours. Tracking this monthly will help you benchmark performance, identify underutilization, and spot trends before they impact profitability. Resource planning allows you to see the utilization rate in advance—before the time is spent.
Utilization data must be easily accessible in real time. If you find out a month later that someone was underutilized, you've already lost the opportunity to act—whether it’s rebalancing workload, ramping up business development, or accelerating [#section-two]hiring.[#section-two]
What Is the Average Utilization Rate?
Across professional services and project-based organizations, average organization-wide utilization tends to hover between 59–60%. This includes billable and non-billable staff (admin, operations, finance) and comes from consistent industry reporting like Deltek’s Annual Clarity Report.
When you consider that 40% of the average firm’s time isn’t billable, it’s no wonder so many organizations struggle to grow. Even though non-billable time (like training, PTO, and internal meetings) is necessary, there’s still significant room for improvement—especially in how project time is planned, tracked, and optimized.
As an example, according to the AIA, the targeted average utilization rate for billable design staff is 77.5%. Some roles may sit closer to 60% (like sr. project managers or team leads), while others (like project architects or designers) may exceed 90%. A healthy utilization strategy accounts for this variability, and the metric goals are all about improving [#section-three]averages.[#section-three]
What’s Possible?
Some companies mistakenly believe they have 100% utilization because everyone is “always busy.” If that were true, they would be among the most profitable companies in the world. Unfortunately, busy doesn’t mean utilization is high—or that your firm is profitable.
Even if utilization were actually that high, it’s typically a sign that you’re far behind on hiring. Employees end up working excessive overtime, quality drops, deadlines slip, and your best people burn out and leave. On the other hand, if utilization is too low, it’s either because there isn’t enough work—a business development issue—or the work isn’t being planned and allocated effectively. Either way, poor planning leaves money on the table, creates bench time, and leads to inconsistent performance.
For most professional services firms, 85–90% utilization for billable staff is a top-level target, while a high-performing organization-wide rate falls between 65–66%. These benchmarks reflect firms that have optimized planning, forecasting, and project execution.
Reaching these levels isn’t about working more hours—it’s about managing time more effectively. It requires visibility across the organization, coordinated planning, and the ability to forecast resource needs before problems emerge. Firms that hit these benchmarks tend to see higher profit margins, better employee retention, and stronger project delivery.
If you're not actively measuring and managing utilization, you're flying [#section-four]blind.[#section-four]
Why Utilization Matters So Much
If you're selling time, there are very few levers to optimize the business: you can cut operating costs, increase prices, or improve the efficiency with which you staff people on billable work. Cutting costs may save you 2–5%. Raising prices might yield 5–10%—but it risks losing clients. However, increasing staffing efficiency can improve profitability by 2–4x.
That’s why resource management is the primary lever for improving time efficiency—and time efficiency is the lever for increasing profitability.
Even more importantly, your costs—payroll, overhead, tools—are mostly fixed. That means every percentage point increase in utilization flows directly to the bottom line. For example, a jump from 59% to 65% utilization can take you from 6–10% profit to 30–40%, according to PSMJ’s Circle of Excellence report.
The Resource Management Institute similarly estimates that a 5% increase in utilization can generate $1–2 million in additional profit for mid-sized firms.
And the effects go beyond financial performance. A landmark study by the Center for Business Practices found that organizations with mature resource management practices outperformed their peers across all measures such as project execution, client satisfaction, financial success, and overall performance. Yet, despite decades of evidence, most firms today still struggle to manage resources effectively.
[#section-five]How to Improve Utilization[#section-five]
There are two causes of low utilization: lack of work and lack of planning. Here’s what to do:
- Know your numbers: You can’t improve what you don’t measure. Make utilization data visible in real time so teams can act on it.
- Plan your workload: High-performing firms spend more time on planning. They use structured, collaborative processes to allocate work two weeks, one month, and one quarter ahead.
- Set smart goals: Target utilization by team, role, and even individual—not just company-wide. Each person should have a mix of billable and non-billable time appropriate to their function.
- Forecast demand: Use project pipeline and role demand to anticipate when it’s time to hire or win more work. As utilization rises, it’s a leading indicator that you need to staff up. When it drops, it's time to double down on business development.
- Balance the team: Use software to make workload visible across departments and prevent overutilization of top performers.
Resource planning is what makes this possible. Better planning leads to fewer delays, fewer staffing gaps, and more billable hours per [#section-six]employee.[#section-six]
From Busy to Profitable
Utilization isn’t about working more hours—it’s about managing the hours worked more efficiently. That means reducing bench time, cutting scope creep, and assigning the right people to the right projects at the right time.
With effective resource planning, organizations can:
- Increase team-wide visibility & planning collaboration
- Align the entire team around priorities & availability
- Eliminate bottlenecks & scheduling conflicts
- Prevent burnout before it happens
- Reduce the time spent assembling project teams
- Accurately forecast when to hire
When everyone can see who’s doing what and prioritizes work together, utilization improves. And when utilization improves, profitability improves, driving performance across the [#section-seven]firm.[#section-seven]
Plan Your Way to Higher Utilization
From working with thousands of time-billing companies, we’ve seen a clear pattern: the most profitable firms are the best planners. They spend more time aligning teams, clarifying expectations, and making work visible. They understand that efficiency is the engine of sustainable growth.
If your firm wants to:
- Do more with the same headcount
- Deliver projects on time and on budget
- Attract and retain top talent
- Increase profit margins
...then utilization is the number to focus on.
And the time to start is now.
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