Here is a utilization report that records the number of hours employees spent working on projects in a given date range. You see how many of those hours are billable verses non-billable. That results in a effective billing rate. I.e. the true rate you are getting.
Why is a utilization report important?
Utilization reports tell you how effective your business is. They tell you how much you are earning.
Let’s say you have ten consultants on staff. They all bill out at about the same rate. Nine of those employees have an average of 20% administrative time. The other has only 15%. Nine of them are working about 40 hours, while the tenth one is consistently working 50. Sure, not all 50 are billable hours. But still, 50 is huge.
You can easily imagine that the ‘star’ employee is pulling down a lot more dough than the other nine. But how much? Run a utilization report and you’ll see.
Here’s an example of two consulting scenarios below. Your star consultant is banking a lot more than the other nine. And the effective billing rate is higher.
|180 hours||150 billable||$100 per hour||$15,000 revenue||$83 effective rate|
|225 hours||191 billable||$100 per hour||$19,125 revenue||$85 effective rate|
But do you know the utilization and rates your consultants are working at?
It’s real easy to find out. Just run one of these reports. When you do, you must choose a date range. Try running monthly reports, and then try quarterly, and finally yearly. You’ll learn a lot about your actual track record.
Download from www.stdtime.com
But wait… people are not machines
There’s just one thing… people are not machines. Don’t expect to measure things like horsepower and mean-time-between-failures and such. If you want higher effective billing rates, more hours, and more revenue, you’ll have to inspire employees to want to do more. You can’t wave a utilization report in front of them and demand more. It doesn’t work; they’ll probably quit unless they really need the work.
Employees want to be inspired and be part of a cause. That cause often includes stepping stones to more responsibility and promotions by becoming an integral part of the organization. It involves fulfilling the long-term goals of the company and securing long-term viability in the marketplace.
So… utilization reports are nice. And probably a requirement for viable consulting firms. But are you using them to inspire, or just to demand more? Something to consider…