I’m scheduled for 40 hours this week, but I’ll probably work closer to 90. If those are billable hours, then that over 200% utilization! Awesome! Unsustainable, but awesome.
Define Consulting Utilization Rate: The percentage of scheduled hours spent on client billable work.
A 200% utilization rate is pretty amazing, and also completely unsustainable over the long run. That is why Standard Time® forces you to choose a date range when examining the utilization rates. It’s not going to be the same for every week, or every month, or even for ever year. It changes all the time, depending on how much time you spend on client jobs.
How to calculate utilization rate: Divide client billable hours by scheduled hours. The results is a percentage of utilization.
Employee utilization is also closely connected to effective billing rates. If you are scheduled for 40 hours, but only work 20, then your billable amount must be spread over the full 40. In that case, it’s 50% of what you got. In other words, for every scheduled hour, you got only 50% of your total billable rate.
How to calculate effective billing rate: Multiple total client revenue by utilization percentage.
Crazy stuff? Don’t worry; there’s a simple report in ST that calculates all this. Just click it and go. But you may not want to know the results. Just kidding… you’ll be just fine, and probably happy that you knew.