Utilisation rate is the single most important metric most agency owners never track properly. It tells you how much of your team's paid time is actually generating revenue. Get it right and you have a clear view of capacity, profitability, and when to hire. Get it wrong and you have no visibility into what is going on, wondering why revenue feels flat despite a busy team.
This guide covers everything you need to know: the formula, what counts as billable, benchmarks by agency type, a worked profitability example, practical ways to improve, and the tools to track it. If you want to see how utilisation feeds into your overall numbers, try our Agency Profitability Calculator.
Quick Summary: 6 Things to Know
What Is Utilisation Rate and Why It Matters
Utilisation rate measures the percentage of your team's available working time that is spent on billable client work. It is the bridge between your payroll costs (fixed) and your revenue (variable). When utilisation is high, your team is generating revenue. When it is low, you are paying people to do work that does not directly bring in money.
For agencies, this matters more than almost any other industry because your product is your people's time. You are not selling widgets from a warehouse. You are selling hours, days, and expertise. If those hours are not being billed to clients, they are costing you money.
Why this metric sits above everything else
Utilisation connects your biggest cost (people) to your revenue. It tells you whether you need more clients, more staff, or better processes. It is the first thing we look at when an agency asks us why their profit margins are thin.
The Utilisation Rate Formula
The Formula
Utilisation Rate = (Billable Hours / Available Hours) x 100
Expressed as a percentage. Calculate per person, per team, and across the whole agency.
The formula itself is straightforward. The challenge is defining each part correctly.
Available Hours
Total working hours after removing non-working time
- Start with contracted hours (e.g. 40 hours/week)
- Remove bank holidays (8 days in England)
- Remove annual leave (typically 20-25 days)
- Remove average sick days (UK average: 5-7 days)
Typical result: around 1,760 hours per year per full-time employee
Billable Hours
Hours spent directly on chargeable client work
- Design, development, and copywriting for clients
- Campaign management and optimisation
- Strategy sessions with clients
- Client reporting and analytics
If you can attach the time to a client project, it is billable
Example: Weekly Utilisation for a Designer
A designer works 40 hours per week. They spend 6 hours in internal meetings, 2 hours on admin, and 2 hours on a pitch for a prospective client. That leaves 30 hours on billable client work. Utilisation rate: (30 / 40) x 100 = 75%. That is a healthy number for a creative role.
What Counts as Billable vs Non-Billable
One of the biggest reasons agencies get utilisation wrong is inconsistency in what they classify as billable. You need a clear definition that the whole team follows.
| Activity | Billable? | Notes |
|---|---|---|
| Design work for a client | Yes | Core billable activity |
| Development sprints | Yes | Directly chargeable to the project |
| Client calls and meetings | Yes | Time spent on active client projects |
| Campaign management | Yes | PPC, social, email on retainer |
| Client reporting | Yes | Monthly reports, dashboards, analytics |
| Internal team meetings | No | Stand-ups, all-hands, retrospectives |
| New business pitches | No | Speculative work for prospective clients |
| Admin and timesheets | No | Invoicing, expenses, HR tasks |
| Training and CPD | No | Courses, conferences, skill development |
| Internal marketing | No | Your own website, social media, blog |
The grey area: project management
Some agencies count project management as billable, others do not. If you charge clients for PM time (either explicitly or built into your rates), count it. If your PM time is absorbed as overhead, do not. Be consistent across the team. Mixing approaches makes your data meaningless.
Utilisation Rate Benchmarks by Agency Type
Not all agencies are the same. A creative agency running at 65% is performing well. A digital performance agency at the same rate has a problem. Here are realistic benchmarks based on agency type.
| Agency Type | Typical Range | Target | Why |
|---|---|---|---|
| Creative / Branding | 55-70% | 60-70% | More concepting, brainstorming, and iterative work |
| Digital / PPC / SEO | 65-85% | 70-80% | Retainer-based, ongoing campaign work |
| Design / UX | 60-75% | 65-75% | Mix of project and retainer work |
| PR / Communications | 60-75% | 65-75% | Relationship-heavy, harder to track |
| Full-Service | 60-75% | 65-75% | Blended across disciplines |
| Development / Tech | 70-85% | 75-80% | Sprint-based, clearly scoped deliverables |
Above 85%? That is a red flag, not a badge of honour
Agencies that consistently run above 85% utilisation are almost certainly heading for trouble. Your team has no slack for unexpected client requests, no time for training, and no room to breathe. Quality drops, people burn out, and your best staff leave. The sweet spot is 70-80%. Leave some capacity in the tank.
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How to Calculate Revenue Per Head Using Utilisation
Utilisation on its own tells you how busy your team is. Combined with your charge-out rate, it tells you how much revenue each person generates. This is revenue per head, and it is one of the most useful KPIs for agency financial planning.
Revenue Per Head Formula
Revenue Per Head = Available Hours x Utilisation Rate x Charge-Out Rate
Use this to set revenue targets and plan hiring decisions.
Example scenario: Mid-weight designer
Available hours: 1,760 per year. Utilisation rate: 72%. Charge-out rate: £85/hour. Revenue per head: 1,760 x 0.72 x £85 = £107,712 per year. If that designer costs you £42,000 in salary plus £8,000 in employer NI and pension, the gross margin on that role is around £57,700. That is a 53% margin, which is healthy for an agency.
The revenue per head calculation makes hiring decisions much clearer. If a new hire will cost £55,000 fully loaded and you expect them to run at 70% utilisation with a £90/hour charge-out rate, they should generate around £110,880 in revenue. That is a clear business case. Use our profitability calculator to model different scenarios.
Why Low Utilisation Kills Profitability: A Worked Example
The relationship between utilisation and profit is not linear. Small changes in utilisation create big changes in profit because your costs stay the same. Here is a worked example showing the impact.
Example scenario: 10-person agency, same costs, different utilisation
| Metric | At 60% Utilisation | At 75% Utilisation |
|---|---|---|
| Team size | 10 people | 10 people |
| Available hours per person/year | 1,760 | 1,760 |
| Total available hours | 17,600 | 17,600 |
| Billable hours | 10,560 | 13,200 |
| Average charge-out rate | £80/hour | £80/hour |
| Revenue | £844,800 | £1,056,000 |
| Staff costs (salaries + NI + pension) | £500,000 | £500,000 |
| Overheads (rent, software, insurance) | £120,000 | £120,000 |
| Net profit | £224,800 | £436,000 |
| Net margin | 26.6% | 41.3% |
The difference: £211,200 in extra profit
Same team, same costs, same charge-out rate. The only difference is 15 percentage points of utilisation. That translates to 2,640 more billable hours across the team, worth £211,200. This is why utilisation is the metric that matters most. Model your own numbers with our Agency Profitability Calculator.
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7 Ways to Improve Your Agency's Utilisation Rate
Improving utilisation is not about making your team work harder. It is about reducing the time wasted on things that do not generate revenue. Here are seven practical approaches.
1. Reduce internal meetings
Audit every recurring meeting. Does it need to happen? Does it need to be an hour? Does everyone need to attend? Most agencies can cut 20-30% of internal meeting time by switching to async updates, shortening stand-ups, and being ruthless about who needs to be in the room. A 10-person team saving 2 hours each per week recovers 1,040 hours per year. At £80/hour, that is £83,200 in potential billable time.
2. Scope projects more accurately
Under-scoped projects eat into utilisation because your team spends more time than budgeted. When the extra hours are not billable, utilisation drops even though everyone is busy. Build in contingency (we recommend 10-15%), use historic data to estimate, and push back on scope creep before it begins. Read our scope creep guide for a full framework.
3. Automate admin tasks
Time entry, invoicing, expense reports, and reporting all consume non-billable hours. Use tools that automate what they can. Set up template invoices, automate time tracking reminders, and use accounting software that pulls in bank feeds automatically. Even saving 30 minutes per person per day across a 10-person team adds up to 1,300 hours per year.
4. Cross-train your team
Specialists sitting idle while another discipline is overloaded is a common problem. Cross-training means your designers can handle basic front-end work, your copywriters can do some social media management, and your developers can assist with QA. You do not need everyone to be a generalist, but having people who can flex across disciplines smooths out the peaks and troughs.
5. Use bench time productively
When a team member finishes a project and has no immediate client work, that is bench time. Rather than letting it go to waste, create a list of productive activities: internal tool development, process documentation, training, and client relationship building. Bench time should never be idle time. It should be an investment in making the next project more efficient.
6. Review work in progress (WIP) weekly
A weekly WIP review looks at every active project: hours used vs budget, remaining scope, and any risks. This catches problems before they become expensive. If a project is running over budget, you can adjust scope, bring in additional resource, or flag it with the client. Without weekly reviews, over-servicing goes unnoticed until the project is finished and the profit has disappeared.
7. Track with proper tools
Spreadsheets break down quickly. You need a time tracking tool that your team will actually use, that reports at both the individual and project level, and that integrates with your project management workflow. The next section covers the best options for agencies.
Tools for Tracking Utilisation
You cannot improve what you do not measure. Here are the most popular tools for tracking agency utilisation, with notes on what each does well.
Harvest
Time tracking with built-in invoicing and team utilisation reports. One of the most established tools in the agency space. Strong Xero and QuickBooks integrations. The capacity report shows you utilisation at a glance.
From £9/user/month
Toggl Track
Lightweight time tracking with powerful reporting. The project dashboard shows billable vs non-billable splits. Works well for smaller teams that need simplicity. Good mobile app for on-the-go tracking.
Free for up to 5 users, then from £7/user/month
Float
Resource planning and scheduling tool. Lets you allocate people to projects visually and see capacity gaps. Stronger on forward-looking planning than retrospective time tracking. Pairs well with Harvest or Toggl for actual time data.
From £5/user/month
Forecast (by Harvest)
Combines resource scheduling with Harvest time tracking data. Shows you planned vs actual utilisation. Best for agencies already using Harvest that want to add capacity planning. Gives you a forward-looking view of team workload.
From £24/user/month (includes Harvest)
Clockify
Free time tracking with no user limit. Reports include billable hours, team dashboards, and project summaries. A good starting point for agencies that have never tracked time before. The free tier is generous enough for most small agencies.
Free for unlimited users, paid plans from £4/user/month
Our recommendation
If you are not tracking time at all, start with Clockify (free) or Toggl Track. If you are already tracking but need capacity planning, add Float. If you want an all-in-one solution, Harvest plus Forecast is hard to beat. The best tool is the one your team will actually use every day.
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Common Utilisation Mistakes Agencies Make
1. Not tracking utilisation at all
This is the most common mistake. Agencies that do not track time have no idea whether they are at 55% or 80%. Without data, every decision about hiring, pricing, and capacity is a guess. Even rough tracking is better than nothing.
2. Counting all hours as billable
Some agencies inflate utilisation by counting internal meetings, business development, and admin as billable. This gives a misleadingly high number and hides the real problem. Only count hours that are genuinely chargeable to a client project.
3. Ignoring bench time
Bench time is invisible if you are not looking for it. A team member between projects who fills their day with low-value tasks looks busy but is not generating revenue. Track bench time explicitly so you can see it, manage it, and plan around it.
4. Not reviewing monthly
Tracking time without reviewing the data is pointless. Set a monthly review where you look at utilisation by person, by team, and across the agency. Compare it to your benchmark and investigate any significant changes. A number is only useful if someone acts on it.
5. Using gross hours instead of available hours
If you use 2,080 hours (52 weeks x 40 hours) as your denominator instead of the actual available hours (around 1,760 after holidays), your utilisation rate will look lower than it really is. This leads to poor decisions, like thinking you need to hire when you actually need to reduce holiday cover gaps.
6. Treating utilisation as the only metric
High utilisation with low charge-out rates still produces poor profitability. Utilisation needs to be paired with revenue per head, gross margin, and project profitability to give a complete picture. Use our Agency Profitability Calculator to see how these metrics work together.
7. Not breaking it down by role
An agency-wide utilisation number hides important differences. Your developers might be at 82% while your designers are at 58%. The overall number looks fine, but the design team needs attention. Always track by individual and by discipline.
Putting It All Together: Your Monthly Utilisation Review
Here is a simple framework for running a monthly utilisation review that actually leads to action.
| Step | What to Do | What to Look For |
|---|---|---|
| 1. Pull the data | Export billable and non-billable hours from your tracking tool | Missing timesheets, incomplete entries |
| 2. Calculate by person | Work out individual utilisation rates | Anyone below 60% or above 85% |
| 3. Calculate by team | Aggregate by discipline (design, dev, etc.) | Teams significantly above or below benchmark |
| 4. Compare to target | Check agency-wide rate against your benchmark | Trend direction, month-on-month changes |
| 5. Investigate outliers | Dig into why individuals are high or low | Over-servicing, bench time, under-scoped projects |
| 6. Take action | Adjust resourcing, flag scope issues, plan hiring | Decisions that will move next month's number |
Tip: Make it a habit, not a one-off
The agencies that get the most value from utilisation tracking are the ones that review it consistently. Put a 30-minute monthly review in your calendar. After three months, you will have enough trend data to make confident decisions about pricing, hiring, and capacity.
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Frequently Asked Questions
What is a good utilisation rate for an agency?
A good utilisation rate for most agencies falls between 70% and 80%. Creative agencies typically sit around 60-70% because of the higher proportion of concepting and brainstorming time. Digital and PPC agencies tend to run at 70-80% because their work is more directly billable. Above 85% is a warning sign for burnout and quality issues.
How do you calculate utilisation rate?
Utilisation rate = (billable hours / total available hours) x 100. For example, if a designer works 40 hours in a week and spends 30 of those hours on billable client work, their utilisation rate is (30 / 40) x 100 = 75%. Available hours should exclude holidays, sick days, and bank holidays.
What counts as billable hours in an agency?
Billable hours are any hours spent directly on client work that you can charge for. This includes design, development, copywriting, strategy sessions with clients, campaign management, reporting, and project management time allocated to specific client projects. Internal meetings, pitching, admin, training, and business development are non-billable.
What is the difference between utilisation rate and billable rate?
Utilisation rate measures the percentage of available time spent on billable work. Billable rate (or charge-out rate) is the hourly rate you charge clients for that time. Both affect profitability. A team member with a high utilisation rate but a low billable rate may generate less revenue than someone with moderate utilisation and a higher rate.
How does utilisation rate affect agency profitability?
Utilisation directly drives profitability because staff costs are fixed regardless of how many hours are billable. If your team costs £30,000 per month and you improve utilisation from 60% to 75%, you generate significantly more revenue from the same cost base. Our profitability calculator can model the exact impact for your agency.
Why is 100% utilisation unrealistic?
No one can spend every working hour on billable client work. Your team needs time for internal meetings, training, admin, company-wide updates, holiday, and simply switching between tasks. Agencies that push for 100% utilisation end up with burned-out staff, poor quality work, and high turnover. The overhead of running a business always consumes some capacity.
Should I include directors and management in utilisation calculations?
It depends on their role. If a director does hands-on client work (which is common in smaller agencies), include them. If they are purely in a management and business development role, exclude them from the team utilisation figure but track their time separately. Mixing non-client-facing leadership into the average will drag the number down and make it harder to benchmark.
How often should I review utilisation rates?
Weekly at minimum for project-level tracking, and monthly for the overall agency number. Weekly reviews let you spot problems early, such as a team member sitting idle between projects or someone consistently working overtime on under-scoped work. Monthly reviews give you the trend data you need for capacity planning and hiring decisions.
What is bench time in an agency?
Bench time is when a team member has no billable client work to do. They are available but not allocated to a project. Some bench time is normal and can be used productively for training, internal projects, or process improvements. Excessive bench time (more than 20-25% of capacity) usually means you need more clients or fewer staff.
How do I improve utilisation without burning out my team?
Focus on reducing wasted non-billable time rather than adding more hours. Cut unnecessary internal meetings, automate admin tasks, scope projects more accurately so less time is lost to scope creep, and use bench time productively. Cross-training your team so people can flex across disciplines also helps fill gaps without overloading individuals.
What tools can I use to track utilisation?
Popular options include Harvest, Toggl Track, Float, Forecast by Harvest, and Clockify. The best tool depends on your agency size. Harvest and Toggl Track are great for time tracking with reporting. Float and Forecast are better for forward-looking resource planning. Clockify offers a solid free tier for smaller teams.
Does utilisation rate account for holidays and sick days?
It should. Available hours should be the actual working hours available after removing bank holidays, annual leave, and sick days. In the UK, a full-time employee typically has around 1,760 available hours per year (260 working days minus 28 days leave, times 8 hours). Using gross hours (2,080) will understate your real utilisation.
Related Guides
Use our Agency Profitability Calculator to model how changes in utilisation, charge-out rates, and team size affect your bottom line.
Read our guide to agency profitability for the complete picture on margins, pricing, and financial health.
If scope creep is dragging down your utilisation, read our agency pricing strategy guide for frameworks that protect your margins.
Related Agency Growth Guides
- Agency Profitability Guide . Margins, benchmarks, and how to improve them
- Agency Pricing Strategy . Retainers, projects, and value-based pricing compared
- Scope Creep and Agency Profitability . How to protect your margins on every project
- Agency Cash Flow Survival Guide . Managing cash when revenue is lumpy
- Agency Profitability Calculator . Model your numbers and see the impact of changes
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