Ask the owner of a design studio or consultancy how the business is doing and you'll often hear "we're flat out". Everyone is busy, timesheets are full, and yet the bank balance doesn't reflect it. Utilisation rate is usually where that disconnect starts, because it measures activity rather than return.
What utilisation actually measures
Utilisation is the share of available hours your team spends on client work. If someone has 1,600 available hours a year and records 1,120 on client projects, their utilisation is 70%. It's a useful number: it shows whether you have spare capacity, whether people are stretched, and whether internal work such as admin and business development is eating too much time.
What it doesn't tell you is whether those client hours were paid for, or at what rate.
Three ways a high utilisation rate can mislead you
Hours recorded are not hours billed. On fixed-fee work, an overrun still shows as client time. A project that takes 300 hours against a fee that assumed 200 looks great for utilisation and terrible for margin.
Not all client hours are worth the same. A director spending most of the week on work a junior could do lifts utilisation while quietly lowering the value of every hour.
Targets change behaviour. If people are judged on utilisation, time gets coded to client jobs where it doesn't belong, and the number stops meaning anything.
The number to read alongside it: realisation
Realisation compares what you actually billed with the value of the time recorded at standard rates. If the team logged £100,000 of time on a project and you invoiced £75,000, realisation is 75%. Read together, the two numbers tell a far clearer story:
- High utilisation, high realisation: a healthy, well-priced business.
- High utilisation, low realisation: busy but underpriced, or poorly scoped.
- Low utilisation, high realisation: good pricing, but not enough work or too much internal time.
- Low utilisation, low realisation: a pricing problem and a pipeline problem at the same time.
You can read more about both measures on our pages for studio utilisation rate and realisation rate.
What good looks like
There's no single right figure, because it depends on the role. Fee-earners in a project-based practice often sit somewhere between 65% and 80%, while directors who also run the business will be lower, and should be. Aiming for 100% is a warning sign rather than a goal: it leaves no room for training, business development or the unexpected, and burnout follows.
The more useful question is whether utilisation is stable and whether it lines up with margin. If utilisation rises while gross service margin falls, the extra hours are going on work that isn't paying.
How to make the number useful
- Measure it by person and by role, not just as a practice-wide average.
- Report it monthly next to realisation and project margin, never on its own.
- Separate chargeable time from client time that can't be billed, such as overruns and pitching.
- Use it to plan hiring: sustained utilisation above your target is the clearest early signal that you need more capacity.
Utilisation is a good servant and a poor master. It tells you how hard the team is working. Realisation and margin tell you whether that work is worth doing.
Not sure what your numbers are really saying? Our Finance Review looks at utilisation, realisation and margin using your own data and gives you three prioritised actions.
