Calculator

Utilization calculator for agencies

Enter what your people cost and what they bill. The calculator returns your utilization, what each paid hour actually earns, the rate your target margin requires, and the gap between the two in dollars per hour and per year.

People whose time you sell.
Hours actually invoiced. Out of 2,080 paid.
Salary, taxes, benefits, and their share of overhead.
What you collect per hour worked, after discounts and write-offs.
Profit as a share of revenue.
Utilization
Revenue per year
Cost per year
Margin you are making
Revenue per paid hour
Rate required for your target margin
The gap, per billable hour
The gap, per year

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How the numbers are worked out

A full-time person is paid for 2,080 hours a year. Utilization is the share of those hours that reach an invoice. Someone who bills 1,400 hours is 67.3% utilized, and the other 680 hours went to holidays, sick days, sales calls, internal meetings and the gaps between projects.

Revenue is headcount times billable hours times your average rate. Cost is headcount times loaded cost. The margin is what is left, as a share of revenue.

The required rate turns the question around. Take your total cost, divide by one minus your target margin to get the revenue you need, then divide by the hours you actually bill. If that number is above the rate you charge, the gap is what every billable hour is short.

What to put in each field

  • Billable headcount. Only people whose time you sell. Leave out the office manager and the full-time salesperson; their cost belongs in overhead.
  • Billable hours. Use last year's invoiced hours divided by headcount. Planned hours flatter you.
  • Loaded cost. Salary plus payroll taxes and benefits, plus that person's share of rent, software, and every salary that is not billable. For a small agency, loaded cost often lands between 1.3 and 1.6 times salary. Work out your own.
  • Realized rate. Revenue collected divided by hours worked on client projects. Your rate card is what you ask for. This is what you got.

Reading the result

A negative gap has two fixes: a higher rate, or more billable hours from the same people. The verdict line shows both. Pushing utilization is the one owners reach for first and it is the one with a ceiling, because a team billing above 80% has no time left to sell, train or recover. The reasoning is in utilization rate, and the wider picture is in billable hours. If the gap comes from people sitting between projects, read bench management.