--- title: "Billable Utilization: Formulas and Strategies for Increased Profitability" url: https://stacklist.com/card/f42b748b-6803-4197-ae88-58feac7fa5a2 source_url: "https://toggl.com/resources/billable-utilization/" stack: https://stacklist.com/stack/54032cf5-6878-4863-a5ae-093c58741825 summary: "Billable utilization rate measures the percentage of employee hours spent on billable client work, with a healthy range of 75-90% for most agencies to balance revenue and team burnout. The article provides calculation formulas, contextual guidance from industry expert Eli Rubel, and explains how tracking utilization prevents margin collapse and reveals workflow inefficiencies." tags: "billable-utilization, agency-profitability, time-tracking, workforce-management, utilization-rate, toggl, revenue-optimization" key_entities: "Eli Rubel (person), Toggl (organization), billable-utilization-rate (concept), net-profit-margin (concept), agency-profitability (concept)" classification: "reference" content_hash: "sha256:99d080a96a7fe6445e48e92b3923f49d595707502a55ca21c4e25865ea38f4c2" acp_version: "0.2" token_counts_approximate: 2292 visibility: public agent_accessible: true status: "final" --- # Billable Utilization: Formulas and Strategies for Increased Profitability In this article In this article What’s a healthy billable utilization rate? How do you know if your team’s utilization rate is “good”? Here’s the cheat sheet: Healthy utilization for most agencies sits between 75% and 90% The sweet spot? 85-90% That's the zone where you maximize revenue without immediately triggering mass burnout or group Slack meltdowns. “When we get to 90%, we have a recruiter working on it. Somewhere between 75% to 90% is the healthy, healthy place. ” — Eli Rubel Keep utilization context in mind, though If you’re consistently under 75%, it might feel like you’re giving your team breathing room, but you’re also bleeding money, so it might be time to rethink your staffing. Sometimes, though, it’s worth looking at your upcoming pipeline to understand how long you’ll likely remain below the waterline. Eli Rubel, rightly known as the Agency Profitability Guy, explains that one of his agencies is currently below his preferred utilization rate threshold, at just 60%. He would normally preach against operating like this, preferring to rely on a key decision rule: if utilization drops below 75% for three consecutive months, it's time to reduce staff. But some rules are meant to be broken. “It's very contextually sensitive. We're about to launch a couple of initiatives that will get us well above that number. If I let those people go, and then the demand comes in, suddenly, I'm scrambling to find talent again, which would be messy. So, I'm making a strategic choice to be willing to lose that immediate profit in exchange for being prepared to grow. — Eli Rubel How to calculate your billable utilization rate In the dark about your own magic numbers? Here’s a simple utilization formula you can borrow: ‍Billable utilization rate (%) = (Billable hours / Total available hours) × 100 Billable hours = Time spent on client work that can be invoiced Total available hours = The total number of hours an employee is expected to work (typically per week, month, or year) Example: Let’s say one of your designers is scheduled to work a 40‑hour week and logs 32 total billable hours. Your billable utilization rate = (32 / 40) × 100 = 80% Nice. That's comfortably within the healthy zone. You might not be cracking champagne, but no alarms are going off, either. Note: If estimates aren’t available in Toggl, manually include them in a separate column. Tip: You can run this calculation weekly, monthly, quarterly, or across your whole team. Just make sure your time tracking setup gives you clean billable vs. non‑billable activities data. 3 reasons calculating your agency utilization rate is worth it In case you’re tempted to shove your billable utilization data in a spreadsheet and forget about it, here are three solid reasons to care. 1. It keeps your margins from quietly collapsing On paper, your agency might look like it's killing it — clients signing on, the team fully booked — the whole shebang. But if your utilization rate is low, your profit margin probably is, too. Work is only valuable if it's billable, and too much internal time (or untracked time) will sink your numbers faster than a bad retainer deal. Margin drops build up silently unless you're tracking utilization closely. Eli Rubel spells out what the difference means to his agency: At 90% utilization, we’re at a 52% net profit margin. At 60%, we’re in the 20s. 2. It highlights inefficiencies hiding in plain sight You don't need to overhaul your processes to make your team more effective, but you do need to know where the friction is. Utilization data reveals gaps that aren't obvious on a calendar, like: Teams spinning their wheels on non-billable hours Projects soaking up way more time than they should Roles that aren’t scoped properly It gives team leads and ops folks a more honest view of how time is actually spent rather than what you planned. From here, you can clean up your agency workflows. 3. It gives your forecasting a reality check Without utilization data, planning is a guessing game. You might have a sense of how busy your team feels, but you won't know how much capacity utilization you have or how close you are to needing more hands on deck. Track utilization consistently, and you'll spot patterns: who's regularly overbooked, how long certain project types actually take, and where timelines slip. All of it feeds into better forecasting, whether you're planning resourcing, revenue, or client load. Billability vs. utilization vs. capacity: What’s the difference? Billability, utilization, and capacity are three key metrics that get tossed around like they’re interchangeable. Here’s what each actually measures. Billability Billability is a simple binary term determining whether you can bill time to a client or not. If someone spends an hour designing a landing page for a client, that’s billable If they spend an hour on internal training or admin, that’s non-billable Utilization Utilization shows how much of your team's available time is billable. It's an important agency score that explains how much of your time is monetized, but not how effectively. But as it's a percentage rather than a performance metric, this can be limiting. “Utilization only tells you the amount of hours worked. It doesn't tell you anything about the value delivered. Someone at 50% utilization might be a high performer compared to someone at 80% who’s not. — Kyle Hunt Capacity Capacity answers the question: How much work can this person do well? That means looking at: Task duration Cognitive limits Output quality over time “Most people can do about six hours of real creative work a day before things start to fall apart. After that, error rates go up, revisions increase, and productivity drops. — Kyle Hunt While utilization might say someone has 10 free hours, capacity might tell you they've got three good ones left. Billability Utilization Capacity Definition Whether time is billable to a client % of available time spent on billable work The sustainable, high-quality output a person can deliver Used for Invoicing, time categorization, client billing Profitability tracking, workload analysis Resource planning, forecasting, avoiding overload Example Client design task = billable; internal meeting = not 30/40 hours billable = 75% utilization A designer can create 6 emails/day before quality declines Expressed as percentage? ✅ Yes, across roles or periods ✅ Always — this is how it’s defined ⚠️ Sometimes, but often better expressed in outputs or thresholds 8 smart strategies agencies make to stay profitable Enough of the theory. The next step is to overhaul your approach to billable utilization using real strategies from agency folks who've actually done the hard things. We’re talking resetting targets, reshuffling teams, rebuilding margins, and learning how to track time without killing the vibe. Use these plays to feel confident that your team’s time is put to work in all the right places. Strategy 1: Calculate utilization accurately with time tracking Your utilization is fiction unless you're tracking time as evidence. You might think you're running at 80%, but without clean, consistent data, you're guessing and probably underbilling. Eli Rubel presents the idea that too many agency owners are afraid to track employee or freelancer time because “we’re human, we want to be nice and kumbaya.” He expresses the need to get over this mindset because time tracking is absolutely fundamental to the agency business model. “An agency is in the business of selling someone else's time and then making a profit on it . You can't sell someone else's time efficiently if you don't know what their time is in the first place. It boggles my mind that people fly blind in that way.” — Eli Rubel Toggl tip: Accurate utilization starts with getting your whole team to actually track their time. Toggl helps teams reach full adoption by logging time from anywhere using the desktop app, browser extension, mobile app, or turning calendar events into time entries. With built-in functionality like idle detection, automation, and auto-tracking, Toggl handles the tedious parts so your team can focus on the work that matters. The result? Fewer hours lost to administrative tasks and total clarity on what’s billable, so you’re not leaving revenue on the table. Strategy 2: Redefine what billable vs. non-billable work means (and track them properly) "Is this billable?" is probably the most asked and least confidently answered question in agency life. Client call? Sure. Final deliverable? Definitely. Chasing inspiration through a rabbit hole of design blogs, color palettes, and half-formed ideas? Hmmm, that’s where it gets fuzzy. But for creative agencies, that fuzziness is the work. Eli Rubel’s NoBoringDesign agency has seen firsthand how creative exploration often blurs the line and why it still absolutely counts: