If you’re new to consulting or professional services, you’ll hear people talk about “utilization.” It’s a simple metric that shows how much of your time goes to client work.This post explains what utilization is, how it’s usually calculated, and how to manage it without surprises.
Utilization in consulting is the percent of your work time spent on revenue-generating client work.
Utilization is a percentage that helps firms understand how much of your time is spent on work that brings in revenue.Most firms use utilization to:
- Plan staffing and workloads
- Estimate project profitability
- Set performance expectations by role.
Targets usually shift as you move up:
- Junior staff often have higher targets because they spend more time delivering work.
- Managers and partners often have lower targets because they spend more time leading teams, reviewing work, and helping win new work.
Most firms use a version of this formula:
Utilization % = Billable hours ÷ Base hours
Billable hours are the hours you can charge to a client, or hours tied directly to funded client work.In federal contracting, not every project bills by the hour (for example, firm-fixed-price work). Even so, firms often still track “billable” time as the time spent delivering funded client work.
Base hours are the hours your firm considers “available” for client work in a year.Important: firms define base hours differently. Some use 2,080 hours. Some subtract holidays. Some treat PTO differently. Use your firm’s policy.
If your firm uses 2,000 base hours and you work 1,600 billable hours:
1,600 ÷ 2,000 = 80% utilization
- Client delivery work you can bill
- Approved client-related time (depends on your firm)
- PTO and holidays (depends on your firm’s formula)
- Training and internal meetings
- Recruiting, proposals, and business development
Managing utilization is mostly about staying aware of where you stand and communicating early.
- Know your target. Ask what percentage you’re expected to hit for your level.
- Track it monthly. Don’t wait until the end of the year.
- Speak up early if you’re light on work. Staffing gaps are easier to fix early.
- Plan for non-billable time. Training, admin work, and PTO are normal.
Yes, it’s possible to exceed 100% utilization if you work a lot of billable overtime and your firm counts those hours.
In federal consulting, utilization can be harder to control than people expect because:
- Funding and task orders drive the work. You can be ready to work and still be waiting on approvals or the next task. This is very true when there is a lapse in appropriations.
- Bench time happens between tasks. It doesn’t mean you’re underperforming. Sometimes it’s just timing.
Utilization measures hours, not results. That can create a moral hazard:
- It can encourage people to optimize for being busy instead of being efficient.
- Finishing faster can hurt your numbers unless you immediately find more billable work.
- In some cultures, it can push “hours first” behavior and increase burnout risk.
Utilization can still be useful. It works best as a planning tool, not the only measure of performance.
- Ask your manager what counts as billable time and what your utilization target is.
- Track your utilization monthly so you can adjust early.
- Build the skills that make you easier to staff and more valuable on projects.
- Utilization is billable time divided by base time.
- Your firm’s definition matters, so use their policy.
- Track early and communicate early to avoid year-end panic.
If you support federal clients and want practical training you can use right away, sign up for my free CPA CPE credits course at
www.federalfinancecpe.com/free.
