Utilisation Rates

Utilisation is the Percentage of Billable Time that is billed to a client. There are generally two ways to calculate this number, gross utilisation and net utilisation:

·         Gross utilisation is billed hours over total possible billable hours over a given period. For example, in the course of a month there may be twenty (20) workdays leading to 160 potential hours. If the consultant bills 120 hours over that period, then the gross utilization is 75%.

·         Net utilisation subtracts public holidays, vacation and sick time from the possible billable hours, for example if a consultant took a week of vacation, totalling 40 hours, then the net utilization would be 100%; 120 billed hours divided by 120 possible billable hours.

Calculated under either method, this number is important to overall revenue and profitability of the organisation. With higher utilisation there are higher revenues and gross profits, since costs such as salary are fixed over a short period of time.

On the surface it would appear that the ideal organisation should strive for a utilisation rate of 100%. This, however, is short-sighted. An organisation needs to provide time for training, sales support, and have resource flexibility to address new sales opportunities.

Very often a PSO will need to present a potential team or partial team to close a sales opportunity. If there is no talent available "on the bench" the organisation will not have the resources required to respond to sales challenges such as this.

The prudent manager works with the sales organisation to forecast upcoming projects and plan staffing and training accordingly.

Formula

Where Available Hours = Total Hours – (Public Holidays + Annual Leave + Personal Leave)