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What Are Utilization Benchmarks for Professional Services?

It is important for professional services teams to ensure that their billing approach not only maximizes profits but also stays competitive in the market. One of the ways to measure this is by implementing professional services utilization benchmarks.

There are many different ways to measure professional services utilization benchmarks but these may include using project dashboards or measuring project KPIs.

What are the types of utilization benchmarks for professional services?

There are two different categories of utilization benchmarks for professional services:  

  • Internal utilization benchmarks: These involve analysis of purely internal data such as measuring team performance. While this is useful for things like resource planning, the downside is that you are only measuring your results against your own company, without considering competitor utilization benchmarks. 
  • External utilization benchmarks: This kind of benchmarking takes into account industry data to see where your organization fits into the overall market. It analyzes where most companies see the most value and whether your organization would be considered operationally effective.

 If you are looking to enhance your project profitability, you may want to look at a mix of utilization benchmarks for your professional services teams, such as:

  • Utilization rate (hours worked / total available hours): This metric shows how much of your employee’s available time is spent on billable work.
  • Realization rate (total billed hours / total billable hours): This measures your total billed hours worked of all available billable hours for a particular resource.
  • Agency realization rate (total utilization rate for all employees / total employees): This calculates the utilization rate for all billable staff.

However, it is absolutely essential that when considering utilization benchmarks for professional services, you remember that you are dealing with human metrics. That is to say, you will never reach 100% billable utilization — your teams will need to attend meetings, undertake training, take their PTO, and avoid burnout. 

Instead, it’s about cutting down on the time wasted during billable hours. What can help is resource management software or time tracking software to ensure client work is being assigned to those with capacity and you have an accurate picture of how long it may take in relation to other projects.