People are your biggest asset

**– use them wisely**

Effective resource utilization is important to any company. But for professional services companies it’s probably the most important aspect of business operations.

Because utilization drives performance across all metrics – from billing to revenue to profitability – every professional service company should make raising it a top priority. Higher utilization means that more productive work is being done, and at a lower cost.

And with the current challenges facing business, making even small improvements – where possible – will be vital in dealing with downward cost pressures from customers and clients.

Small gains pay off big

In a company with 200 fee earners working 220 days a year making a $1000 per employee per day in billable revenue with a 70% utilization rate and a 15% margin will see $30.8m in a year in revenue, and $4.62m in profit.

If we increase utilization to 73.5% (just a 3.5% increase), revenue jumps to $32.34m – an increase of around 5%. However, because the company’s costs haven’t changed, this additional $1.54m can be added directly to margin.

This means that if we boost utilization by 3.5%, we can increase margin from 15% to 19%, and total profit by 33%.

Increased utilization can also have a host of positive secondary effects beyond making money. Well utilized employees who are satisfied and engaged with their work will perform better and stay with the business longer.

Moreover, good utilization means reduced headcounts thanks to the optimum allocation of workloads among your teams. When fewer people are required to complete projects, the single largest cost center for many professional services organizations – salaries – can be kept manageable.

This leads to better profitability at an individual project And makes it possible for the company to take on more billable work (as more projects can be completed with the same team structure)and means the organization can thrive with higher margins, a better level of service delivery, and more satisfied clients.

Moving the needle

Knowing you need to keep a close eye on utilization to ensure maximum company performance is one thing, but the ability to track it and optimize it is another. Complete visibility and control over your project plan, schedule, cost and budget is essential to identify inefficiencies, and areas for improvement.

This guide serves as a starting point for identifying your current utilization levels, and the steps needed to maximize them. Helping you move your business from simply tracking time, to encouraging a culture that structures its processes, workflows, and attitudes in a way that treats time as your most precious commodity.

Complete visibility and control over your project plan, schedule, cost and budget is essential to identify inefficiencies, and areas for improvement.