Here's the thing: your billing rate and your utilization rate are the two biggest levers controlling your agency's profitability. You can have the highest hourly rate in your market, but if your team is only billing 50% of their available hours, your margins will still be thin. Conversely, a team with moderate rates and strong utilization will almost always outperform the higher-priced agency with sloppy capacity management.

This guide covers everything you need to know about utilization rate, including how to calculate it, what good benchmarks look like for different roles, and how to actually improve the number without burning your team out.

> Want to see your number? Use our free Utilization Rate Calculator to calculate your rate, compare to benchmarks, and see the revenue impact.

What Is Utilization Rate?

Utilization rate measures the percentage of your team's available working hours that are spent on billable, client-facing work. It tells you how effectively your agency is converting available labor capacity into revenue-generating activity.

The formula is simple: Utilization Rate = (Billable Hours / Total Available Hours) x 100

If a designer has 40 available hours in a week and spends 32 of those on client projects, their utilization rate is 80%. The remaining 8 hours went to internal meetings, admin, professional development, or other non-billable activities.

Utilization rate can be calculated for individual team members, departments, or the entire agency. Each level tells a different part of the story.

Utilization vs. Realization: Why You Need Both

This is where most agencies get confused, and it matters more than you might think. Utilization measures how busy your team is with billable work. It answers the question: "Are we spending our time on things we can charge for?" Realization measures how much of that billable work actually turns into collected revenue. It answers a different question entirely: "Are we capturing the value of the work we did?"

A team can be highly utilized but have terrible realization. That happens when projects go over budget, when time gets written off to avoid scope conversations, when invoices get discounted, or when clients negotiate down after the fact.

High utilization plus low realization means your team is busy but your agency isn't making money. That's a recipe for burnout without the financial reward to show for it. Realization Rate = (Revenue Collected / Potential Revenue at Standard Rates) x 100

Track both. If your utilization looks healthy but your margins are thin, the gap is almost certainly in realization. That usually points to scoping problems, pricing problems, or a culture of silent write-offs.

2026 Utilization Rate Benchmarks

Benchmarks vary by source, but here's what the data consistently shows across multiple industry studies: Agency-wide averages: Marketing and creative agencies typically target 70-80% utilization across the full team. The annual target for net utilization (accounting for holidays, sick time, and professional development) sits around 50-60% at most agencies. By role: Not every role should have the same utilization target. Expecting your creative director to hit the same number as a junior designer is unrealistic and counterproductive. RoleTarget Utilization Junior designers/developers80-90% Senior creatives/developers70-80% Project managers60-70% Account managers50-60% Principals and leadership30-50%

Junior designers and developers should be spending most of their time on direct production work. High individual contributor output is the expectation.

Senior creatives and developers spend more time mentoring, doing code review, creative direction, and quality oversight. These activities don't always show up as billable hours, but they're essential for quality delivery.

Project managers spend significant time on internal coordination, scheduling, risk management, and administrative tasks. Their value is in keeping projects on track and profitable, not in maximizing their own billable hours.

Account managers split time between client relationship management, business development activities, and internal strategy sessions. A highly billable account manager probably isn't doing enough relationship building.

Principals and leadership split time between billable client work, business development, strategy, and running the agency. Trying to push this number too high usually means you're working in the business instead of on it. By agency size: Promethean Research data shows that studio-sized agencies (under 10 people) tend to be the most profitable, partly because utilization is naturally higher in small teams where everyone wears multiple hats. As agencies grow past 10 and then 25 employees, average margins tend to decline, often because utilization management becomes more complex without the right systems in place.

Why Your Utilization Rate Might Be Wrong

If you're not tracking time consistently across your entire team, your utilization number is unreliable. And if your number is unreliable, any decisions based on it are suspect.

Common problems that distort utilization data: Selective tracking. If only your production team tracks time but your PMs and account managers don't, your agency-wide utilization will be inflated. True utilization requires tracking the entire team's hours, billable and non-billable. Sloppy categorization. Billable time that gets logged as non-billable (or vice versa) throws the whole calculation off. Clear guidelines for what counts as billable are essential. End-of-week guessing. When people fill in timesheets on Friday from memory instead of tracking in real-time, accuracy drops dramatically. Studies consistently show that time logged in the moment is significantly more accurate than time reconstructed from memory days later. Ignoring non-billable capacity. A utilization rate only means something if the denominator (available hours) is accurate. If you're not accounting for PTO, holidays, sick days, and company meetings, your targets will be unrealistic.

How to Improve Utilization (Without Burning People Out)

Here's the important caveat that a lot of utilization content skips: pushing utilization higher isn't always the right move. An agency running at 95% utilization is an agency with no margin for error, no capacity for unexpected client requests, and a team heading straight for burnout.

The goal isn't maximum utilization. It's optimal utilization, which is the rate that maximizes revenue while preserving team health, quality of work, and capacity for growth.

With that said, if your utilization is below your targets, here are practical ways to improve it:

Reduce Non-Billable Time Waste

Start by understanding where non-billable time goes. Internal meetings are usually the biggest offender. Audit how many hours per week your team spends in meetings that could have been an email, a Slack message, or a 5-minute standup. Context switching between tasks costs up to 40% of productive time according to research on the "toggle tax." When team members jump between six different tools and twelve different Slack channels, their effective work capacity drops even though they look busy all day.

Consolidate tools and communication channels. Block dedicated focus time for production work. Challenge every recurring meeting: does this need to happen weekly? Does everyone in this room need to be here?

Improve Resource Allocation

Poor utilization often isn't about your team being lazy. It's about the wrong people being assigned to the wrong work, or work not being distributed evenly across the team.

When one designer is at 95% utilization while another is at 50%, you don't have a utilization problem. You have an allocation problem. Real-time visibility into who's working on what, and how much capacity each person has remaining, is the foundation of good resource management.

Fix Your Scoping Process

Under-scoped projects create a cascade of utilization problems. When a project goes over budget, the overage either gets written off (hurting realization) or gets absorbed as unbilled time (hurting utilization). Either way, your numbers suffer.

Better scoping means more accurate estimates, fewer budget overruns, and more predictable utilization. Track how your estimates compare to actuals on every project. Adjust your templates based on real data, not guesses.

Make Time Tracking Painless

This is the most impactful single change most agencies can make. If time tracking is easy, people do it. If it's painful, they don't. And if they don't track time, you have no data to work with.

The best time tracking tools integrate directly with your project management system so team members can start a timer on the task they're already looking at. No context switching. No separate app. No end-of-week guesswork. Just a click to start and a click to stop.

Tracking Utilization: What to Monitor

Once you're tracking utilization consistently, build a simple dashboard that gives you visibility at three levels: Individual level: Is each team member hitting their role-appropriate target? Who's over-utilized (burnout risk) and who's under-utilized (capacity available)? Team or department level: Are there allocation imbalances between departments? Is your design team at 90% while your development team is at 60%? Agency level: What's your blended utilization rate? How does it trend over time? Is it improving, declining, or flat?

The agencies that track utilization consistently report profitability 20-30% higher than those operating without real-time visibility into where their time goes. That's not because tracking changes behavior overnight. It's because visibility creates accountability, accountability creates conversations, and conversations create improvement.

Utilization rate isn't glamorous. Nobody starts an agency because they love capacity planning. But the agencies that figure this out tend to be the ones that stay profitable while their competitors wonder why they're working so hard with so little to show for it.