As a small business or agency owner, you know that your team’s time is your biggest asset and often your biggest expense.
But how do you really know if your employees are being efficient? Are their hours actually going toward the kind of work that grows your business?
That’s where this guide to employee utilization comes in.
Let’s break down what it is, why it matters for service-based businesses like yours, and two simple exercises you can run to see how your team is actually spending their time.
What Is Employee Utilization?
In plain English, utilization measures how much of your team’s time is spent on billable work—the kind of work that brings in revenue—versus everything else (admin tasks, internal meetings, downtime, etc.).
The basic formula looks like this:
Utilization Rate (%) = (Billable Hours ÷ Total Hours Worked) × 100
So if someone works 40 hours in a week and 30 of those are billable to clients, their utilization rate is 75%.
Why It Matters for Agencies and Service Businesses
For service-based businesses, time is inventory. You don’t sell physical products—you sell ideas, results, and time.
If too much of your team’s time is tied up in non-billable work (or worse, wasted), it cuts into your margins, reduces capacity, and makes scaling feel like an uphill battle.
Getting a handle on utilization is one of the fastest ways to improve profitability without adding more people or clients.
What Counts as Billable vs. Non-Billable?
Here’s a quick cheat sheet to help you understand the difference.
✅ Billable Time
Work that you can (and do) charge your clients for:
- Designing a client’s website
- Running ads or campaigns
- Writing copy or code
- Delivering client strategy sessions
- Responding to client requests
❌ Non-Billable Time
Time that’s necessary to run your business, but doesn’t generate direct revenue:
- Internal meetings or team check-ins
- Writing proposals or onboarding new clients
- Training and professional development
- Admin tasks (emails, software setup, invoicing)
- Business development and marketing
- Taking breaks or handling personal stuff
Some businesses also consider gray-area tasks like strategy calls or revisions to be non-billable if they weren’t scoped or priced in. That’s why tracking is so important. You might uncover hours of “invisible” time that’s dragging your margins down.
What’s a Good Utilization Rate?
Benchmarks vary by role, but here’s what most agencies and service firms aim for:
| Role | Target Utilization |
| Junior / Entry-Level | 80–90% |
| Mid-Level Producer | 75–85% |
| Senior / Lead | 60–75% |
| Manager / Strategist | 50–60% |
| Owner / Partner | 30–50% |
Keep in mind: these are billable utilization targets. If you include productive non-billable time (like business development or internal training), the total “effective” utilization rate might be higher.
Exercise 1: Run a “Time Audit Week”
While “employee utilization” sounds like a fluffy term, there are tangible exercises you can do to get to the bottom of it.
One of the most effective ways to start? Run a simple Time Audit Week.
Here’s how it works:
Ask each team member to track what they’re doing every hour of the workday for one full week. You can use a tool like Toggl, Clockify, or just a shared Google Sheet with columns for:
- Billable client work
- Internal meetings
- Admin or ops tasks
- Marketing or sales efforts
- Breaks or personal time
The goal isn’t to micromanage, it’s to get honest, baseline data about where everyone’s time is going.
Here’s a quick template you can try here!
What this will show you:
- How much time is going to actual client work
- How much time is lost to meetings, admin, or context-switching
- Which roles are stretched too thin—or underutilized
This one-week snapshot often reveals way more than you expect. And it’s the first step in fixing margin leaks and workload bottlenecks.
Exercise 2: Do a Billable vs. Non-Billable Breakdown
Once you have the time-tracking data, it’s time to crunch the numbers.
For each team member (or role), calculate:
- Total Hours Worked
- Billable Hours
- Utilization Rate = (Billable Hours ÷ Total Hours) × 100
Now sort the rest of the time into categories:
- Admin or internal ops
- Business development
- Training or development
- Idle time
This breakdown helps you see how much of each person’s time is truly revenue-generating—and where process improvements, delegation, or role shifts could free up more billable hours.
Why this matters for businesses like agencies:
Agencies in particular tend to blur the lines between billable and non-billable work. Strategy calls, brainstorming sessions, or proposal writing might eat up hours but not show up on an invoice.
Understanding how much time is being absorbed by this kind of work helps you price better, staff smarter, and avoid scope creep.
What’s Next?
You don’t need to overhaul your whole business overnight. Start with these two exercises.
You’ll likely spot a few quick wins – like trimming a weekly meeting or delegating admin tasks – and lay the foundation for better staffing decisions and smarter pricing.
At Affinity Accounting, we help service-based businesses like yours dig into these numbers all the time.
If you’re looking for support figuring out your team’s true capacity, margins, or pricing strategy, we’re here to help.
Simply head over to our Contact Page to book an introductory call. Helping businesses reach the next level of profitability and growth is what we do
Want to get a handle on your team’s efficiency?
Let’s talk about what utilization looks like in your business.
Until next time.
