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Hire 15 People or Layoff 35? Tips for Optimizing Billable Utilization

When I started my career in consulting 29 years ago, we filled out a “time-sheet” every two weeks, put it in a manilla envelope, and someone in the project management team would overnight it to the home office. Today, we enter time daily. Literally. If I don’t enter my time by the end of the day, I get an email reminding me I have “missing time.”

Now that I’ve run a services organization, I get the desire (and need!) to track time so religiously.

A one-point dip in billable utilization can cost a 250-person organization $20,000 / week[1] (that’s $86,667/month OR $1,040,000 per year).

And that’s only a 1% dip in utilization. What if 5, 10, or 20 people suddenly show up on the bench?

On the flip side is lost growth potential if you do not have enough resources.

Don’t get me started on how much fun life is when your peers in sales, customer success and finance start weighing in one way or another for whether there are enough, too many or too few resources.

The challenge is the information vacuum that often exists around resourcing. Billable utilization is a trailing indicator of staffing levels – and doesn’t translate 1 to 1 for predicting future utilization.

The best way to create visibility to future resourcing needs is to translate your sales pipeline into a resource pipeline.  Essentially you:

  1. Start with your current projects and staffed resources.
  2. Layer in the opportunities in the pipeline, staffing needs, start dates and probability of closing.
  3. Add up the results over time to figure out if you have a surplus, shortage, or stills mismatch[2]

This creates the data and analytical foundation to help the professional service organization figure out if they need to hire, cross-train or get out and sell more to consume the supply of resources over the next 1/3/6 months.

With this visibility – sales, customer success, finance can be part of the solution – not the problem!

And don’t just take my word for it.  A few years ago, I helped someone implement the above processes as they were having challenges with the consistency of billable utilization and driving growth. They implemented the approach I outlined above. They successfully grew revenue and profits and their firm was acquired in a favorable transaction.

Oh – did I mention – they are now my boss?

This is one of those “they liked the idea so much – they hired me into Withum to help other organizations improve their people-based business operations.”

[1] Calculated:  40 hours/week * 1% * 250 people * $200 / hour = $20K/week

[2] Typically by week or month

Author: Mark Sloan, Practice Lead

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