The agency utilisation rate that breaks vs. compounds

Utilisation is the metric agency founders track too late. By the time it's a number on a dashboard, the team is already either bored (low utilisation) or quitting (high utilisation). This walkthrough is how to track it before either of those happens, and the lever that pulls a tired agency out of high-utilisation hell without hiring.

The number

Utilisation = billable hours / total available hours per week. Available = ~38 working hours after meetings, admin, and PTO. So 30 billable hours/week = 78% utilisation against 38, or 60% against a 50-hour week (which is the right denominator if your team is actually working 50).

The bands

• <50% utilisation — gross margin is bleeding. Either you've sold less work than the team's capacity (sales problem) or you've over-staffed the work you have (planning problem). At <40% sustained, the agency is unprofitable. Most early agencies live here for a while and don't realise it.
• 50-60% — concerning but workable. You have slack to learn, write, or sell internally. Treat this as either an investment phase or a leading indicator that you need to sell more work.
• 60-75% — the healthy band. Team is busy but not burning. Margin compounds at this level.
• 75-85% — productive but fragile. One sick week derails projects. Senior people are doing junior work because everyone is full.
• >85% sustained — danger zone. People are working more than 50 hours. Quality slips invisibly. Attrition follows within 6 months. This is the band where founders feel like the business is humming and don't realise people are about to quit.

Track it weekly per person, not monthly aggregate

The aggregate hides the senior person stuck on internal projects (low individual utilisation) while juniors are at 95%. Per-person weekly utilisation surfaces the imbalance fast.

A Notion database with one row per person per week, two columns (billable hours, total hours), and a computed % column is enough. Don't buy software for this until you have 15+ billable team members.

The lever for a tired agency: kill the lowest-margin client

Above 80% utilisation, the typical founder reaction is "we need to hire." That reaction is usually wrong. Hiring adds 8-12 weeks of onboarding, dilutes the team's craft, and the new person can't pick up the existing fire because they don't know the clients.

The better lever: fire the lowest-margin client.

Run the math:

• For every active client, compute hours-spent-this-month × blended hourly cost (salary + benefits + overhead, divide by 160 working hours).
• Divide that into the monthly revenue from that client.
• The lowest margin is usually the noisiest, oldest, or most loyal client — and it's usually 5-15% gross margin, not the 30-40% you assumed.

Firing them recovers 15-25% of the team's capacity immediately. Utilisation drops back into the healthy band. The team breathes. Margin goes up because the client you cut was actually destroying it. Replace the slot with someone better-fit on the next sales cycle.

The hardest part of this isn't the math; it's the conversation. The script that works: "We've grown into a different specialty and we don't think we're the right team for what you need anymore. Here are two agencies we'd recommend instead." Most clients respect it.

What this isn't

• A metric for billable-by-the-hour businesses only. Productised services and fixed-price work need to track utilisation against capacity too — just compute "available hours / hours actually delivered to revenue-generating work" instead.
• Static. Healthy bands shift with team size; a 3-person team can sustain 85% briefly because the founder is a flex resource. A 15-person team can't.