What is a good utilisation rate for an agency?

Capacity management is both a margin tool and a quality signal, and most agencies treat it as neither. They discover their utilisation problem retrospectively, usually when someone hands in their notice.

The band, and why it has a ceiling

Under-utilisation wastes margin. Over-utilisation burns people and degrades quality. That's why the strong range is a band, 70 to 80% billable, not a number to maximise.

Above 80%, you're borrowing from your people. The work still goes out, but the quality variance creeps up, the goodwill drains, and eventually your best people leave. Below 60%, and certainly below 55%, the problem is upstream: you're carrying capacity for work you don't have, which usually means poor planning or the wrong client mix.

Capacity is a forward discipline

The utilisation number tells you about the past. The capacity plan tells you about the future, and that's the one buyers probe.

If you have no forward view, you're reactive only. An informal view two to four weeks out is acceptable. A formal capacity plan looking eight or more weeks ahead is strong. If you can't see eight weeks out, you're reacting to problems that were predictable and preventable, and that's expensive in margin and in morale. Buyers read reactive capacity management as a scale risk: if you can't plan at this size, you can't plan at twice the size.

The number that sits behind it

Utilisation on its own can mislead. High utilisation on underpriced work is still a bad business. So pair it with people costs as a percentage of gross income: above 70% is fragile, 60 to 65% is acceptable, below 60% is strong. Agencies that routinely carry people costs above 70% are massively vulnerable to revenue volatility, because there's nothing left to absorb a shock.

Both numbers roll up into gross income per head, which is the single most revealing metric in an agency. More on that in the metrics question below.