The Agency Profit Podcast
Mastering Utilization and Capacity Planning for Agency Profits
Jan 24, 2024
This podcast episode delves into the importance of utilization rates for agency profitability. It discusses the historical context and challenges in measuring utilization, emphasizes the impact on agency profitability, and introduces the Parakeeto framework for calculating utilization. The episode also explores the formula for utilization, the distinction between delivery hours and billable hours, and the significance of a consistent metric aligned with a broader management framework.
40:26
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Quick takeaways
- Defining utilization accurately and using it in conjunction with other metrics is crucial for measuring agency profitability.
- Improving utilization involves tactics such as reducing client dilution, investing in resource forecasting, load balancing within teams, and minimizing dependencies and synchronicity in projects.
Deep dives
Understanding Utilization and its Importance
Utilization is a key metric that measures how much of the available capacity, whether it's from people or machines, is being used to generate revenue. It became particularly important in the agency industry during the billable hour era. However, in a modern agency context, utilization can be more complex and abstract due to changes in billing models and the decoupling of time worked and revenue earned. Understanding how to define utilization accurately and using it in conjunction with other metrics is crucial.
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