The Quickest Way to Increase Your Resource Utilization
Time is Money when it comes to billable hours.
Billable hours are the hours that are spent on client projects. Utilization is defined as the amount of an employee's available time that's spent on this productive, billable work, expressed as a percentage. For any engineering service provider, this metric is the single biggest determinant of profitability. That’s why it is so crucial to understand what your current percentage billable utilization is - and even more important to understand how to increase that utilization.
What happens when we have less billable hours?
Let’s look at an example:
Employee X: This employee’s annual cost (including overhead) is $144,000. Assuming that they bill 1,800 hours annually, their hourly cost is $80. For this scenario, let’s say this employee works 1,000 hours on a project for which the firm receives $90,000 in revenue.
The number of billable hours drastically impacts a company’s revenues.
At the end of the day, the revenue from all projects has to cover the firm cost, plus profit, so the profitability metrics must use the billable hours only. As you can see, the difference in this employee’s billable hours produced a $16K difference in revenue to the company, and turned potential profit into a loss.
According to the Deltek Clarity Architectural and Engineering Industry Study, the average utilization rate for these industries is 60%. You might be surprised by how low this number is. Low utilization rates can hint at inefficiencies in a company, but also provide a starting point to eliminate waste and increase productivity and effectiveness.
What causes low utilization rates?
There are many reasons for low utilization rates, including:
There isn’t enough billable work to go around and employees are not being effectively utilized due to lack of demand
There are inefficiencies in internal processes that are causing excess administrative time
Training time isn’t adequately preparing junior team members to handle the available workload
Your company has too many subcontractors on a project, rather than utilizing the in-house workforce
Inefficiency at distributing the work
Structure Issues: Low utilization rates can indicate a top-heavy structure – too much management and not enough production
How can you easily and effectively increase utilization rates?
We know engineering service providers are highly motivated to increase their utilization rates and that’s why we’ve created a platform that seamlessly provides them the information to do just that.
totaliQ’s unique Expertise Inventory gives organization’s maximum visibility into who their experts are, where these experts are located and even gives information into which projects that employee is involved in. This is a real-time database that auto-updates and generates information according to the knowledge and insights that employees contribute.
This level of visibility into the organization means that companies know exactly who they have in-house. The expertise inventory can be used to increase utilization by finding the right resources for project teams and project proposals.This allows them to engage these employees before taking on subcontractors or hiring new employees at additional cost, and thus lowering the billable hours for under-utilized current employees.
Additionally, totaliQ allows companies to quickly and efficiently find the right people across the organization so that tasks can be assigned to these employees based on the required expertise for the task at hand.
Finally, we know cash flow remains in check and projects flow smoothly when there is a clearly outlined set of tasks and timelines. totaliQ ensures that project managers have full visibility into what experts they have available and who can be assigned each part of a project, so that there are no unforeseen tasks that need to be outsourced and hold up timelines.
Inefficiencies at distributing work, under-utilized employees and over-utilized subcontractors can wreak havoc on an organization’s bottom line over the long term. totaliQ has created a seamless way to counteract these common issues in a fun, easy to use platform. Interested to see if it really works? Contact us for a free demo today and let us show you how you can use your expertise to your advantage.