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Monday, August 28, 2006

Utilization Rates and How They Work With Benchmarking and Best Practice

You can measure your success against others in the computer consulting business by using benchmarking and best practice. When you examine industry benchmarks and rate your own performance in comparison, you can determine what areas you need to improve to get the most successful results. Utilization rates are critical to benchmarking and best practice. The utilization rate is defined as the ration of how many hours you bill clients compared to the number of yours you actually work during a certain period.


You should compare your skills with benchmarking and best practice based on a 40 hour work week. Thus, if you are working 40 hours per week but really only working with clients for 10 hours, the utilization rate would be 25%.


Benchmarking and best practice within the computer consulting industry is typically approximately 50% minimum in regards to utilization rate. You need to gauge whether your utilization rate is going up to meet these standards for best practice and benchmarking.

You should be at 50% utilization rate by the sixth to ninth month of your computer consulting business. By the time your business is fully grown, you will probably be at a utilization rate of 75%, meaning you will be working 30 billable hours per week. If you get higher than this percentage, you are probably not going to be able to do your best work. You might get a huge paycheck, but you will probably burn out quickly.

Part of being in the computer consulting business s measuring your performance against your competitors. Benchmarking and best practice will help you figure out where you stand in the industry, and your utilization rate will be dependent upon where your business is in its life cycle.

Blogged By: Joshua Feinberg