Billability

Billability (the capacity to be billed) is the most important indicator of your agency's economic stability. It describes the ratio between the working hours that you can actually invoice to clients and the total available working time. High utilisation alone does not generate revenue – only when working time becomes billable time does the margin look right at the end of the month.

Definition: What is Billability?

Billability is a key performance indicator (KPI) that measures how efficiently a team or an individual performs revenue-generating work. It strictly distinguishes between two types of working time:

• Billable Hours: Time directly assigned to and invoiced for a client project (e.g. design, coding, consultancy).
• Non-Billable Hours: Time spent on internal tasks, admin, sales, further training, or unproductive meetings.

For agencies, this distinction is vital for survival. Those who only look for "full calendars" often overlook the fact that internal time-wasters are eroding profitability.

The Formula: How to Calculate Billability

The calculation is simple but ruthlessly reveals how productive your structures are. The formula is:

(Billable hours / Total available working time) × 100 = Billability as a %

A Calculation Example

A developer in your team works 40 hours per week (= available time). Of these:

• 32 hours go into client projects (billable).
• 8 hours go into internal meetings, emails, and coffee breaks (non-billable).

Calculation: (32 / 40) × 100 = 80% Billability.

This means: 80% of their time generates direct revenue.

Why Agencies Need This KPI

Many agencies fall into the trap of "apparent productivity". Everyone is busy, but at the end of the month, too little profit remains. Tracking billability helps you to:

• Secure profitability: You can see immediately whether projects are running profitably or if you are losing money.
• Calculate prices correctly: If billability is structurally lower than expected (e.g. due to high admin effort), you need to adjust your hourly rates to remain cost-effective.
• Plan resources better: You can see who really has capacity for client projects and who is drowning in internal tasks.

[.b-related-article]Capacity Planning Software: How to make agency projects more profitable[.b-related-article]

What is a Good Billability Rate?

A target of 100% is unrealistic and unhealthy in the long term. No one can bill 8 hours a day without a break – people need time for exchange, organisation, and breaks. As a rule of thumb for agencies:

• 70–80%: A healthy value for operational roles (designers, developers).
• 50–60%: Typical for project managers who have to perform a lot of internal coordination.
• < 50%: A warning signal (except for executives with a high proportion of strategy). Here, you should review your processes.

5 Tips to Increase Billability

To improve the rate, you don't necessarily have to work more, but rather more consciously.

1. Use precise time tracking: Use a tool that makes it easy to distinguish between "actual working time" and "billable time". Often, billable hours are lost because they were forgotten or not accurately recorded.
2. Eliminate internal time-wasters: Analyse your "non-billable" times. Are weekly status meetings really necessary, or is a quick update in the chat sufficient?
3. Avoid scope creep: Do you often perform additional work that wasn't in the original proposal? If so, learn to say "no" or consistently bill for the extra work.
4. Estimate efforts correctly: Regularly compare your planned budgets with the actual hours. This helps you learn to include more realistic buffers for future proposals.
5. Transparency in the team: Explain to the team why billability is important. It’s not about control; it’s about keeping the agency economically stable and avoiding overtime caused by inefficient processes.

With the right time tracking in awork, this process becomes automatic: you can see at a glance which times have been booked to client projects and monitor budgets in real time.

FAQ

What is the difference between utilisation and billability?

Utilisation merely measures how much of the available time is spent working – regardless of what is being worked on. Billability specifically measures how much of that time is paid for. A team can be 100% utilised (e.g. with internal workshops) but have 0% billability.

Does travel time count towards billability?

This depends on your contracts. If you invoice travel time to the client, it counts towards billability (and should be recorded as such in the tool). If not, it is a "cost of sales" or internal time.

Should I include break times?

No. Billability refers to the contractual working hours (e.g. 40 hours). Statutory breaks are not working time and therefore do not factor into the denominator of the formula.

[.no-toc]Conclusion[.no-toc]

Billability is the pulse of your agency. It objectively shows you how well you are converting your team's energy into revenue. Those who keep an eye on and optimise this KPI create space for growth, better salaries, and more relaxed working, because the revenue is right without the team constantly operating in the red.