Agency performance metrics

Direct answer

Start with billable utilization, effective billed rate, project margin, client retention, and collection time. Define the period and denominator for each. A busy team can still lose margin through overruns, discounts, or slow payment.

Why this question comes up

Revenue growth can hide delivery overruns. Review project margin alongside capacity, pricing, and collections. For client-level detail, see the client profitability analysis guide.

Records to gather

• Time entries by person, client, and project, with billable flag
• Client invoices and any write-offs or discounts applied
• Payroll and contractor cost by person
• Project budgets or estimates against actual hours
• Retainer agreements with scope and hours included
• Client renewal and cancellation records if measuring retention

Review workflow

1. Define utilization. Divide billable hours by available hours for the same people and period. Show role mix; headcount alone does not measure delivery capacity.
2. Separate rate from volume. Compare hours worked with hours billed and fees billed. A lower total can reflect fewer hours, lower pricing, or write-offs.
3. Calculate effective billed rate. Divide fees billed for the work by delivery hours on that work. Use the same projects and period; track cash collection separately to avoid timing distortions.
4. Check project margin. Compare net project fees with direct delivery costs, including contractors and any allocated staff costs. State what is and is not included.
5. Follow the billing chain. Compare work performed, invoices sent, and amounts collected. Investigate gaps before calling them scope creep or bad debt.

What a useful answer should include

• Billable utilisation by person and team, with the denominator defined
• Effective billed rate alongside list rate, with both calculations defined
• Project-level margin, not only an agency-wide figure
• Work performed, fees billed, and cash collected shown as separate stages
• Non-billable time categorised — internal, business development, admin
• The period and whether it includes contractors

Common failure modes

• Reporting blended margin only. It can hide projects with weak or negative margins.
• Using list rate as actual yield. Discounts and unbilled work can lower the rate realized on delivery time.
• Undefined utilization denominators. Available, contracted, and total hours produce different percentages. State which you use.
• Ignoring unbilled work. Hours worked but not yet invoiced need separate review; billing and revenue recognition may fall in different periods.