Utilization and Pricing Are the Two Numbers You Run on Feel

Two numbers decide whether a services firm makes money. How much of your people's time you actually sell, and what you charge for it. Most owners set both by instinct, feel their way through the year, and find out in December whether they were close. It's a strange way to run the only two levers that matter.

Start with utilization, because it's the one that has been quietly getting worse. Across professional services firms, average billable utilization fell to 66.4 percent in 2025, the lowest in the history of SPI Research's benchmark and down from 68.9 percent the year before. That's the fourth straight year of decline, and it now sits below the 70 percent floor those same analysts consider the minimum for a firm to be sustainably profitable. It shows up in the margins. Industry-average EBITDA has slipped toward the high single digits, the thinnest in 5 years.

66 percent means a third of the time you're paying for never reaches a client. Some of that is unavoidable. People take vacation, they train, they sell. But the number that separates the strong firms from the rest is not small. The top fifth of firms in that benchmark run around 75 percent utilization. Everyone else averages closer to 65. Their cost base is identical, right down to the salaries and the office lease, but nearly 10 points more of it gets sold. Almost all the profit difference between those two firms lives in that gap.

Utilization is a target problem, not an effort problem

The instinct when utilization drops is to push everyone to bill more hours. That's the wrong read, and it burns out the people you can least afford to lose. High utilization is a design choice, set role by role, not a motivational one.

The firms that get this right don't hold everyone to the same bar. A junior analyst should be running high, somewhere in the mid-to-high eighties, because their job is to execute. A mid-level consultant sits lower, in the high seventies, because they're managing as well as doing. A senior principal might be booked at half their time, because the other half is selling the work that keeps everyone else utilized. When an owner pushes for uniform utilization across those roles, they either overload the seniors who should be selling or leave the juniors with slack nobody's watching. The number moves when you set the right target for each seat, then staff and sell against it. Not when you send a stern email about timesheets.

Pricing on feel is the more expensive habit

Utilization at least gets watched. Pricing usually doesn't. The rate came from what the last firm charged, or what felt defensible in a nervous moment across the table, and it's been drifting up by a small cost-of-living bump every year since. Nobody has asked in a long time what the work is actually worth to the client who buys it.

Here's why it's worth asking. A 5-point improvement in a single lever, the bill rate, utilization, or realization, can swing EBITDA margin by 3 to 8 points, according to advisory groups that benchmark these firms. Of those three, the bill rate is the one that costs nothing to move. Selling more hours means more people and more delivery risk. Raising a price you have been underpricing means sending a different number on the next proposal. The floor on that is your nerve, not your capacity.

The firm that prices on feel is almost always pricing to its own anxiety rather than to the client's alternative. You're quoting against the fear of losing the deal, when the client is comparing you against doing nothing, or against a competitor who charges more than you do and wins on confidence. The buyer rarely knows your cost. They're guessing at your value from the number you put in front of them, and a low number tells them exactly one thing.

Put a real figure on both before the year is set

You don't need a system for this. You need two numbers written down instead of assumed.

For utilization, set a target for each role, not one for the firm, and measure worked-and-billed against it every month rather than every quarter. Slack that sits for 90 days becomes a hiring mistake nobody meant to make. For pricing, take your standard engagement, the one you sell most, and raise it 10 percent on the next three proposals. Watch what happens. If nobody flinches, you found free margin, and you should keep going until someone does.

The math is unsentimental. Move utilization from 65 to 70 and hold your rate, and you've added roughly 8 percent more billable capacity out of the same payroll. Do it while raising the rate 10 percent, and you have rewritten the year without hiring a single person. That's the return on treating two numbers as decisions instead of habits.