Billable vs Non-Billable Design Time Explained

Every hour your design team works costs money. But not every hour generates revenue. This comprehensive guide explains how to categorize billable vs non-billable design time, maximize profitability, and track the metrics that matter for creative agency success.

The Hidden Profitability Problem

Design agencies face a brutal reality: paying designers for 40 hours/week while only billing clients for 25-30 hours.

The Math:

Full-time designer salary: $75,000/year
Total comp (+ benefits, taxes): $95,000/year
Hours per year: 2,080 hours (52 weeks × 40 hours)
True hourly cost: $95,000 ÷ 2,080 = $45.67/hour

Billable hours per week: 28 hours (70% utilization)
Annual billable hours: 1,456 hours
Revenue required per hour: $95,000 ÷ 1,456 = $65.25/hour (just to break even)

To make 30% profit margin:
Required billing rate: $93.21/hour minimum

But you're probably charging: $125-150/hour
Actual profit IF you hit 70% utilization: $87,000-$123,000 per designer

The Problem: Many agencies run at 50-60% utilization, killing profitability.

Why This Happens:

• Don't track time accurately
• Don't distinguish billable vs non-billable
• Write off too much time without realizing it
• Scope creep eats billable hours
• Poor project estimates
• Inefficient processes

This article teaches you how to fix it.

Understanding Billable vs Non-Billable Time

Definitions

Billable Time: Work that directly benefits a specific client project and can be legitimately charged to that client.

Non-Billable Time: Work that benefits the agency, supports operations, or cannot be charged to clients.

The Gray Area: Some work falls in between and requires judgment. We'll cover these scenarios.

Why the Distinction Matters

For Profitability:

Scenario A: 60% Billable Utilization
Annual billable hours: 1,248 hours
Revenue @ $135/hour: $168,480
Cost: $95,000
Gross profit: $73,480 (44%)

Scenario B: 75% Billable Utilization
Annual billable hours: 1,560 hours
Revenue @ $135/hour: $210,600
Cost: $95,000
Gross profit: $115,600 (55%)

Difference: +$42,120 profit per designer

A 15 percentage point increase in utilization = 57% more profit.

For Pricing: If you don't know your true billable time, you can't price projects accurately:

❌ Project estimate based on 40 hours
Reality: 40 billable + 12 non-billable = 52 total hours
Result: Project is unprofitable

✓ Project estimate accounts for realistic utilization
Bid includes buffer for normal non-billable activities
Result: Project hits target margins

For Capacity Planning:

Can we take on a new 100-hour project?

Wrong calculation:
2 designers × 40 hours/week × 4 weeks = 320 hours available ✓

Right calculation:
2 designers × 28 billable hours/week × 4 weeks = 224 hours available
100-hour project + existing commitments = Overbooked ✗

Must account for non-billable time in capacity planning

What Counts as Billable Design Time

Core Billable Activities

1. Client-Requested Design Work

✓ Creating designs per project brief
✓ Developing concepts and directions
✓ Designing layouts, graphics, interfaces
✓ Producing marketing materials
✓ Creating brand assets
✓ Designing presentations
✓ Any work specifically requested by client

Example: Client requests homepage design
- Research and inspiration: Billable
- Sketching concepts: Billable
- Creating mockups: Billable
- Refining designs: Billable
- Producing final files: Billable

2. Revisions Within Scope

✓ First round of revisions (included in scope)
✓ Additional rounds if specified in agreement
✓ Minor adjustments and refinements
✓ Changes based on client feedback

Example: Homepage design contract includes 2 revision rounds
- Round 1 revisions: Billable
- Round 2 revisions: Billable
- Round 3 revisions: Non-billable (or charge extra)

3. Client Meetings and Presentations

✓ Kickoff meetings
✓ Status update calls
✓ Design presentation meetings
✓ Feedback sessions
✓ Client workshops
✓ Project planning meetings

Example: Weekly 1-hour client status call
- Call time: Billable (1 hour)
- Prep time: Billable (0.5 hours)
- Follow-up notes: Billable (0.25 hours)
Total: 1.75 billable hours

4. Research and Discovery (When Scoped)

✓ Competitive analysis (if part of project)
✓ User research for specific project
✓ Brand exploration for client
✓ Market research for client's industry
✓ Stakeholder interviews

Example: Brand identity project includes discovery phase
- Discovery activities: Billable (if in scope)
- Deliverable: Research findings document
- All time tracked to client project

5. File Preparation and Delivery

✓ Preparing files for client delivery
✓ Creating style guides
✓ Organizing asset libraries
✓ Exporting in multiple formats
✓ Packaging deliverables

Example: Preparing brand identity deliverables
- Exporting logo variations: Billable
- Creating brand guidelines PDF: Billable
- Organizing asset folder structure: Billable

6. Project Coordination

✓ Managing project timeline
✓ Coordinating with client team
✓ Status reporting to client
✓ Managing feedback collection
✓ Scheduling and logistics specific to project

Example: Managing website design project
- Creating project plan: Billable
- Weekly status updates: Billable
- Coordinating design reviews: Billable

7. Technical Specifications

✓ Creating design specifications for developers
✓ Annotating designs with measurements
✓ Documenting interactions and behaviors
✓ Developer handoff materials
✓ QA review of implemented designs

Example: Website design handoff
- Creating design specs: Billable
- Annotating Figma files: Billable
- Developer Q&A: Billable
- Reviewing staging site: Billable

When to Bill for Typically Non-Billable Work

Some activities are usually non-billable but CAN be billable if:

Learning Client-Specific Tools:

❌ Generally non-billable: Learning Figma
✓ Billable: Learning client's proprietary design system

If client requires specific knowledge for their project,
that learning time can be included in project scope.

Travel Time:

❌ Non-billable: Commuting to your office
✓ Billable: Travel to client site for meetings/workshops
✓ Billable: Travel for on-site design work

Include in proposals: "Travel time billed at 50% rate"

Excessive Research:

❌ Non-billable: General industry research
✓ Billable: Deep-dive research specifically for client project
✓ Billable: If research is a defined project deliverable

Set expectations: "Up to X hours of research included"

What Counts as Non-Billable Design Time

Core Non-Billable Activities

1. Internal Team Meetings

✗ Weekly all-hands meetings
✗ Internal project planning (before client exists)
✗ Design team critiques (not client-specific)
✗ Administrative meetings
✗ Company town halls

Example: Friday design team critique
- Designers present work in progress
- Team provides feedback
- Helps quality but not billable to any specific client
- Coded as: Non-billable / Agency Operations

2. Sales and Business Development

✗ Initial sales calls with prospects
✗ Creating proposals and estimates
✗ Responding to RFPs
✗ Pitch presentations
✗ Networking events
✗ Conference attendance (unless client-sponsored)

Example: Prospect calls and proposal creation
- Discovery call: 1 hour (non-billable)
- Creating proposal: 3 hours (non-billable)
- Proposal presentation: 1 hour (non-billable)
Total: 5 non-billable hours

If you win the project, this is your customer acquisition cost.
If you lose, it's entirely written off.

3. Administrative Tasks

✗ Timesheet entry
✗ Expense reports
✗ Reading company emails
✗ Managing personal calendar
✗ Software updates
✗ General housekeeping

Example: Weekly administrative overhead
- Timesheet entry: 0.5 hours
- Email management: 1 hour
- Scheduling: 0.5 hours
Total: 2 non-billable hours per week (5% of time)

Necessary but not chargeable to clients

4. Training and Professional Development

✗ Learning new design tools
✗ Taking online courses
✗ Watching tutorials
✗ Reading design articles
✗ Skill development
✗ Team training sessions

Example: Designer learns new Figma features
- Tutorial watching: 2 hours (non-billable)
- Practice exercises: 2 hours (non-billable)

Benefits future client work but not specific to any project

5. Internal Projects and R&D

✗ Agency website design
✗ Internal tools development
✗ Marketing material creation
✗ Portfolio case study development
✗ Experimental design projects
✗ Agency branding updates

Example: Updating agency website
- All design and development time: Non-billable
- This is marketing investment, not client work

6. Rework Due to Errors

✗ Fixing mistakes you made
✗ Redoing work because you misunderstood
✗ Correcting technical errors
✗ Implementing missed requirements

Example: Designer uses wrong brand colors
- Original design: 3 hours (billable)
- Fixing color mistakes: 1.5 hours (non-billable)

Eat the cost of your own errors - don't bill clients

7. Excessive Revisions Beyond Scope

✗ Revision round 4+ (if contract includes only 2)
✗ Major direction changes after approval
✗ Client indecision leading to constant changes
✗ "While we're at it" scope creep

Example: Logo design includes 2 revision rounds
- Revisions 1-2: Billable (in scope)
- Revisions 3+: Non-billable (or renegotiate)

Options:
- Write off (non-billable)
- Stop work and renegotiate for additional rounds
- Include in scope next time with higher pricing

8. Downtime Between Projects

✗ Waiting for client feedback
✗ Waiting for next project to start
✗ Time between client assignments
✗ Bench time (no active projects)

Example: Designer completes Project A on Thursday
- Next project starts Monday
- Friday time: Non-billable downtime

Goal: Minimize through better project scheduling

Strategic Non-Billable Time

Some non-billable time is investment, not waste:

Portfolio Development:

Creating compelling case studies:
- Time spent: Non-billable
- Return: Wins more clients and higher rates
- Worth it: Yes

Budget: 5-10 hours per major project
Treat as marketing expense

Thought Leadership:

Writing articles, speaking, creating content:
- Time spent: Non-billable
- Return: Brand awareness, inbound leads
- Worth it: Yes

Budget: 2-4 hours per week for senior designers
Generates inbound business development

Process Improvement:

Building templates, improving workflows:
- Time spent: Non-billable today
- Return: Faster billable work tomorrow
- Worth it: Yes

Budget: 1-2 hours per week
Compounds efficiency over time

The Gray Area: When It's Not Clear

Scenario-Based Guidance

Scenario 1: Research and Inspiration

Question: Is looking at design inspiration billable?

It depends:

❌ Non-billable:
- General browsing of design sites
- Building personal inspiration library
- Staying current with design trends

✓ Billable:
- Researching specific client's industry
- Finding inspiration for active project
- Competitive analysis for client
- Limited to reasonable scope (2-3 hours max)

Best practice: Set research time limit in proposal
"Up to 3 hours of competitive research included"

Scenario 2: Concept Development

Question: Is exploring multiple concepts billable?

It depends:

❌ Non-billable:
- Creating 8 concepts when client only asked for 3
- Over-delivering because you're enjoying the work
- Experimenting beyond project requirements

✓ Billable:
- Creating agreed-upon number of concepts (e.g., 3 directions)
- Exploration explicitly scoped in contract
- Client-requested concept variations

Best practice: Define in proposal
"3 initial design directions, client selects 1 to refine"

Scenario 3: Internal Review Before Client Delivery

Question: Is internal QA and review billable?

Generally no, but...

❌ Non-billable:
- Internal creative director review
- Team critique before client presentation
- QA and error-checking

Why: These are quality control measures for YOUR benefit
Client shouldn't pay for you to check your own work

Exception: ✓ Billable if explicitly in scope
"Creative director oversight included: 10% of design time"
Add to project price, but don't line-item it

Scenario 4: Email Communication

Question: Is email time billable?

Use this framework:

✓ Billable email:
- Responding to client design questions
- Providing project updates
- Clarifying requirements
- Design decision explanations
Limit: Round to nearest 15 minutes, cap at reasonable amount

❌ Non-billable email:
- Scheduling/logistics
- Administrative coordination
- General check-ins
- "Thanks" or "Got it" responses
Too small to track

Scenario 5: Presentations and Prep

Question: Is presentation preparation billable?

Split it:

✓ Billable:
- Creating presentation deck with designs
- Organizing client-facing materials
- Preparing to explain design decisions

❌ Non-billable:
- Excessive rehearsal time
- Internal presentation reviews
- Creating overly elaborate presentations

Rule of thumb: Bill 50% of prep time for major presentations
1 hour meeting → 0.5 hours prep (billable)

Scenario 6: Project Management Time

Question: Is project management billable?

Yes, but cap it:

✓ Billable (within reason):
- Creating project timelines
- Status reporting to client
- Coordinating feedback
- Managing deliverables

Typical: 10-15% of total project hours

❌ Over-billing PM:
Don't charge 20 hours of PM for 40 hours of design work
Client will see this as padding

Include PM time in your hourly rate or flat project pricing

Scenario 7: Revisions vs. New Work

Question: Client asks for changes - revision or new work?

Framework:

✓ Revision (billable within rounds):
- Adjusting existing design elements
- Changing colors, fonts, layouts
- Refining approved direction

✓ New Work (billable as change order):
- Complete direction change
- Adding new pages/deliverables
- Expanding scope beyond original

Example:
Client: "Can we try a completely different approach?"
Response: "That would be a new concept beyond our revision rounds. 
I can provide a quote for exploring that direction if you'd like."

Tracking Billable vs Non-Billable Time

Time Tracking Best Practices

Using Corcava's Time Tracking:

Step 1: Create Project Categories

Client Projects (Billable):
- Client A - Website Redesign
- Client B - Brand Identity
- Client C - Marketing Materials

Internal Projects (Non-Billable):
- Agency Operations
- Business Development
- Professional Development
- Internal Projects
- PTO/Vacation

Step 2: Track All Time

Designer's day:

9:00-9:30 AM → Email and admin (Non-billable: Agency Operations)
9:30-12:00 PM → Client A website design (Billable: Client A)
12:00-1:00 PM → Lunch (Not tracked)
1:00-2:00 PM → Internal team meeting (Non-billable: Agency Operations)
2:00-5:00 PM → Client B brand concepts (Billable: Client B)
5:00-5:30 PM → Proposal for prospect (Non-billable: Business Development)

Total tracked: 7.5 hours
Billable: 5.5 hours (73% utilization)
Non-billable: 2 hours (27%)

Step 3: Add Task-Level Detail

Time entry example:

Project: Client A - Website Redesign (Billable)
Task: Homepage Design
Description: "Created hero section with 3 layout variations"
Time: 2.5 hours
Billable: Yes
Date: November 10, 2025

Step 4: Review and Approve

Weekly time review process:
1. Designer submits timesheet
2. Project manager reviews billable hours
3. Flag questionable entries:
   - "Is this really billable?"
   - "This seems high for that task"
   - "Was this in scope?"
4. Adjust as needed before invoicing
5. Discuss patterns with team

Time Entry Guidelines for Designers

Best Practices:

1. Track in Real-Time

❌ Don't: Try to remember at end of week
✓ Do: Track as you work or at end of each day
Result: 20-30% more accurate time data

2. Be Honest

❌ Don't: Round everything up or pad time
✓ Do: Record actual time worked
Result: Accurate project profitability data

3. Use Descriptive Task Names

❌ Bad: "Design work - 3 hours"
✓ Good: "Homepage hero section - 3 layout concepts - 3 hours"
Result: Client understands invoice, you can analyze time

4. Flag Uncertainty

If you're not sure whether time is billable:
- Track it
- Add note: "Verify if billable"
- Let project manager decide
Result: Consistent policy application

5. Separate Billable from Non-Billable

Working on Client A project but spend 30 min troubleshooting Figma:

Track as:
- 3 hours → Client A (billable)
- 0.5 hours → Agency Operations (non-billable: software issues)

Don't bill client for your software problems

Weekly Utilization Report

Sample Report:

┌──────────────────────────────────────────────────────────┐
│ Weekly Utilization Report - Week of Nov 10, 2025         │
├──────────────────────────────────────────────────────────┤
│ Designer: Alex Martinez                                   │
│ Total Hours: 40.0                                         │
│ Billable Hours: 28.5 (71.3%)                             │
│ Non-Billable Hours: 11.5 (28.8%)                         │
├──────────────────────────────────────────────────────────┤
│ BILLABLE BREAKDOWN                                        │
│ Client A - Website: 15.0 hours                           │
│ Client B - Brand Identity: 8.5 hours                     │
│ Client C - Marketing: 5.0 hours                          │
├──────────────────────────────────────────────────────────┤
│ NON-BILLABLE BREAKDOWN                                    │
│ Internal Meetings: 4.0 hours                             │
│ Business Development: 3.5 hours                          │
│ Administrative: 2.0 hours                                │
│ Professional Development: 2.0 hours                      │
├──────────────────────────────────────────────────────────┤
│ STATUS: ✓ On Target (goal: 70-75%)                      │
└──────────────────────────────────────────────────────────┘

Calculating Utilization Rates

The Formula

Billable Utilization Rate:

(Billable Hours ÷ Total Available Hours) × 100 = Utilization %

Example:
Billable Hours: 28 hours
Available Hours: 40 hours
Utilization: (28 ÷ 40) × 100 = 70%

What to Include in "Available Hours":

✓ Include:
- Regular work hours (typically 40/week)
- Overtime if expected to be billable

✗ Exclude:
- PTO/vacation days
- Sick days
- Holidays
- Unpaid leave

Adjusted calculation:
If designer takes 1 day off (8 hours):
Available hours: 32 (not 40)
Billable hours: 24
Utilization: (24 ÷ 32) × 100 = 75%

Target Utilization Rates

Industry Benchmarks:

EXCELLENT: 75-80% billable
- High project load
- Efficient workflows
- Minimal non-billable time

GOOD: 70-75% billable
- Healthy project pipeline
- Sustainable workload
- Standard non-billable activities

ACCEPTABLE: 65-70% billable
- Some downtime between projects
- More internal responsibilities
- Junior designers (more training time)

CONCERNING: 60-65% billable
- Insufficient project pipeline
- Too much non-billable work
- Process inefficiencies

PROBLEM: < 60% billable
- Not enough client work
- Excessive non-billable activities
- Agency is losing money on this person

By Role:

Junior Designer: 60-70%
- More learning and training time
- Less efficient than senior staff
- May support non-billable work

Mid-Level Designer: 70-75%
- Mostly client work
- Some mentoring junior staff
- Balanced workload

Senior Designer: 75-80%
- Primarily client-facing
- Efficient workflows
- Minimal non-billable drain

Creative Director: 50-60%
- Lots of oversight (non-billable)
- Business development
- Team management
- Less hands-on design

Account Manager: 65-75%
- Client communication (billable)
- Proposal writing (non-billable)
- Project coordination

What to Do About Low Utilization

If Team Member Under 65%:

Step 1: Diagnose the Problem

Run report: Where is non-billable time going?

Scenario A: Lots of "Downtime/No Project"
→ Problem: Not enough work
→ Solution: Sales/pipeline issue

Scenario B: Lots of "Internal Meetings"
→ Problem: Meeting overload
→ Solution: Reduce meeting time

Scenario C: Lots of "Rework/Revisions"
→ Problem: Quality or scope issues
→ Solution: Improve process or tighten scope

Scenario D: Lots of "Administrative"
→ Problem: Inefficient processes
→ Solution: Automate or delegate

Step 2: Take Corrective Action

For Pipeline Issues:
- Increase business development
- Adjust pricing to win more work
- Consider temp/contract work to fill gaps

For Process Issues:
- Identify and eliminate time-wasters
- Automate repetitive tasks
- Streamline approval processes

For Skill Issues:
- Provide training to increase speed
- Better project assignments
- Consider role adjustment

Step 3: Set Improvement Goals

Current: 62% utilization
30-day goal: 68% utilization
60-day goal: 72% utilization
90-day goal: 75% utilization

Weekly check-ins to track progress

Maximizing Billable Hours

Reducing Non-Billable Time

Strategy 1: Automate Administrative Tasks

Manual timesheet entry: 2 hours/week non-billable
Switch to [automatic time tracking](https://app.corcava.com/register): 0.25 hours/week
Time saved: 1.75 hours/week = 91 hours/year
Converted to billable at $135/hour = $12,285 extra revenue/year

Strategy 2: Reduce Internal Meetings

Current: 6 hours of meetings/week
Goal: 3 hours of meetings/week (50% reduction)
Time saved: 3 hours/week = 156 hours/year
Converted to billable at $135/hour = $21,060 extra revenue/year

How:
- Make meetings shorter (30 min instead of 60 min)
- Make meetings less frequent (biweekly instead of weekly)
- Invite fewer people (only who needs to be there)
- Cancel meetings that can be emails

Strategy 3: Improve Sales Efficiency

Current: 10 hours to create proposal, 40% win rate
Goal: 5 hours to create proposal (templates), 50% win rate

Time saved per proposal: 5 hours
Extra wins: +25% more projects closed

Result: Less time per proposal + more wins = better ROI on BD time

Strategy 4: Better Project Scoping

Problem: Vague scope leads to excessive free revisions
Solution: Detailed scope with limited revisions

Before:
- "Design homepage" (vague)
- Client requests 5 revision rounds
- 20 hours non-billable rework

After:
- "Design homepage with 2 revision rounds included"
- Round 3+ requires change order
- 5 hours non-billable rework (75% reduction)

Strategy 5: Template and Systematize

Create reusable templates for:
- Common design patterns
- Project proposals
- Client onboarding
- Design specifications
- Delivery documentation

Time saved: 2-4 hours per project
Over 20 projects/year = 40-80 hours saved
= $5,400-$10,800 extra billable revenue

Increasing Billable Opportunities

Strategy 1: Proactive Upsells

During project, identify additional needs:

"While designing your website, I noticed you need:
- Social media template suite
- Email newsletter templates
- Display ad templates

Would you like a proposal for these?"

Result: More billable work from existing happy clients

Strategy 2: Retainer Agreements

Convert project clients to monthly retainers:

One-off projects:
- Feast or famine revenue
- Lots of non-billable sales time
- High client acquisition cost

Retainers:
- Predictable billable hours
- Less non-billable sales time
- Higher lifetime value

See our [complete retainer management guide](/blog/design-retainer-management)

Strategy 3: Clear Hourly Tracking

Track billable time in visible increments:

15-minute minimum:
Small tasks add up:
- 5 min client email → Round to 15 min (billable 0.25 hr)
- 10 min file adjustment → Round to 15 min (billable 0.25 hr)
- 20 min status call → Round to 30 min (billable 0.5 hr)

Over a week, this captures 2-3 hours more billable time
that would otherwise be written off as "too small to track"

Strategy 4: Reduce Scope Creep

Client: "While we're at it, can you also..."

❌ Wrong response: "Sure!" (free work)
✓ Right response: "Absolutely! That would be a change order.
Let me send you a quick estimate."

Protect billable hours by:
- Defining scope clearly upfront
- Using change order process for additions
- Training team to recognize scope creep
- Educating clients on what's included

Agency-Wide Utilization Management

Setting Targets by Quarter

Example Agency (5 designers):

Q1 Target: 68% average utilization
- Project pipeline building
- Post-holiday slowdown
- Focus on sales
Target: 3,400 billable hours (5 designers × 170 hrs/mo × 4 mo × 68%)

Q2 Target: 73% average utilization
- Pipeline converts to projects
- Full project load
- Healthy operations
Target: 3,650 billable hours

Q3 Target: 70% average utilization
- Summer vacations
- Slightly lower availability
- Maintain project quality
Target: 3,500 billable hours

Q4 Target: 75% average utilization
- Year-end push
- Clients using remaining budgets
- Maximize Q4 revenue
Target: 3,750 billable hours

Annual: 71% average (14,300 billable hours)
Revenue at $135/hour: $1,930,500

Monthly Utilization Reviews

Agency Leadership Meeting Agenda:

TOPIC: Monthly Utilization Review

1. Overall Agency Utilization
   Current month: 72%
   vs. Target: 70%
   Status: ✓ On target

2. By Designer:
   Alex: 78% (high, watch for burnout)
   Jordan: 69% (on target)
   Casey: 65% (below target, investigate)
   Morgan: 74% (on target)
   Riley: 68% (on target)

3. Action Items:
   - Check in with Casey: Why low utilization?
   - Review Alex's workload: Too much?
   - Pipeline review: Enough work for next month?

4. Non-Billable Analysis:
   Where is non-billable time going?
   - Internal meetings: 15% (target: 12%)
   - Business development: 8% (target: 10%)
   - Admin: 5% (target: 5%)
   - Training: 3% (target: 3%)

5. Improvements:
   - Reduce meeting time by 20%
   - Increase BD efficiency

Utilization Dashboard

Real-time visibility with Corcava's reporting:

┌──────────────────────────────────────────────────────────┐
│ Agency Utilization Dashboard - November 2025             │
├──────────────────────────────────────────────────────────┤
│ Overall Utilization: 72% (Target: 70%) ✓                │
│ Total Billable Hours: 560 hours                          │
│ Total Capacity: 780 hours (5 designers × 39 hrs/wk × 4) │
├──────────────────────────────────────────────────────────┤
│ BY DESIGNER:                                              │
│ Alex Martinez    │ 78% │ ████████████████░░ │ High ⚠   │
│ Jordan Kim       │ 69% │ ██████████████░░░░ │ Good ✓   │
│ Casey Johnson    │ 65% │ █████████████░░░░░ │ Low ⚠    │
│ Morgan Taylor    │ 74% │ ███████████████░░░ │ Good ✓   │
│ Riley Chen       │ 68% │ ██████████████░░░░ │ Good ✓   │
├──────────────────────────────────────────────────────────┤
│ TREND: +3% vs last month (improving) ↗                  │
│ FORECAST: On track to hit Q4 target of 75%              │
└──────────────────────────────────────────────────────────┘

Handling Common Scenarios

Scenario: Client Questions Your Invoice

Client: "Why are you billing 45 hours when the project estimate was 40 hours?"

Wrong Response: "That's just how long it took."

Right Response: "Good question! Let me break it down:

• Original scope: Homepage design with 2 revision rounds (40 hours)
• Actual work:
  • Initial design: 18 hours (as estimated)
  • Revision round 1: 10 hours (as estimated)
  • Revision round 2: 12 hours (as estimated)
  • Additional revision round 3: 5 hours (not in original scope)

You requested a third revision round which added 5 hours. Would you like me to waive that for this project, or shall we adjust the scope on future projects to include 3 rounds?"

Key: Transparency + clear scope documentation

Scenario: Designer Consistently Over-Billing

Problem: Designer bills 38-40 hours/week when agency average is 28 hours.

Investigation Questions:

1. Are they actually working more? (check deliverables)
2. Are they padding time? (compare to task complexity)
3. Are they less efficient? (compare to other designers)
4. Are projects under-scoped? (check against estimates)

Possible Actions:

If over-working: Redistribute load, watch for burnout
If padding: Coaching on honest time tracking
If inefficient: Training or performance management
If under-scoped: Adjust future estimates

Scenario: Too Much Non-Billable Time

Problem: Agency running at 55% utilization (target: 70%).

Root Cause Analysis:

Step 1: Where is non-billable time going?
Run report by category:

Non-billable breakdown:
- Downtime/no projects: 18% (PROBLEM: not enough work)
- Internal meetings: 12% (normal)
- Administrative: 8% (high, target 5%)
- Business development: 7% (normal)

Step 2: Address biggest problem first
Issue: Not enough client work (18% downtime)

Actions:
- Increase business development efforts
- Lower prices temporarily to win more work
- Consider taking on contract/freelance projects to fill gaps
- Market more aggressively

Step 3: Address second problem
Issue: Too much admin time (8%)

Actions:
- Implement [automated time tracking](https://app.corcava.com/register)
- Use templates for common tasks
- Delegate admin to non-design staff
- Streamline invoicing process

Financial Impact of Utilization

The Profitability Math

Agency with 5 Designers:

SCENARIO A: 60% Utilization (Poor)
─────────────────────────────────────
Annual billable hours: 6,240 (5 × 2,080 × 60%)
Billing rate: $135/hour
Revenue: $842,400

Costs:
- Designer salaries: $475,000
- Overhead (50%): $237,500
Total costs: $712,500

Profit: $129,900 (15% margin) ⚠️

SCENARIO B: 70% Utilization (Good)
─────────────────────────────────────
Annual billable hours: 7,280 (5 × 2,080 × 70%)
Billing rate: $135/hour
Revenue: $982,800

Costs: $712,500 (same)

Profit: $270,300 (28% margin) ✓

SCENARIO C: 75% Utilization (Excellent)
─────────────────────────────────────
Annual billable hours: 7,800 (5 × 2,080 × 75%)
Billing rate: $135/hour
Revenue: $1,053,000

Costs: $712,500 (same)

Profit: $340,500 (32% margin) ✓✓

DIFFERENCE B → C:
+$70,200 profit (26% increase)
Just from 5 percentage points of utilization improvement

The Takeaway: Small improvements in utilization = massive profit impact.

Break-Even Utilization

What utilization do you NEED to break even?

Formula:
Break-even utilization = Total Costs ÷ (Billing Rate × Available Hours)

Example:
Total costs: $712,500
Billing rate: $135/hour
Available hours: 10,400 (5 designers × 2,080 hours)

Break-even = $712,500 ÷ ($135 × 10,400)
Break-even = $712,500 ÷ $1,404,000
Break-even = 50.7% utilization

Below 51% utilization = losing money
Above 51% utilization = profitable
Target 70%+ for healthy margins

Conclusion: Mastering Billable Time

Key Takeaways:

1. Track Everything

• Use proper time tracking software
• Categorize billable vs non-billable clearly
• Review weekly for accuracy

2. Know Your Numbers

• Target: 70-75% utilization for designers
• Below 65% = investigate and fix
• Above 80% = watch for burnout

3. Protect Billable Time

• Clear project scopes prevent free work
• Use change orders for scope additions
• Don't bill for your own errors

4. Reduce Non-Billable Waste

• Automate administrative tasks
• Minimize unnecessary meetings
• Systematize repetitive processes
• Use templates and reusable assets

5. Increase Billable Opportunities

• Fill pipeline with more projects
• Convert clients to retainers
• Proactively identify upsell opportunities
• Capture all legitimate billable time

The Bottom Line:

A 10 percentage point improvement in utilization (from 65% to 75%) can increase agency profit by 50-100%.

It's not about working designers harder. It's about:

• Having enough client work to fill time
• Eliminating inefficient non-billable activities
• Properly scoping and protecting billable work
• Tracking accurately so you know what's working

Ready to Optimize Your Agency's Billable Time?

Start your free Corcava trial and get:

• ✓ Automatic billable vs non-billable categorization
• ✓ Real-time utilization dashboards
• ✓ Project budget tracking
• ✓ Team utilization reports
• ✓ Profitability analysis per project
• ✓ Invoicing integrated with time tracking

Stop guessing at profitability. Start tracking what matters.

For more design agency management content, explore guides on design retainer management, automatic time tracking for designers, and managing change requests without scope creep.