Fully Booked and Barely Profitable

There is no space in the calendar. Everyone is working late in the same week of every month. You turned down an enquiry last Tuesday because there was genuinely nowhere to put it.

By every visible measure the business is doing well. The profit does not agree, and the gap between how hard it feels and what it returns has been widening for about two years.

Being full is not the same as being efficient

A service business sells time. If you do not know how much sellable time exists, and how much of it is actually reaching a client, then being full tells you nothing about whether you are making money.

Most professional service firms discover, when they measure it properly for the first time, that between thirty and fifty percent of paid hours never reach a client at all.

You are not short of capacity. You are short of visibility into where the capacity currently goes.

Where the hours actually go

The work that consumes a service business is rarely the work it invoices for:

• Rework, because a brief was unclear or an approval came late.
• Scope drift, the small extra requests that nobody logs and everybody honours.
• Internal meetings that exist to compensate for unclear ownership.
• Admin and reporting, assembled by hand from several places.
• Unbilled advice, the calls and quick questions that used to be occasional.
• Selling and proposals, real work that is treated as free.

None of these is unreasonable. The problem is that they are invisible, so they are neither priced nor managed. They simply absorb the margin.

Measure for four weeks, roughly

You do not need timesheets to the minute, and pursuing that precision usually kills the exercise. You need a rough split, per person, per week, across four categories:

1. 1.Client work that is billable.
2. 2.Client work that is not billable, including rework and scope drift.
3. 3.Selling, proposals and marketing.
4. 4.Internal admin and meetings.

Four weeks of approximate numbers will tell you more than a year of exact ones you never collect. Almost every firm that does this finds one client and one activity consuming disproportionate time.

The client who is quietly costing you

Rank your clients by profit per hour rather than by revenue. The ordering usually changes dramatically, and the largest client is frequently not the best one.

Once you can see it, you have real options: reprice at renewal, change the scope, change how the work is delivered, or in a small number of cases, let them go. Our piece on when your best customer is costing you money goes further into that decision.

Fix scope before you fix price

Raising rates on an undefined scope simply raises the price of an argument. Define first:

• What is included, in specific and countable terms.
• How many rounds of revision are covered.
• What triggers a change request, and what it costs.
• Response times, and the hours they apply to.
• What happens when the client is late providing something.

That last one is the most commonly omitted and the most expensive. A project delayed by the client still occupies your calendar and your team’s attention, and if the contract is silent about it, you absorb the whole cost.

Then decide what you will not do

Utilisation improves fastest not by working more hours but by removing categories of work. Every firm has a service line that is beloved, visible and unprofitable.

Keeping it is a legitimate choice. Keeping it without knowing what it costs is not, and that is the situation most firms are in.

The number worth running the business on

Not revenue. Not utilisation alone. Profit per available hour, tracked monthly.

It combines pricing, scope, efficiency and client mix in one figure, and it moves when any of them changes. When that number is on the wall instead of revenue, the conversations in the business change within a quarter.

This work sits across operations improvement and finance and pricing strategy, and it is a frequent engagement with service businesses. If you want a fast read on where your capacity is leaking, the free operations diagnostic is built for exactly this.