Billable hours or fixed fee? What the utilisation benchmarks tell you

Every service firm has the same argument with itself: do we charge for our time, or for the outcome? Billable hours and fixed fees are two different bets about where your risk sits — and the benchmarks show that either way, the margin leaks in a place most firms do not watch.

The number the benchmarks keep flagging

SPI Research’s 2025 Professional Services Maturity benchmark, drawn from 403 firms, found billable utilisation had fallen to 68.9% — well below the 75% the study treats as healthy — while project overrun rose to 11.3%. In plain terms: consultants are billing less of their time than they should, and projects run longer than quoted. The top-performing fifth of firms held utilisation above 76%. Small firms do not track this at all, which is exactly why it leaks.

Billable hours: you get paid for effort

Charging by the hour puts the risk on the client — longer work, larger bill. It suits open-ended or advisory work where scope genuinely cannot be pinned down. The catch is capture: time that is not logged is margin that vanishes, and for a small firm that loss is never in the accounts, only in the hours nobody wrote down. Clio’s legal-trends data on solo and small firms found realisation around 86% — meaning even firms that track hours quietly write off roughly one in seven.

Fixed fee: you get paid for the outcome

A fixed fee moves the risk to you — run long and it is your problem — but it rewards efficiency and clients love the certainty. The danger is scope creep: without a clear line around what the fee covers, "just one more thing" eats the margin a week at a time, which is exactly the 11.3% overrun the benchmark measures.

How to choose

• Predictable, well-defined work leans fixed fee.
• Open-ended or advisory work leans hourly, or a retainer with capped hours.
• New client or new work type — start hourly until you know how long it takes, then price a fixed fee with confidence.