The only two leading metrics I track for efficiency and value
Isaac Perdomo shares how to calculate Effective Hourly Rate and a modern look at utilization, including examples and formulas.
Most accounting firms are chasing efficiency blindly.
New tool here. New process there.
Few stop to think: "How will we measure success?"
After working with nearly 100 firms at Opzer, we were forced to find a simple answer.
We went on a quest to find indicators that were actionable, easy to track, and could be directly influenced by team members (which ruled out profits or revenue).
We settled on two metrics.
In this article, I’ll discuss the reasoning behind them, their simple calculation, and how they impact both value and team wellbeing.
I’ll also touch on how both metrics work together to translate efficiencies into return on value, helping firms grow revenue without adding staff.
Metric #1: Effective Hourly Rate (as a proxy for margins)
Effective Hourly Rate (EHR) measures the average revenue generated per hour of client work.
Before you think this doesn't apply to you because you don't bill by the hour, let me assure you:
It does.
This metric can be measured whether you charge hourly, monthly, fixed fees, or based on value. It’s like ‘calories in, calories out’ in fitness: whether you track them or not, they exist.
Similarly, every firm has an effective hourly rate, even if it’s not measured.
Knowing your effective hourly rate helps you compare:
Clients
Services
Pricing models
The efficiency of teams and individuals
Effective Hourly Rate (EHR) formula:
This metric requires only two data points:
The revenue earned from a job or client
The time your team invested to deliver it
This metric can be measured by job, client, group of clients, or firm-wide to identify your highest value clients.
Targets
We’ve seen firms earning as little as $75/hr and as much as $375/hr.
Either can be highly profitable depending on your cost basis.
Unlike the next metric, which needs to be balanced, there’s virtually no harm in making EHR as high as possible.
If you can find ways to deliver a $2,000 job in one hour, and the client is willing to pay, you absolutely should.
Let's see this metric in action with some examples.
Example 1: Firm transitioning from hourly to fixed fees
Scenario
Bean Counters & Beyond was feeling the pressure. Their competitors had transitioned to fixed fees—a pricing model increasingly preferred by clients.
To stay competitive and meet evolving client expectations, the firm decided to experiment with fixed fees.
Being conservative, the owner decided to roll out the shift gradually while tracking their EHR to ensure increased return of value.
Experiment
Under the hourly model, each client consumed an average of 10 hours per month. They billed at $100/hour, hence generating $1,000 in monthly revenue per client.
The firm transitioned some clients to a fixed fee of $1,000/month (same revenue but not tied to hours worked).
Outcome
With fixed fees, the firm is incentivized to improve efficiency. They used automation and streamlined their processes, reducing the average time spent per client from 10 hours to 7 hours monthly.
Impact
Under the hourly model: $100/hr
Under the fixed-fee model: $1,000/month ÷ 7 hours = $143/hour (Effective Hourly Rate)
The firm increased its efficiency by 43%.
If these improvements are applied firm-wide, this firm could support 43% more revenue without adding workload.
Example 2: Detecting your least valuable clients
Scenario
Seeing the impact, the owner of Bean Counters & Beyond decided to transition all clients to fixed fees.
After tracking their average hourly rate across clients for several months, however, they noticed time invested in a particular client had increased to 12 hours—resulting in an effective rate of $83/hour.
Analysis
The firm realized the client’s business had grown, leading to an expanded scope of work that wasn’t reflected in the fees.
The team also identified automation opportunities.
Action
Raised the client’s fees by 25%, bringing the monthly revenue from $1,000 to $1,250.
Reduced the time spent on this client’s work from 12 hours to 10 hours per month.
Impact:
Before: $1,000 ÷ 12 hours = $83/hour
After: $1,250 ÷ 10 hours = $125/hour
This represents a ~50% improvement in this client’s EHR.
Tracking this metric allowed the firm to keep their margins in check by taking action before an engagement became low value.
Metric #2: (Modern) Utilization Rate
Utilization used to be the metric to optimize in a purely hourly billing industry.
As firms shift away from hourly billing, the ‘bill more hours’ mindset is becoming outdated.
In a fixed fees world, logging more hours for the same work hurts your return on value rather than improve it.
These days, the purpose of utilization rates has changed. Modern utilization is more about distributing work intelligently.
What it really tells you:
When your star employees are burning out
Which seniors are not delegating enough and bottlenecking growth
Which team member(s) to assign to your next client
In essence, it helps you understand how balanced your team's capacity is.
Total capacity reflects the contractual obligations of the team member(s) in question. Typically, 40 hours a week or ~2,000 hours a year.
This metric can be measured by team member, a group of team members, a department, or firm-wide.
Targets
Aim for 70% annually for team members dedicated to production/service delivery.
On a weekly basis, this translates to 75-85% (or the equivalent of 30-34 hours out of a 40-hour workweek).
Why not 100%? Shouldn't the team work all the hours I hired them for?
No one working 40 hours a week can reasonably spend 100% of their time on client work. Not weekly. And certainly not annually.
Don't try.
You have to allow time for breaks, time-off, personal development, training, internal meetings, off-sites, and more.
Example 1: Who’s got capacity (assigning a new client)?
Situation
Our example firm, Bean Counters & Beyond, lands a new client requiring four hours of service delivery per week.
Analysis
The owner previously used his gut to assign work.
But now, armed with data, he checks the utilization of the team in recent weeks to decide who can handle the workload.
The three senior team members with the relevant expertise for this work are:
Alex: 60% utilization (spending 24 hours/week on client work out of 40).
Ben: 85% utilization (spending 34 hours/week on client work out of 40).
Carla: 75% utilization (spending 30 hours/week on client work out of 40).
Action
Although Ben is the ‘superstar’ and is always willing to take on more, the owner decides to assign the new client to Alex, given he has the most capacity.
Impact
The new client is onboarded smoothly and the workload is distributed fairly and effectively across the team, maintaining morale and preventing burnout for high-performers like Ben.
Example 2: Improving delegation
Situation
The senior accountant, Ben, takes on more work but starts clocking 44 hours/week on client work (110% utilization).
To alleviate Ben and other senior staff, the firm recently hired a junior accountant. However, the junior is underutilized (averaging just 40% utilization).
Analysis
Problem: Ben isn’t delegating enough.
Opportunity: The junior accountant can take on simpler tasks, reducing Ben’s workload and providing the junior with valuable experience to develop their skills.
Action
The firm owner identifies tasks Ben can delegate to the junior, such as data entry, preliminary reviews, and routine client communication.
By shifting 12 hours/week of tasks to the junior, Ben’s utilization drops to 80% (32 hours/week) while the junior’s utilization increases to 70%.
Impact
Ben gains more time to focus on high-value work, like strategic client consultations and mentoring the junior accountant.
The junior gains hands-on experience, building confidence and developing their skills.
The firm makes better use of their resources by addressing under-delegation issues, redistributing workloads, and leveraging the junior hire more effectively.
How these metrics work together
While EHR measures the value of each hour worked, utilization shows how effectively your team’s capacity is being used. Together, they give you a complete picture.
Take a hypothetical firm with 10 full-time team members generating $1 million in annual revenue.
Total capacity: ~20,000 hours annually
Utilization rate: 50% (10,000 client hours).
Effective Hourly Rate: $100/hour
At this level, the firm maxes out at $1 million in revenue.
Let’s now consider the effect of tiny improvements on the metrics discussed:
Improvement | Impact | Additional Revenue |
+1% utilization | +200 hours | $20,000 |
+$1 EHR | $101/hour | $10,000 |
These improvements aren’t mutually exclusive either.
Let’s be more ambitious and see how they add up:
Improvement | Impact | Additional Revenue |
+5% utilization | +1,000 hours | $100,000 |
+$10 EHR | $110/hour | $110,000 |
The combined improvements equal $210,000.
A 5% increase in utilization plus a $10 EHR boost results in$210,000 of extra revenue capacity, all of which could flow directly to the bottom line—assuming costs remain consistent.
Such results don’t require hiring more or increasing hours worked. Instead, they come from improvements in processes, technology, and pricing strategies that optimize both utilization and EHR.
Small changes, big impact
Pick one team or group of clients, and start tracking these two metrics.
Use this as an experiment to see where inefficiencies lie and how small changes can make a big impact.
Aim to increase the value of every hour worked by optimizing workflows and pricing, and improve your team’s work-life balance by encouraging delegation and distributing your workload.
Remember: what gets measured improves.
Start small and grow from there.