Utilization Rate
Categories: Metrics, Company Management, Accounting
The utilization rate allows you to track how much you use something.
You're a connoisseur of nose hair grooming. You have a display case full of nose hair clippers. Most are collectors' items or just for display...you know, so you can impress your fellow nose-grooming hobbyists.
You want to figure out the utilization rates for each of your main clippers. That way, you can report the numbers for the fans of your blog, "The Sniffer Snipper." There are three clippers that you use for day-to-day nostril curation. Monday through Thursday, you use the Cliptastic 5000. It’s an industrial model originally developed during the Cold War to close the nose hair gap with the Soviet Union. It gets the job done efficiently without much wear and tear. Perfect for the work week. Friday and Saturday, you use the Chic Shaper X9. Popular with Instagram models and French politicians, it gives a much finer, more alluring cut. Perfect for date night or clubbing with your crew.
Sunday requires a more demure cut. Something more reflective, more relaxed. It’s time for the Whiff Whisper Blue. It provides a slow, comfortable trimming experience.Those are the clippers you use on a regular basis. Time to determine utilization rates. You use the Cliptastic 5000 four days a week: Monday, Tuesday, Wednesday, and Thursday. There are seven possible days. So utilization rate is 4 divided by 7...or 57%. You use the Chic Shaper X9 two days a week. Friday and Saturday. Two out of seven: that's about 29%. The Whiff Whisper only gets used one day a week. One out of seven. Utilization rate is about 14%.
In real life, businesses can use the utilization rate to see how efficiently they’re using their resources. They can figure out how much they operate equipment to see if they have additional slack to ramp up production. Or they can use it as an employee evaluation tool. By looking at a worker’s utilization rate, a company can see if their employees' time is getting applied effectively.
You start a nose clipper consultancy business to take advantage of your vast knowledge of the industry. You contract your services to manufacturers to test their products and advise them on various high-level clipper-related problems. You work 40 hours a week.
But only 22 of those hours are paid, billable hours working for clients. The rest of the time, you're working on marketing...and watching YouTube videos about the history of nose hair. So 22 of 40 hours working with clients. That's a utilization rate of 55%.
Probably some room for improvement. Maybe it's time to switch to the Chic Shaper for work days...it’ll get you that more impressive cut for client meetings. And hopefully you’ll be able to jack up those billable hours. Increase the utilization rate for the Chic Shaper to 86%...pretty much every day but Sunday.
Then maybe you can get your billable hours utilization rate above 60%. After all, a few more clients...and then you can afford a few more collector clippers for the display case. Like the clipper Lincoln used before giving the Gettysburg Address. Or the clipper that Neil Armstrong took to the moon. One small clip for man...
Related or Semi-related Video
Econ: What is Utilization Rate?1 Views
And finance Allah shmoop What is utilization rate Thie utilization
rate allows you to track how much you use something
the rate of use A rate of utilization Very cleverly
named All right people You're a connoisseur of nose hair
grooming You have a display case full of nose hair
clippers Most are collector's items just on display there looking
good there on the glass you know so you can
impress your fellow knows grooming hobbyists Well you want to
figure out utilization rates for each of your main clippers
That way you can report the numbers for the fans
of your popular Blawg the sniffer snipper Well there are
three clippers that you use for day to day nostril
Curation what Monday through Thursday you used the clip tastic
five thousand It's a turbocharged industrial model originally developed during
the Cold War to close the nose hair gap with
the USSR Well it gets the job done efficiently without
much wear and tear Perfect for the work week Well
Friday and Saturday you use the Sheikh Shaper X nine
popular with Instagram models and French politicians It gives a
much finer more alluring cut perfect for date night or
clubbing you know with your crew Sunday requires a more
Jim You're cut something more reflective more relaxed It's time
for the with whisper blew It provides a slow comfortable
trimming experience Well those air the clippers you use on
a regular basis time to determine utilization rates you use
the clip tastic five thousand forty's Week Monday Tuesday Wednesday
Thursday there seven possible day so utilization right here's four
divided by seven are about fifty seven percent used The
sheik Shaper X nine two days a week Friday and
Saturday two out of seven twenty nine percent And the
whiff whisper only gets use once a week one out
of seven on the rate they're fourteen percent In real
life businesses can use the utilization rate to see how
efficiently they're using Their resource is like What if they
had a tractor smelter thing that was just sitting there
Not used four days a week But they may be
rented to another tractor smelter and make more money Something
like that Well really businesses can figure out how much
they operate equipment see if they have additional slack to
ramp up production And in that slack sometimes they can
run it out or do everything's with it and make
a fortune And if that's not the case well then
they can use it as an employee evaluation tool Like
by looking at a worker's utilization rate a company can
see if their employees time is getting applied effectively like
one cashier only processes one hundred twelve grocery store shoppers
a day But everyone else processes at least one hundred
eighty then it's likely she's probably spending social hour too
often with her customers yapping them about their purchases right
Okay well so you start a nose clipper consultancy business
to take advantage of your vast knowledge of the industry
You contract your services to manufacturers test their products and
advise them on various high level Clipper related problems You
work forty hours a week but only twenty two of
those hours are pay billable hours working for clients The
rest of the time you're working on well marketing and
processing billing and watching YouTube videos about the history of
nose hair So you stay current on the industry so
that's twenty two of forty hours working with clients are
billing them for your time That's a utilization rate ofyour
time We're actually being paid for it of fifty five
percent Probably some room for improvement there right You really
need all that research Could you get more clients to
then Bill Okay so maybe it's time to switch to
the Sheik shaper for work days It will get you
that more impressive cut for client meetings Yeah How'bout that
Hopefully you'll be able to jack up those billable hours
Increase the utilization rate for the sheik shape or to
eighty six percent Pretty much every day but Sunday Yeah
that'd be big Then maybe you can get your billable
hours utilization right above sixty percent Right You make a
lot more money If you do that after all a
few more clients And then you can afford a few
more collector clippers in the display case here Like the
Clipper Lincoln used before giving the Gettysburg or the Clipper
that Neil Armstrong took to the moon Remember the quote
One small clip for man You know something like that