Distinguish available and billable time
Available work hours include time that may be spent on sales, proposals, administration, support, learning and unpaid revisions. Billable hours are the subset that can actually be invoiced.
Calculate utilization from real history
Divide billable hours by available working hours for the same period. Use several months when possible so one unusually busy or quiet week does not dominate the assumption.
Connect utilization to pricing
A lower utilization rate means the business must recover annual revenue from fewer billable hours. Required rates should therefore be based on realistic capacity, not a theoretical 2,080 billable hours.
Improve the system, not only the percentage
Track why time is non-billable. Better scoping, templates, automation and client qualification may improve capacity without simply working longer hours.