Beyond Utilization: What Billing Multiples and Realization Rates Can Reveal About Your A&E Firm's Financial Health

For architecture and engineering firms, the conversation around financial performance often focuses on utilization – the percentage of time employees spend on billable work. While utilization is a critical metric, it only tells one small part of the story. To get a complete picture of financial health, firms also need to track and understand two important KPIs: Billing Multiples and Realization Rates. 

As a fractional CFO working with A&E firms, I've noticed that most firm owners know whether their staff are spending time on billable work or not. And if firm-wide utilization rates are hovering in the 65-75% range, things feel pretty good. But in many cases, these firms may still be underperforming financially, and the reason often lies with their pricing and how efficiently their time is being converted into revenue.   

Let’s explore what billing multiples and realization rates are, why they matter, and how firms can improve them – sometimes with just small changes in how they manage time, billing, and project oversight.

Your Financial Foundation: Billing Multiples and Realization Rates 

Every architect and engineer knows the importance of a solid building foundation. You can design the perfect building or bridge, but if that building isn’t constructed on a strong foundation, cracks will start to form and eventually the structure will falter. The same holds true for your business. Without a strong, reliable foundation to support your financial decisions and growth strategy, long-term stability becomes uncertain.  

Billing Multiple (or Net Multiplier) 

Think of your Billing Multiple as your foundation – a critical metric that when clearly defined and effectively applied, keeps your firm profitable, scalable and structurally sound. 

The billing multiple tells you how many dollars of revenue you’re generating for every dollar spent on direct labor. This metric reflects both pricing and operational efficiency. For most A&E firms, a healthy billing multiple is somewhere between 3.0 and 3.5, though this can vary based on firm size, specialization, and market. A billing multiple of 3.25 means you’re earning $3.25 for every $1 you pay in salaries for billable staff.

In fact, according to the BQE Engineering Benchmarking Report, the average across hundreds of firms was 3.21. 

Realization Rate 

With that foundation in place, the next layer is your Realization Rate, which measures the percentage of the billable value a firm creates that is then invoiced (and collected!) by the firm. For example, if your team logs $10,000 worth of time but you only bill $8,000, your realization rate is 80%. Anything below 100% indicates write-downs, inefficiencies and scope issues. According to BQE CORE’s 2025 Engineering Benchmark Report, the average firm Realization Rate was 87%.  

From there you can turn your attention to the much-discussed Utilization Rate, which tells you how much of your team’s time is spent on billable work. Together, these three metrics can help tell the financial story of your firm, with each one building on the clarity and stability of the one before it. But without a solid Billing Rate Multiple at the base, the others can quickly lose their effectiveness. 

Where A&E Firms Can Leak Profits – and How to Improve  

Why do firms often not hit profit targets? Because they’re not realizing the full value of their time, or they’re not converting that time into revenue efficiently. There are a few common reasons:

• Over-servicing clients without adjusting scope or fees 
• Underbilling due to lack of data, miscommunication, or client pressure 
• Manual write-downs made without much oversight or discipline
• Delays in billing that lead to aged receivables or disputes 

However, with the right technology and systems in place (like BQE CORE), firms can spot these issues early, before they impact cash flow or profitability, giving teams the opportunity to course-correct in real time. Here are a few things I often recommend when firms want to get a better handle on billing performance and realization:

1. Boost Your Billing Multiple by Rethinking Project Delivery 

Low Billing Multiples could point to issues like underpricing, overstaffing senior personnel on low-fee projects, or excess overhead. If your billing multiple is consistently below 3.0, it's worth reviewing how projects are priced and staffed, and whether your labor mix is aligned with the work being delivered. 

2. Look Beyond the Averages

Firm-wide realization rates can hide the problem areas. Break it down by client, project, or PM. You'll often spot patterns – some people over-service, some clients resist scope adjustments, and some projects are chronically underbid. 

3. Make Scope Changes Easier to Document

Half the battle with realization is scope creep that goes untracked. Give your team a simple way to raise their hand when things shift. It’s easier to address in the moment than weeks later during billing. This should start with giving your teams, and especially the project managers, access to project data. Firm management platforms like CORE, that visualize data and give real-time charts and graphs, can be a huge win. But make sure the teams have the right permissions so the data they need isn't restricted only to firm leaders or the accounting team. 

4. Watch the Write-Downs

If your firm is regularly writing down time before billing, make sure those decisions are being tracked and reviewed. Are they strategic (maintaining a key relationship), or are they signs of systemic problems with estimating or delivery? You don’t need to eliminate write-downs entirely, but you should understand where and why they’re happening. 

5. Speed up the Collection Process

Billable work is only realized once you get paid. Send invoices quickly after the month closes, follow up on unpaid invoices, and don’t be afraid to pause work if payments stall. Cash is king! 

 A Real-World Example: Putting the Metrics Together 

Let’s imagine your business is growing, your team is busy, and you’ve reached the point where you need to hire someone new to keep up with demand. You find a candidate with the right experience (no small feat these days), and it’s time to talk salary. They’re asking for $100,000 per year. How do you determine whether you can afford that, while still maintaining profitability? 

This is where the Billing Rate Multiple comes in. By working backwards, you can quickly assess what billing rate you’d need to justify that salary, taking into account both overhead and expected utilization.

Assume:

• A Billing Rate Multiple of 3.0 
• A Utilization Rate of 80% 

Here’s the math: 

• $100,000 salary × 80% utilization = $80,000 direct labor cost 
  $80,000 × 3.0 billing rate multiple = $240,000 in required annual revenue

Now, divide that required revenue by the billable hours: 

• 2,080 hours/year × 80% utilization = 1,664 billable hours 
  $240,000 ÷ 1,664 hours = $145/hour billing rate 

In this example, you’d need to bill this employee’s time at $145/hour to meet your target multiple and ensure the hire is financially viable. Is that rate reasonable for the role and market? If yes, great – you’re positioned to make a smart, strategic hire. If not, you may need to reconsider the salary, adjust your target multiple, or refine your service pricing. 

Every scenario is different, but this approach gives you a clear, data-backed framework for making hiring decisions aligned with your business goals. 

Tracking Realization and Utilization After Hiring 

Once you settle on the salary and billing rate, and that new employee is onboard and billing time, it’s time to dive into your realization rates and utilization rates.  

Here’s an example looking at a month’s worth of work: 

• If your employee bills $145/hour for 124 hours, that’s $18,000 billed. 
• But if you write off a portion of the invoice, and you only collect $16,200, then
• Realization Rate = $16,200 ÷ $18,000 = 90%

While a 90% realization rate is acceptable, anything lower is risky. It means you’re leaving money on the table, and this should be flagged and discussed among the leadership team and with your project managers. If your firm consistently sees low realization, even a well-calculated Billing Rate Multiple won’t be enough to ensure profitability.  

With your billing rate set and realization monitored, the next piece of the puzzle is the Utilization Rate. This 80% figure is typical for certain roles in A&E firms – high enough to ensure profitability, but realistic enough to allow time for internal meetings, training, admin work, or business development. Remember each role will have a different utilization rate target, and typical the more senior the person, the lower the target because they will take on non-billable responsibilities like management, business development, etc. 

As you monitor utilization, look for non-billable time entries that may be misclassified. Some employees (especially new employees) often aren't fully aware of what qualifies as billable, and time spent on client-related tasks can sometimes be mistakenly recorded as non-billable. 

Even a small shift (an hour or two per week) from non-billable to billable time can have a significant impact on overall profitability.  

Think of this process as patching small holes in your profitability bucket. It’s not the first step, but once your foundational metrics are in place – tightening up your Utilization is one of the smartest ways to capture revenue that might otherwise slip through the cracks. 

Final Thoughts 

Billing Multiples tell you how efficiently you're converting labor into revenue and serve as the financial foundation for your business. Realization tells you how much of that work you're actually getting paid for and Utilization tells you how busy and billable your team is.  

Each of these metrics provides a different piece of the financial puzzle. But when tracked together, they give you the clarity needed to drive smarter decisions and stronger financial results. 

When looking to make improvements, you don’t need to solve everything at once. Start by picking one project. Dig into the numbers. Ask questions. Look for patterns. Small improvements can add up quickly. 

Most importantly, make it a team effort. When finance, project teams, and leadership are aligned around the same goals, the numbers tend to take care of themselves. 

Firms that understand this, and act on it, consistently outperform their peers. And often, it doesn’t require a massive overhaul. Just better visibility, smarter processes, and a willingness to look beyond the surface metrics. 

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