The Hidden Cost of Low Utilization, With Carson Pierce

The Agency Profit Podcast

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1M ago 36:04

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Points of Interest

00:01 – 00:51 – Introduction: Marcel welcomes Carson Pierce back to the show and introduces the episode’s focus on utilization, specifically the hidden costs of low utilization in agencies.
01:18 – 01:50 – Why Utilization Matters Now: Marcel notes that many agencies are struggling with overstaffing and underutilization in a difficult market, which compounds hidden costs over time.
01:50 – 02:45 – Carson’s Perspective on Utilization: Carson explains that agency owners often see only the surface-level financial impact of low utilization, but miss the deeper, unexpected effects it creates.
02:45 – 03:26 – Everyday Utilization Analogies: Carson shares real-world examples, like an unused Jeep and moving trucks, to illustrate how underutilized assets quietly drain resources.
03:39 – 05:59 – Defining Utilization Clearly: Marcel defines utilization as the percentage of purchased team capacity actually used for revenue-generating client work, clarifying common misconceptions and variations.
07:25 – 09:25 – Over-Servicing as a Hidden Cost: Carson highlights how idle team members often fill time by overservicing clients, which distorts expectations, undermines project profitability, and becomes habitual.
09:25 – 11:00 – Internal Projects and Incentives: Marcel explains that low utilization often shifts time into internal projects, which can be productive but frequently become unfocused or misaligned with priorities.
11:00 – 13:47 – Lost Efficiency Without Pressure: Carson argues that high utilization forces efficiency improvements, whereas low utilization removes urgency, leading to stagnant processes and missed bottleneck discovery.
15:55 – 17:46 – Disengagement and Cultural Risks: Carson warns that underutilized employees may feel unproductive, disengage, or eventually leave, while survivors of downsizing can resist returning to higher workload levels.
20:08 – 21:34 – Opportunity Cost of Low Utilization: Marcel expands on the long-term financial risks, including reduced profitability, lower enterprise value, depleted cash reserves, and a shift to defensive decision-making.
25:23 – 27:35 – Managing Unutilized Time Wisely: Carson advises agencies to be deliberate with excess capacity, setting clear expectations for client over-servicing or internal projects and preparing for busy periods.
29:21 – 34:21 – Modeling and Leadership Lessons: Marcel and Carson stress the importance of building a business model to set realistic utilization targets, and Marcel shares candid lessons from Parakeeto’s restructuring journey.

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