The following is an excerpt from an email I sent to DeveloperTown in April 2016. 

Let's start this discussion with some magic numbers. Most professional services firms run off of the same set of assumptions when it comes to billable resources.

Keep in mind, we're talking about billable hours. There are billable hours (we can charge out clients for that time) and there are non-billable hours (personal development, time off, team meetings, time spent moving houses, lunch with me even though it feels like work, etc). And some weeks, you don't always have line-of-sight on 40 billable hours. Ignore that complication for this discussion. This all assumes there's 40 billable hours of work available for you to do.  :)

40 billable hours in a week

The most basic magic number is the 40 hour work week. This one likely doesn't need much description for where it comes from. It's eight billable hours in a day, five billable days a week. If we were a staff aug firm like Anchor Point, the expectation would be 40 billable hours minimum - no exceptions. On the other side of that, we know of several consulting firms that do fixed monthly fees for their people where they bill out a "full time" resource with a 36 billable hours per week assumption. That four hours of slack provides a placeholder for company meetings, personal development, etc.

Here at DT we've been historically silent on defining a hard rule around 40 billable hours. We've always said that should be the target, but that you're mileage may vary based on the project, overall workload, etc. As a general rule, if you bill between 36 and 40 hours in a week, you're likely going to be okay. Over the long run, the expectation is that you should be averaging 40 billable hours a week - assuming you have productive work to do. If you don't have client work to do, escalate to your manager or to an engagement manager for any projects you're on.

What does a perfect week look like? It might look like this...

You should see a solid chunk of billable hours (north of 36 hrs), and a couple of line items related to the company or your team.

168 billable hours in a month

Most consulting companies estimate that there are 168 billable hours in a month for each billable person. There's some fuzzy math to get to that number. But most reasonable measures will get you to something close to that. A quick example:

• 40 hrs per week x 52 weeks = 2,080 hrs in a year

• now divide by 12 months to get 173 hrs per month

• now give someone two weeks off (so [40x50]/12), and you get 167ish  

This is the first time you see an expectation of utilization come into play. Quick reminder: utilization is the percentage of billable hours for a person in a given period of time. While we ignore an expectation of utilization in the weekly number, 168 has an expectation of 97% utilization. Here you see the first baked in assumptions around time off, sick time, and slack.

This number can be a nice number to look at to see trends. In any given week someone might be sick, have something odd happen on a project, etc. However, when you zoom out and look at a month, you can see the trends. For example, last month no full time employee of DT logged less than 172 hours for the month. (Yea! Go DT!) However, there were only 10 people with more than 168 billable hours.

Again... not necessarily an issue. This isn't a hard and fast rule - it's just a heuristic. Some roles (like mine) aren't expected to be full time billable. Some people were between projects for a week or so. It's a useful number to watch at a macro level.

1,800 billable hours in a year

Most consulting firms estimate around a 90% utilization annually. That's around 1,872 hours annually, or about five weeks non-billable. Notice I didn't say five weeks of vacation. That might be the reason. It might also be that people are between projects or we assign people to non-billable work (like our very own DT website). It also includes holidays.

We're actually a bit more conservative here at DT. Given the nature of our projects, we've recognized that we actually tend to average more like an 86% utilization. Obviously we'd like to raise that up a bit over time, but it means we're averaging around 1,800 billable hours per year for each billable person. It's a great number to track at the firm level. And this means that there's a bunch of time "budgeted" for vacations, holidays, team events, people getting sick, and bench time between projects.  

The following is an excerpt from an email I sent to DeveloperTown in April 2016. 

I love competition. Where none exists in my life, I'll go out of my way to create it. It's a big motivator for me. But it's not my only motivator. I'm also very motivated by fraternity, and by wanting to help others.

Competition in business is an interesting thing. In his book The Hard Thing About Hard Things author Ben Horowitz talks about "wartime." From Horowitz:

​"In wartime, a company is fending off an imminent existential threat. Such a threat can come from a wide range of sources including competition, dramatic macro economic change, market change, supply chain change, and so forth."

By that definition, we (DeveloperTown) are not at war. While we have competition, none of it is an "imminent existential threat." When you think of that kind of competition, you typically call to mind epic winner-takes-all battles like Explorer vs. Netscape, Apple vs. Microsoft/IBM, and MySpace vs. Facebook.

This is a good thing. I don't want to have to fight another consulting company "to the death" to have to remain in business. While I'm sure we would rise to the challenge, it's not really the kind of fight one should go looking for.

Instead, we are lucky enough to be in a market and industry where we can partner freely with other firms with very little fear of a significant loss of market share. Right now - and for the foreseeable future - there is too much demand, and not enough qualified people to do the work. Because we are in professional services - and not a product that could scale to take the entire market - we aren't in danger of a winner-take-all battle.

That said, I still like competition. I like winning. I like what lessons I often learn when I lose.

In the early days, we competed against Expected Behavior. We don't really compete against them any longer. They've largely pivoted into products. But for about a year, you could find a whiteboard (I think it was mine) with a short tally of deals we won vs. deals they won. This was of course at a time when our teams also socialized together - game nights, team events, etc. It was the model of friendly competition. We competed, but we weren't jerks about it. So long as the client chose one of our two firms, we were happy with the client's choice. (We were most happy when they chose us.)

Today, we partner with: NOI Strategies, Anchor Point, InGen Technologies, Mavenly, BMI, MilesHerndon, Fretless, Foxio, and a bunch of independents. And we'd happily partner with more firms. But we find that most larger firms are hesitant to want to partner. They'd rather win all the work. I'm sure we would rather have all the work too... but that doesn't mean there's not good reasons to partner with someone else from time to time.

Competition is also on my mind because of this week's Verge event. It's been a few months since I've attended a Verge event. It was a great event - a couple of solid pitches, one questionable pitch, and a great fireside chat. But something was different. Matt has started to be much more vocal about his sponsors. He now actively promotes them in between pitches. I don't know when he started doing this, but I noticed it for the first time this week.

This was difficult for me. The first two sponsors he promoted were 1150 and Innovate Map. He said very nice things about them. He said that 1150 is the best place in Indy to go for an MVP. And he said that Innovate Map was the best firm in town to help you define your product and plan it's go-to-market strategy.

I know Matt was just promoting a sponsor. I know Matt recommends us all the time. I knew Matt would be promoting us later that evening. But when I heard those promotions, it hurt. I want us to have that work. I want us to be recognized as the best in this market for those things. I want to win.

It's an unrealistic expectation. 1150 is likely the right choice for some people. Innovate Map is likely the right choice for others. We can't - and shouldn't - win all the work. Intellectually, I understand that. But emotionally, I still want to win.

I think this is a good thing (for me), because it causes me to do a handful of things:

• It causes me to review what our competition is actually doing. What services does 1150 offer now? How do they position it? What's Studio Science up to these days? Has Fretless grown? Has High Alpha actually done anything yet? Is Element Three doing more app dev work these days? Has LEAP officially opened their Indianapolis office yet? When I reflect on the market, it kicks off a series of questions related to our competition. I'm not good at digesting what our competitors are doing on a daily basis. I tend to check in on their activities in spurts.

• It causes me to reflect on our position in the market. Are we still really the firm I picture in my head, or have we moved to a new spot in the market? Are we actually the best place to get an MVP, or do I just want us to be the best place? Are all of our competitors offering something we aren't offering? Should we be offering that thing? What common about the customers that choose us, instead of those that choose our competition?

• It motivates me to take action. All that reflection leads me to identify things I want to change. Maybe it's how we position ourselves. Maybe I think we need to change our offering to the market. Maybe I need to get over it, and extend an olive branch to someone and try to find a way to partner with them instead of trying to find a way to "beat" them.

(To be clear, Matt did eventually say very nice things about DeveloperTown. And there have been previous Verge events where it has been an almost palpable DeveloperTown-love-fest.)

​A bit more from Horowitz:

In peacetime, leaders must maximize and broaden the current opportunity. As a result, peacetime leaders employ techniques to encourage broad-based creativity and contribution across a diverse set of possible objectives. In wartime, by contrast, the company typically has a single bullet in the chamber and must, at all costs, hit the target. The company’s survival in wartime depends upon strict adherence and alignment to the mission.

[...]

A classic peacetime mission is Google’s effort to make the Internet faster. Google’s position in the search market is so dominant that they determined that anything that makes the Internet faster accrues to their benefit as it enables users to do more searches. As the clear market leader, they focus more on expanding the market than dealing with their search competitors. In contrast, a classic wartime mission was Andy Grove’s drive to get out of the memory business in the mid 1980s due to an irrepressible threat from the Japanese semiconductor companies. In this mission, the competitive threat—which could have bankrupted the company—was so great that Intel had to exit its core business, which employed 80% of its staff.

DeveloperTown is a market leader in Indianapolis, and we're at peace. (Despite what my ego says.) That means we don't need a "single bullet" that needs to hit the target at all costs. We won't be focused on "one thing" this year - or likely in the next couple of years. Instead, our strategy is to explore a number of initiatives. We want to leverage the different passions and interests of our team. Some of those include:

• Purposeful marketing and PR efforts - something we've done vary rarely

• An attempt to solidify some of our thought leadership around innovation and how we build and launch products

• A new offerings to early stage startups - where we think a new way to structure engagements can dramatically reduce risk for those starts

• Exploring selling and expanding into new "local" markets outside of Indiana

All of those are a reflection of us trying to expand our markets - or expanding our reach within a market. They are not dramatic shifts to new businesses or direct responses to competitive threats. As we continue to solidify what some of these efforts look like, we'll start to further engage the team in defining them and rolling them out.

Have a good weekend.

Mike