Realization rate is the percentage of your billable value that you invoice. It compares what you billed against what you could have billed, so it exposes how much potential revenue slips away before it ever reaches a client invoice. A figure below 100 percent means value was left on the table.
The formula
Realization rate = (billed value / billable value) x 100
Billable value is the recorded hours multiplied by their rate. Billed value is what you put on the invoice after any reductions.
A worked example
A team records work worth 1,500 in billable value but, after trimming an over-budget task, invoices the client 1,200. Realization is 1,200 divided by 1,500, times 100, which is 80 percent. One fifth of the billable value was not recovered.
How write-downs reduce it
The single biggest lever on realization is the write-down. Every time you bill fewer hours than you recorded, or apply a discount, the billed value falls while the billable value stays the same, so realization drops. Tracking realization over time tells you whether scope creep, under-quoting or generous discounting is quietly eroding margin.
- Write-downs: billing less than the recorded value.
- Discounts: agreed reductions on the headline price.
- Goodwill: not charging for some work to keep a client happy.
Related terms
Realization sits directly downstream of write-downs, and it pairs with utilization rate to give the full picture of agency margin. Both rest on your billable hours. To understand the profit behind these numbers, read our guide to agency profitability, or work out your true rate with the effective hourly rate calculator.
