The Hidden Cost of Utilization, with Carson Pierce — Ep. 196

About this Episode

In this episode of the Agency Profit Podcast, Marcel is joined once again by Carson Pierce to unpack one of the trickiest dynamics in running a service business: utilization. While many agency owners understand the surface-level math of underutilization, Carson and Marcel dig into the hidden and often overlooked costs that come with it: from over-servicing clients and bloated internal projects, to lost efficiency, disengaged team members, and a dangerous “new normal” of lower productivity. They also highlight the long-term financial and psychological impacts, such as reduced enterprise value, diminished cash reserves, and a leadership mindset that shifts from playing to win to playing not to lose. Through real-world analogies, candid lessons from Parakeeto’s own journey, and a clear framework for modeling utilization, this conversation gives agency leaders practical tools and perspective to spot and manage the true costs of low utilization before it quietly erodes profit, culture, and growth potential.

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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.

Show Notes

• Deep dive on Utilization
• Utilization Calculator
• Book: The Goal

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