Glossary
Short, exact definitions. No preamble.
A binding constraint is the single stage of a business that caps overall throughput. Because work flows through stages in series, improving any stage other than the binding constraint produces no additional output.
Fully-burdened cost is the total hourly cost of an employee including salary, payroll tax, benefits, software, and a share of overhead. It is typically 25% to 40% higher than salary alone.
Agency gross margin is revenue minus the direct cost of delivering the work, expressed as a percentage. A healthy services agency runs 50% to 60%. Below 40% there is no capacity left to fund growth.
Utilisation rate is the share of an employee's available hours spent on billable client work. Realistic targets are 65% to 75% for delivery roles and 50% to 60% for leads and account managers.
Delivery capacity is the maximum number of accounts an agency can service at standard, calculated from hours available per role multiplied by realistic utilisation, divided by hours each account consumes.
Throughput is the rate at which a business converts inputs into delivered, paid work. In a system of stages running in series, throughput equals the capacity of the narrowest stage, never the average.
An operating cadence is a fixed meeting rhythm with named owners, a standing set of numbers, and a defined escalation path. Its purpose is to surface a gap between plan and actual within days rather than at quarter end.
Client concentration is the share of total revenue coming from a single client. Above 20% an agency carries meaningful risk; above 30% the owner effectively has a job rather than a business.
