Realization Rate measures the percentage of the billable value a company creates that is then invoiced and collected by the company.
This metric reflects how much of the work performed at standard billing rates is turned into revenue, providing insight into pricing effectiveness, client management, project management, and financial performance. For example, if a company has billing rates of $150/hour and works 10,000 hours, they should be able to invoice for $1,500,000. If this company only collects $1,350,000, their Realization Rate would be 90%. Do note that it is possible to achieve over 100%, and high performing companies often do if they have fixed price contracts
and work efficiently.
Realization Rate = Net Revenue / Value of Billable Work
So Realization Rate indicates what percentage of billable work converts to revenue.