Capacity planning and forecasting for a 50-person services company
Fifty people times eight hours times twenty-two days is 8,800 hours a month. You do not have 8,800 hours. Here is how to find the real number, and the month it runs out.
The four subtractions
Capacity is what is left after four things you already know about:
| Step | Hours | Why |
|---|---|---|
| Headcount × 8h × 22 days | 8,800 | The number people quote |
| − Holidays (1 day) | 8,400 | Public and company holidays in the month |
| − Approved leave (~40 days) | 8,080 | Already on the leave calendar |
| − Non-billable time (20%) | 6,464 | Meetings, admin, internal work |
| − Committed allocations | what is left | Work you have already promised |
The gap between the first and fourth lines is about 27% in this example, and often more. That is why teams that plan from headcount miss their dates.
Forecast demand by probability
Won work counts in full. Pipeline counts at its probability: a 40% deal needing 400 hours is 160 hours of expected demand. Split the two in your forecast, because a month full of pipeline is much less certain than one full of signed work.
Find the first month that does not fit
Project capacity and demand month by month for four to six months. The first month where demand exceeds capacity is the only number that drives a decision, and how many weeks away it is tells you whether hiring is still an option or only subcontracting is.
Model the decision before you make it
Before hiring, compare scenarios: two hires from next month, losing the largest deal, cutting non-billable time to 15%. Each changes the shortfall months and the cost. Employee Desk does this in forecasting and scenarios, using the attendance and leave records you already keep.
Capacity planning should never be a reason to monitor people more. Everything above runs on attendance, leave and project allocations; no screenshots required.
Read more: capacity planning, cost planning and workforce planning.
Frequently asked questions
How do you calculate team capacity?
Start with contracted hours, subtract holidays, approved leave and a non-billable allowance (usually 15 to 25%), then subtract work already committed. What remains is what you can still sell.
How far ahead should a services company forecast?
Four to six months. Further out, pipeline probabilities are too uncertain to act on.
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