Learning how other service-led industries work out their capacity to understand how much revenue they expect from every person fascinates me. Many still rely on simple formulas like multiplying salaries by three or five, but I have never found this the most effective approach.

Setting targets considers more than just revenue aspirations; it’s also understanding what impact, if any, the targets you’re about to set may have on the quality of delivery.

I took a bit of time out of the agency world and spent some of my time as an MD within a business that serviced, rented, built, and sold vehicles. It was how they modelled and planned their service department that flicked a switch for me. First, they don’t expect anyone to be 100% busy, i.e. ‘servicing’ for the full shift. They use measures such as recovery rate and productive efficiency to understand how profitable the service is being delivered. They were also very transparent with performance and the impact on financial results - an approach I already believed in.

The BODA Group’s approach

Across our two agencies, we know how much time each type of role can realistically spend on client work. We still sell our days as 7.5 hours, but in terms of how many days we should sell, that’s all based on what is reasonable for each role to deliver.

For example, take a role that works on clients work 100% of their day, like a designer. We expect that person to only deliver 6 hours of work a day, even though they might be at their desk for 7.5 hours. That then means said person can safely work on 17 days' worth of revenue. What happens to the 1.5 hours per day that’s not being billed out? Training, getting up for a change of scenery, chatting with colleagues, micro sleeps etc tend to swallow time.

Leadership roles, with their additional responsibilities, have different billing expectations. One role in particular expects to deliver eight days of client work. With the remaining days, they work on their area; whether that be people development, business development, client relations or developing new service techniques. But from a capacity and revenue planning perspective, we forecast eight days a month for them. That’s it.

We find this approach aligns nicely with realistic capabilities and, fundamentally, protects our commitment to service quality and overall team well-being.

Allow your team to be a part of the conversation.

Do our teams know what we expect? Absolutely. How do they feel about it? They love it.

Our teams are always a part of the conversation and any conversation around continual improvement too.

We do our best to avoid the pressures of unrealistic targets, a common issue in our industry, and our teams appreciate that. We've found that billing 80% of their time is sufficient for our investment goals and, for us as owners, provides a modest year-end dividend.

Creating a revenue forecast.

Forecasting becomes straightforward with this model. We know what we can sell, so it’s about understanding how much we need to sell to hit our billing potential.

We start by working out the total revenue potential based on the sellable days per role. This might be £3million, for instance. Then, we subtract the value of the committed contract periods we have, up to the end of initial trials and any remaining time of full-term periods. Finally, we factor in a contingency for unforeseen losses, for whatever reason.

This is the formula: Revenue potential - committed contract periods - unforeseen reductions = revenue gap.

Working out the sales target.

The final step is aligning sales targets to ensure timely invoice generation to cover the revenue gap. I won’t go into the mechanics of that here, but you can visit my other article on how to make sure the revenue gap is filled.

Capacity and revenue planning are more than numbers. We must understand our teams’ realistic potential based on balancing it with quality delivery. Our approach, inspired by cross-industry insights, has led to a more realistic, effective, and profitable strategy that everyone is on board with.