Do you have time to hit your financial targets?
I'm sure you have big ideas and plans for your business this year, but have you checked that you have the capacity to do all of the things and reach the financial targets you are wanting to set yourself? Capacity planning is a huge part of your business strategy and let me tell you why. Firstly, it helps you understand just how much you can take on in your business without burning out and second, it tells you if it's even possible to hit your targets with the ideas you have. When you've done your capacity planning what's important is what you do with that information. Don't do the exercise and then ignore the data, listen to what the data is telling you and adjust your business and your goals accordingly. How do you Capacity Plan?
Let's start with the jargon busting: Capacity Planning: The art of balancing resources to meet demands. Service Based Business Capacity planning as a service-based business is working out how many hours you have available, what and how much you can deliver in the timeframe and then cross-referencing that against your financial targets to ensure they work as you want them to! When working out how many hours you want to work don't forget to include time for lunch breaks and consider vacation time! When working out how long each service takes don't forget to include misc hours and admin time! I roughly give myself a 10% margin of error which then also gives me 'white space' in my calendar for catching up when I need to. If you have a team, remember to capacity plan all their hours too so you can see the potential of your business as a whole not just you as the individual.
Once you've worked out the total time available and the length of time for each service it's time to analyse the data, are you able to meet your financial targets, are you able to manage the workload or do you need to make adjustments in the business?
Product Based Business
Capacity planning as a product-based business is all about the maximum production you can outlay, this is especially important if you hand-make your products! As a product-based business, you want to be capacity planning for promotional periods but also capacity planning for the whole year. Start with your financial targets, specifically revenue (it's easier to start with revenue), and ask yourself how much money you would like the business to make. Then forecast the total amount of each item you would need to sell until you reach the revenue target. If your handmade you then need to work out how long it takes you to make each product and how many hours you have available for production each week (including team members if you have them). This will help you work out if you can produce enough to hit your target. You then need to analyse the data and ask yourself can you can create/purchase enough products to meet the demands, do you have the ability to store/ship that amount? Do you have the running costs available to facilitate it?
Why should we Capacity Plan? Capacity planning will give you the data and the indications of what you need to change in your business strategy in order to meet your goals. Capacity planning will tell you what you can achieve alone, what you can achieve with your team, when and if you need to hire, highlight earning potentials and cost outlay, how to build your working week and what changes you need to make in your strategy. I recommend capacity planning at least twice a year, just to keep yourself in line with what's happening in your business and to make sure you can manage the growth of your business without getting yourself in a bit of a pickle! Things to consider in your business: Vacation time - especially if you are solo! Misc time - just add a % onto everything to be safe! The marketplace - what's happening in your industry? Alternatives - what can you change up if you need to? Note: Remember everything you are doing is a forecast, things can change but capacity planning will give you the best chance of staying one step ahead of the game!
If you'd like support working out your capacity and creating an effective strategy to hit your income goals come and chat with me. I have several options available from one-off strategy sessions to more long-term support. Book a call here