The key here is to know exactly how much you can sell before you run into an operational bottleneck, now you can appropriately set your sales objectives. That means a they need a capital investment to get there, so the owner may need to reassess their revenue goal or start saving for the inevitable hire. In this example, we see they cannot reach their $3.5 million goal without adding operational capacity (more service techs). This means their Maximum revenue is $236,000 per month or $2,832,000 annually.
Now, let’s see what their maximum revenue potential is in this example. Why Operational Capacity is Important in Decision Making Just click the link for more information on this powerful Business Growth Simplified online course. If you multiply this time 20 days in an average month, then there are 120 billable hours per month.įind out more on calculating maximum capacity and using your operational metrics to make more profitable decision using the revenue decision. So, in a typical day a technician can make 2 service calls or about 6 hours of billable time. Next, it takes a technician, of which they have 20, about 3 hours to provide their service to a customer for a single job. A service company with about $2.1 million in revenue wants to grow their revenue to $3.5. To determine the maximum revenue just multiply the maximum capacity by the average price per unit.
The result is the maximum number of units your business could produce – your maximum capacity. Next, take the total number of available work hours and multiply this by the number of employees that complete work, then divide this number by your cycle time. First, determine how long it takes someone working around the clock to complete one unit of your service or product. Without knowing your business’ maximum capacity you don’t know exactly how much revenue your business can produce without adding additional assets to your operation! Can you see the problem here? How Do You Calculate Your Maximum Capacity? Fewer than a handful actual knew their business’ maximum capacity. If you cannot deliver on your orders, then you’ll go out of business faster than if you have too few sales.ĭo you know exactly how much money your business operation can produce? Over a 90 day period I presented a workshop of our “ Tuning Your Revenue Engine” management model to more than 100 business owners and professionals. Not knowing how much more business you can handle can kill your your company. You need to make sure you understand your operational metrics not just your financial ones. When I ask “how many more sales do you want” and more often than I care to admit the answer is, “as much as you can get,” but that’s the wrong answer! This answer throws up a red flag for how well the rest of their business is running. Many small to medium sized businesses struggle increasing sales because they don’t know their operational capacity. Avoid Blowing Your Revenue Engine – Visiting Your Operational Capacity