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Capacity Waterfall

Definition

A Capacity Waterfall is a visual representation that shows how sales capacity flows from Beginning of Quarter (BoQ) through attrition and backfills to End of Quarter (EoQ). It makes capacity changes tangible and easy to understand at a glance.

Why It Matters

  • Visual clarity: See exactly where capacity went
  • Storytelling: Explain capacity gaps to non-technical stakeholders
  • Root cause analysis: Identify biggest drivers of capacity change
  • Trend tracking: Compare waterfalls quarter-over-quarter

Basic Waterfall Structure

┌─────────────────────────────────────────────────────────┐
│ │
│ $11M ┃█████████████████████████┃ BoQ Capacity │
│ ┃ ┃ │
│ ┃ -$6.2M ┃ │
│ $5M ┃ ▼▼▼ ┃ Loss Capacity │
│ ┃ ┃ │
│ ┃ +$0.9M ┃ │
│ $6M ┃ ▲ ┃ Backfills Added │
│ ┃ ┃ │
│ $5.7M┃██████████████ ┃ EoQ Capacity │
│ ┃ ┃ │
└─────────────────────────────────────────────────────────┘

Worked Example: North America East Q4 2025

The Story in Numbers

Beginning of Quarter (Oct 1):    $11.0M  (9 people)
Less: Total Attrition: -$6.2M (5 people left)
Less: Leaves of Absence: -$0 (included in attrition)
Plus: Backfills Added: +$0.9M (1 person, partial ramp)
Plus: Ramp Progression: +$0 (no one advanced ramp stages)
─────────────────────────────────────────────────────────
End of Quarter (Dec 31): $5.7M (5 people)

Net Change: -$5.3M (-4 people net)

Waterfall Visualization

$12M ┐
│ ┏━━━━━━━━━━━┓
│ ┃ $11.0M ┃ ← BoQ
$10M │ ┃ ┃
│ ┃ ┃
$8M │ ┃ ┃
│ ┃ ┃ ┏━━━━━┓
$6M │ ┃ ┃ ┃$5.7M┃ ← EoQ
│ ┗━━━━━━━━━━━┛ ┗━━━━━┛
$4M │ │
│ │ ↓ -$6.2M (Loss)
$2M │ │ ↑ +$0.9M (Backfills)
│ └─────┘
$0M └────────────────────────────
BoQ Loss Backfills EoQ

Components of a Capacity Waterfall

1. Beginning of Quarter (BoQ) Capacity

What it is: Starting capacity on Day 1 of the quarter

Example:

BoQ (Oct 1): $11.0M
├─ 7 fully ramped reps × 100% = $9.5M
├─ 2 ramping reps × 75% = $1.5M
└─ Total: 9 people, $11.0M capacity

Bar color: 🟦 Blue (starting point)


2. Loss Capacity (Attrition)

What it is: Capacity lost to departures and leaves

Example:

Q4 Attrition: -$6.2M
├─ Tom (Sept 30): -$1.4M
├─ John (Oct 15): -$1.2M
├─ Mike (Nov 1): -$1.0M
├─ Lisa (Nov 15): -$1.4M
└─ Sarah (LOA Dec 1): -$1.2M
└─ Total: 5 people, -$6.2M

Bar direction: ⬇️ Downward (loss) Bar color: 🟥 Red (negative impact)


3. Backfills Added

What it is: Capacity recovered through new hires

Example:

Q4 Backfills: +$0.9M
├─ Tom's Backfill (Nov 30):
│ Annual quota: $1.4M
│ Ramp in Q4: Month 1 = 0%, partial month
│ Q4 contribution: ~$0
├─ John's Backfill (planned for Q1)
└─ Total: 1 person started, +$0.9M partial capacity

Bar direction: ⬆️ Upward (gain) Bar color: 🟩 Green (positive impact)


4. Ramp Progression

What it is: Existing reps advancing to next ramp stage

Example:

Q4 Ramp Progression: +$0.5M
├─ 2 reps moved from 50% → 75%
│ Gain: 2 × $1.2M × 25% = $0.6M
└─ But 1 rep left before advancing, net: +$0.5M

Bar direction: ⬆️ Upward (gain) Bar color: 🟦 Light Blue (internal improvement)

Note: In Q4 North America East example, no ramp progression occurred.


5. End of Quarter (EoQ) Capacity

What it is: Final capacity on last day of quarter

Example:

EoQ (Dec 31): $5.7M
├─ 4 fully ramped reps × 100% = $5.0M
├─ 1 ramping backfill × 70% = $0.7M
└─ Total: 5 people, $5.7M capacity

Bar color: 🟦 Blue (ending point)


Reading a Waterfall

Key Metrics Panel

Displayed alongside the waterfall:

┌──────────────────────────────────────────┐
│ WATERFALL METRICS │
├──────────────────────────────────────────┤
│ Total Attrition Impact: -$6.2M (56%) │
│ Backfill Recovery: +$0.9M (15%) │
│ Unrecovered Capacity: -$5.3M (85%) │
│ Recovery Lag: 4.5 months avg │
├──────────────────────────────────────────┤
│ Annual Quota Lost: $6.2M │
│ (Full annual quotas of departed employees)
└──────────────────────────────────────────┘

Percentage Calculations

Attrition Rate:

Attrition Rate = Loss Capacity / BoQ Capacity
= $6.2M / $11.0M = 56.4%

Backfill Recovery Rate:

Backfill Rate = Recovered Capacity / Loss Capacity
= $0.9M / $6.2M = 14.5%

Unrecovered Rate:

Unrecovered = (Loss - Recovered) / Loss
= ($6.2M - $0.9M) / $6.2M = 85.5%

Quarter-by-Quarter Waterfall Comparison

Q1 2025

BoQ: $17.0M → Loss: -$2.0M → Backfills: +$0.3M → EoQ: $15.3M
Net: -$1.7M (10% decline)
Status: 🟢 Manageable

Q2 2025

BoQ: $15.3M → Loss: -$2.3M → Backfills: +$0.3M → EoQ: $13.3M
Net: -$2.0M (13% decline)
Status: 🟡 Concern growing

Q3 2025

BoQ: $13.3M → Loss: -$2.5M → Backfills: +$0.3M → EoQ: $11.1M
Net: -$2.2M (17% decline)
Status: 🟠 Accelerating

Q4 2025

BoQ: $11.1M → Loss: -$6.2M → Backfills: +$0.9M → EoQ: $5.7M
Net: -$5.3M (48% decline)
Status: 🔴 Crisis

Trend: Each quarter's decline accelerated, culminating in Q4 crisis.


Advanced Waterfall: Detailed Breakdown

Segment Loss by Type

BoQ: $11.0M

Loss Breakdown:
├─ Voluntary Resignation: -$4.0M
├─ Performance Termination: -$1.0M
└─ LOA (Temporary): -$1.2M
└─ Total Loss: -$6.2M

Recovery Breakdown:
├─ Backfill 1 (ramping): +$0.7M
├─ Backfill 2 (ramping): +$0.2M
└─ Total Recovery: +$0.9M

EoQ: $5.7M

Multi-Tier Waterfall (by Role)

                    Enterprise AE      Mid-Market AE       SDR
BoQ: $6.0M $4.0M $1.0M
Loss: -$3.8M (63%) -$1.8M (45%) -$0.6M (60%)
Backfills: +$0.5M +$0.3M +$0.1M
EoQ: $2.7M $2.5M $0.5M

Insight: Enterprise AE attrition is disproportionately high (63% loss rate).


Using Waterfalls in Presentations

Executive Summary Format

Slide title: "Q4 Capacity Waterfall: $11M → $5.7M"

Visual: Large waterfall chart

Key Takeaways:

  1. Started Q4 with $11M capacity
  2. Lost $6.2M to attrition (56% loss rate, 3× historical avg)
  3. Recovered only $0.9M through 1 backfill (15% recovery rate)
  4. Ended Q4 with $5.7M capacity (48% below BoQ)
  5. Action needed: Hire 5-6 AEs in Q1 to restore capacity

Quarterly Business Review (QBR) Format

Slide 1: Waterfall

  • Visual showing BoQ → Loss → Recovery → EoQ

Slide 2: Root Cause

  • Why was attrition so high? (compensation, manager turnover, market)

Slide 3: Recovery Plan

  • Hiring plan for next 2 quarters
  • Expected timeline to return to target
  • Retention initiatives

Best Practices

1. Use Consistent Colors

  • BoQ/EoQ bars: Blue
  • Loss bars: Red (downward)
  • Gain bars: Green (upward)

2. Label Everything

❌ -$6.2M
✅ -$6.2M (Loss: 5 people, 56% attrition)

3. Show Both Dollars and Headcount

Loss Capacity: -$6.2M (5 people)
Backfills: +$0.9M (1 person, partial ramp)

4. Include Percentages

Backfill Recovery: +$0.9M (15% of loss recovered)
Unrecovered Gap: -$5.3M (85% still unrecovered)

5. Compare to Target

EoQ Capacity: $5.7M
Target Capacity: $10.0M
Gap to Target: -$4.3M (43% below)

Common Pitfalls

1. Not Showing Net Change

Mistake: Waterfall shows BoQ and EoQ, but doesn't call out net change

Better: Highlight net change prominently

BoQ: $11.0M → EoQ: $5.7M
NET: -$5.3M (-48%)

2. Ignoring Ramp Progression

Mistake: Only showing Loss and Backfills, forgetting existing reps advancing ramp

Better: Include "Ramp Progression" bar (even if small)

3. Using Headcount Instead of Capacity

Mistake: "9 people → 5 people" (doesn't show capacity impact)

Better: "$11M → $5.7M (9 people → 5 people)"

4. No Context

Mistake: Waterfall with no commentary

Better: Include:

  • Historical comparison (is this normal?)
  • Root cause analysis (why so high?)
  • Action plan (what are we doing about it?)

Tools for Creating Waterfalls

Excel/Google Sheets

  • Use stacked column chart
  • Manually calculate bar heights
  • Color-code by type

Tableau/Power BI

  • Waterfall chart type (built-in)
  • Auto-calculates running totals
  • Interactive filters

Modus (Demo App)

  • Automated waterfall generation
  • Real-time updates
  • Drill-down to individual employees

References

  • Waterfall charts are standard in finance and operations
  • Also called: Bridge chart, cascade chart, capacity flow chart
  • Common in sales capacity planning, workforce analytics, revenue waterfalls