Gap to Target
Definition
Gap to Target is the difference between your target capacity (what you need) and your current capacity (what you have). It quantifies whether you're overstaffed, understaffed, or right-sized.
Formula
Gap to Target = Target Capacity - Current Capacity
Interpretation:
- Positive gap: You're SHORT on capacity (need to hire)
- Zero gap: You're AT target (perfect world)
- Negative gap: You're OVER capacity (surplus)
Worked Example 1: Capacity Shortfall
Scenario:
- Target Capacity: $10.0M
- Current Capacity: $7.0M
Gap to Target = $10.0M - $7.0M = +$3.0M
Status: 🔴 30% below target (shortfall)
Interpretation:
- You need $3.0M more selling capacity
- At $1.2M per fully ramped AE → Need ~2.5 more RRE
- Accounting for ramp → Need to hire 3-4 people
Worked Example 2: At Target
Scenario:
- Target Capacity: $10.0M
- Current Capacity: $10.1M
Gap to Target = $10.0M - $10.1M = -$0.1M
Status: 🟢 At target (within 1%)
Interpretation:
- Team is properly sized
- Maintain current hiring pace to offset attrition
- Focus on retention and productivity
Worked Example 3: Over-Capacity
Scenario:
- Target Capacity: $10.0M
- Current Capacity: $12.5M
Gap to Target = $10.0M - $12.5M = -$2.5M
Status: 🟡 25% over target (surplus)
Interpretation:
- You have more capacity than needed
- Might be intentional (buffer for attrition)
- Or accidental (over-hired, target changed)
- Consider: Slow hiring, increase quotas, expand TAM
Gap in Headcount Terms
Convert dollar gap to people equivalent:
Headcount Gap = Gap to Target / Standard Quota
Example:
Gap: $3.0M
Standard Quota: $1.2M annual
Headcount Gap: $3.0M / $1.2M = 2.5 people
→ Need to hire 3 people to close gap (rounding up)
⚠️ Important: This assumes fully ramped reps. If hiring now:
- 3 hires today → Only ~0.75 RRE capacity this quarter (due to ramp)
- Need MORE hires if trying to close gap quickly
Quarterly Gap Progression
Track how gap changes over time:
| Quarter | Target | Current | Gap | Status |
|---|---|---|---|---|
| Q1 2025 | $10M | $15.3M | -$5.3M | 🟢 Over (buffer) |
| Q2 2025 | $10M | $13.3M | -$3.3M | 🟢 Over (buffer) |
| Q3 2025 | $10M | $11.1M | -$1.1M | 🟢 Slightly over |
| Q4 2025 | $10M | $7.0M | +$3.0M | 🔴 Short (crisis) |
Trend Analysis:
- Started year with 53% surplus
- Each quarter, attrition eroded capacity faster than backfills could restore
- By Q4, flipped to 30% shortfall
- Action needed: Accelerate hiring in Q1
Root Causes of Gap
Positive Gap (Shortfall)
Why you're short on capacity:
-
High Attrition
- Lost more people than expected
- Didn't backfill fast enough
- Example: 45% quarterly attrition vs 13% expected
-
Slow Hiring
- Positions left open too long
- Time-to-hire exceeded plan
- Offers declined
-
Ramp Drag
- New hires ramping slower than expected
- Poor onboarding
- Too many junior hires
-
Leaves of Absence
- Temporary capacity loss
- Medical, parental, sabbatical
-
Quota Increases
- Target capacity raised mid-year
- Market expansion
- New product lines
Negative Gap (Surplus)
Why you're over-capacity:
-
Over-Hiring
- Hired ahead of target
- Buffer for attrition
- Aggressive growth plan
-
Lower Attrition
- Retention improved unexpectedly
- Market cooled down
-
Faster Ramp
- Better onboarding than planned
- Experienced hires ramped quickly
-
Target Reduction
- Revenue target lowered
- Market contraction
- Product sunset
Setting Target Capacity
Top-Down Approach (Revenue-Driven)
Step 1: Set Revenue Target
Annual Revenue Goal: $50M
Step 2: Define Standard Quota
Average Quota per Rep: $1M
Step 3: Account for Attainment
Expected Team Attainment: 85%
Step 4: Calculate Capacity Needed
Target Capacity = $50M / 85% = $58.8M
Step 5: Convert to RRE
Target RRE = $58.8M / $1M = 58.8 RRE
Bottom-Up Approach (Coverage-Driven)
Step 1: Define Coverage Need
Total Addressable Accounts: 5,000
Accounts per Rep: 100
Step 2: Calculate Reps Needed
Required Reps = 5,000 / 100 = 50 reps
Step 3: Account for Ramp
If 20% of team is ramping at 60% avg:
40 fully ramped = 40 RRE
10 ramping at 60% = 6 RRE
Target: 46 RRE effective
Step 4: Convert to Dollars
At $1M per RRE:
Target Capacity = 46 RRE × $1M = $46M
Managing the Gap
Closing a Positive Gap (Shortfall)
3 strategies:
1. Hire More
Current Capacity: $7.0M
Gap: +$3.0M
→ Hire 3-4 reps
→ Timeline: 6 months to full productivity
Pros: Permanent solution Cons: Expensive, slow to ramp
2. Accelerate Ramp
Current ramp: 5 months to 100%
Improved ramp: 4 months to 100%
→ Existing 3 ramping reps gain +$0.9M capacity one month earlier
Pros: Faster impact Cons: Requires onboarding investment
3. Reduce Attrition
Current attrition: 15% quarterly
Improved attrition: 10% quarterly
→ Save 5% × $7.0M = $350K per quarter
Pros: Protects existing capacity Cons: Long-term cultural fixes
Managing a Negative Gap (Surplus)
3 strategies:
1. Slow Hiring
Current plan: Hire 4 reps per quarter
Adjusted plan: Hire 2 reps per quarter
→ Let natural attrition reduce surplus
Pros: No layoffs, cost-efficient Cons: Takes time
2. Increase Quotas
Current quota: $1M per rep
New quota: $1.2M per rep
→ Same headcount, higher target capacity
Pros: Leverages existing team Cons: Risk of demotivation if too aggressive
3. Expand TAM
Surplus capacity: $2.5M
→ Enter new market segment
→ Launch new product
→ Geographic expansion
Pros: Growth opportunity Cons: Requires market validation
Acceptable Gap Thresholds
Recommended Tolerances
| Gap Range | Status | Action |
|---|---|---|
| -10% to +10% | 🟢 Green | No action, maintain course |
| +10% to +20% | 🟡 Yellow | Accelerate hiring, monitor closely |
| +20% to +30% | 🟠 Orange | Urgent hiring needed |
| > +30% | 🔴 Red | Crisis mode, re-evaluate targets |
| < -10% | 🟡 Yellow | Slow hiring, consider reallocation |
Example Status Report
Current Quarter:
Target: $10.0M
Current: $7.0M
Gap: +$3.0M (30%)
Status: 🔴 Red (Crisis)
Action: Hire 4 AEs immediately, expected recovery by Q3
Forecasting Future Gap
Project gap trajectory based on hiring plan:
Example:
| Quarter | Target | Current | Gap | Action Plan |
|---|---|---|---|---|
| Q4 2025 | $10M | $7.0M | +$3.0M | 🔴 Crisis |
| Q1 2026 | $10M | $7.3M | +$2.7M | 🟠 Hire 4 AEs |
| Q2 2026 | $10M | $8.5M | +$1.5M | 🟡 Ramp continuing |
| Q3 2026 | $10M | $9.8M | +$0.2M | 🟢 Nearly closed |
| Q4 2026 | $10M | $10.5M | -$0.5M | 🟢 At target |
Recovery timeline: 4 quarters from crisis to target
Best Practices
1. Report Gap as %
❌ Gap: $3.0M (What does this mean?)
✅ Gap: $3.0M (30% below target)
2. Show Trend
Q3 Gap: -$1.1M (11% over)
Q4 Gap: +$3.0M (30% under)
→ Swing of $4.1M in one quarter (attrition spike)
3. Break Down by Team
| Team | Target | Current | Gap | Status |
|---|---|---|---|---|
| Northeast | $4M | $2.8M | +$1.2M | 🔴 Short |
| Southeast | $3M | $2.9M | +$0.1M | 🟢 Good |
| West | $3M | $3.5M | -$0.5M | 🟢 Over |
Insight: Northeast has critical gap, West has surplus → Transfer resources?
4. Communicate Action Plan
Gap: $3.0M (30% below target)
Recovery Plan:
• Hire 4 AEs in Q1 (approved)
• Expected start dates: 2 in Month 1, 2 in Month 3
• Full recovery: Q4 2026 (assuming 13% attrition)
• Risk: If attrition exceeds 15%, need 1-2 additional hires
Common Pitfalls
1. Comparing to Wrong Target
Mistake: Using annual target for quarterly gap
Example:
Annual Target: $40M
Current Capacity (Q1): $8M
Gap: +$32M ← WRONG!
Correct:
Quarterly Target: $10M
Current Capacity: $8M
Gap: +$2M
2. Not Accounting for Ramp in Solutions
Mistake: "Gap is $3M, hire 3 people, gap closed."
Reality: Those 3 people contribute ~$0.75M in first quarter. Gap won't close for 4-5 quarters.
3. Treating All Gaps Equally
Mistake: +10% gap treated same as +30% gap
Reality: +10% is normal fluctuation, +30% is crisis requiring immediate action.
Related Terms
- Current Capacity - What you have
- [Target Capacity] - What you need
- Unrecovered Gap - Capacity lost to attrition not yet recovered
- Capacity Planning - Process for managing gaps
- Hiring Planning - Closing gaps through hiring
References
- Standard metric in sales capacity planning
- Gap analysis is fundamental to workforce planning
- Also called: Capacity shortfall, capacity deficit, headcount gap (when measured in people)