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What is Capacity Planning?

Definition​

Capacity Planning is the strategic process of forecasting, measuring, and managing the amount of selling capacity your sales organization can deliver to meet revenue targets.

The Core Question​

"Do we have enough sellers, at the right productivity levels, to hit our revenue goals?"

Capacity planning answers this question with data, not guesses.

Why Traditional Headcount Planning Fails​

The Old Way (Headcount Planning)​

Revenue Target: $50M
Average Quota: $1M per rep
Math: $50M / $1M = 50 reps needed
Conclusion: "Hire 50 AEs"

Problem: This assumes:

  • ❌ All 50 reps are fully ramped
  • ❌ All 50 reps hit 100% attainment
  • ❌ Zero attrition during the year
  • ❌ Everyone starts on January 1

The New Way (Capacity Planning)​

Revenue Target: $50M
Average Quota: $1M per rep

But account for:
✓ Ramp time: 30% of team ramping at 50% avg
✓ Attrition: 15% annual turnover
✓ Attainment: 85% average (not 100%)
✓ Staggered start dates

Actual capacity needed: ~65 RRE
Required hiring: 75-80 people (accounting for ramp and attrition)

Result: More accurate, more achievable.

The Three Pillars of Capacity Planning​

1. Measuring Current Capacity​

Not: "How many people do we have?" But: "How much can they actually sell?"

Current Capacity = Σ (Employees × Ramp % × Expected Attainment)

Example:

  • 20 fully ramped reps at 85% attainment = 17.0 effective RRE
  • 5 ramping reps (avg 50% ramp) at 70% attainment = 1.75 effective RRE
  • Total: 18.75 RRE (not 25)

2. Forecasting Future Capacity​

Account for:

  • Ramp progression: Existing reps moving from 60% → 85% → 100%
  • Expected attrition: Historical turnover rates applied forward
  • Planned hires: New reps with realistic start dates and ramp schedules
  • Leaves of absence: Temporary capacity reductions

Example projection:

Q1 2026 Start: 18.75 RRE
  + Ramp progression: +2.5 RRE
  - Expected attrition: -2.0 RRE
  + New hire contributions: +1.5 RRE (partial quarter)
= Q1 2026 End: 20.75 RRE

3. Managing the Gap​

Identify and close capacity gaps:

Gap = Target Capacity - Current Capacity

If positive (shortfall): Hire more, accelerate ramp, reduce attrition If negative (surplus): Slow hiring, reallocate resources, adjust targets

Key Inputs to Capacity Planning​

Historical Data​

  • Attrition rates (by role, tenure, manager)
  • Ramp curves (time to productivity by role)
  • Attainment distribution (actual performance vs quota)
  • Time to hire (how long to fill roles)

Future Plans​

  • Revenue targets (quarterly and annual)
  • Market expansion (new territories, segments)
  • Product launches (new offerings requiring capacity)
  • Strategic initiatives (new sales motions)

Current State​

  • Active headcount (who's here today)
  • Open requisitions (approved but not filled)
  • Pipeline candidates (offers extended, start dates confirmed)
  • Planned departures (known retirements, transfers)

Key Outputs of Capacity Planning​

1. Capacity Dashboard​

Metrics tracked:

  • Current Capacity vs Target
  • Gap to Target
  • Attrition Rate
  • Capacity at Risk (next quarter prediction)
  • Recovery Lag

2. Hiring Plan​

12-month forward view:

  • Number of hires needed per quarter
  • Expected start dates
  • Ramp schedules
  • Capacity contribution timeline

3. Capacity Forecast​

4-quarter rolling projection:

  • Beginning of Quarter (BoQ) capacity
  • Expected attrition
  • Planned hiring contributions
  • End of Quarter (EoQ) capacity
  • Gap trajectory

4. Scenario Models​

What-if analysis:

  • Optimistic: Low attrition (10%), fast ramp
  • Baseline: Historical averages (15% attrition)
  • Conservative: High attrition (20%), slow ramp

The Quarterly Capacity Planning Cycle​

Month 1: Assess & Diagnose​

Week 1: Measure current capacity Week 2: Calculate gap to target Week 3: Analyze root causes (attrition, ramp, unfilled roles) Week 4: Review with leadership

Month 2: Plan & Forecast​

Week 1: Predict next quarter attrition (Capacity at Risk) Week 2: Model ramp progression and new hire contributions Week 3: Build hiring plan (roles, start dates, ramp schedules) Week 4: Create 4-quarter capacity forecast

Month 3: Execute & Track​

Week 1: Approve hiring plan and backfills Week 2: Launch recruiting for planned hires Week 3: Track actuals vs plan (attrition, hiring progress) Week 4: Update forecast, prepare for next quarter

Who Owns Capacity Planning?​

Primary Owner: RevOps / Sales Operations​

Responsibilities:

  • Build and maintain capacity models
  • Track metrics (attrition, capacity at risk, recovery lag)
  • Produce quarterly capacity forecasts
  • Partner with recruiting on hiring timelines

Key Partners​

Sales Leadership:

  • Set revenue targets
  • Approve hiring plans
  • Manage attrition (retention strategies)
  • Own team performance (attainment)

Finance:

  • Budget for headcount growth
  • Model revenue impact of capacity gaps
  • Track capacity ROI (revenue per RRE)

Recruiting/HR:

  • Execute hiring plans
  • Report time-to-hire metrics
  • Manage onboarding and ramp programs

Capacity Planning vs Other Planning Types​

Planning TypeFocusHorizonKey Metric
Capacity PlanningSelling capacity4 quartersRRE, Gap to Target
Headcount PlanningNumber of peopleAnnualHeadcount
Workforce PlanningOrg structure1-3 yearsSpans, levels
Territory PlanningCoverage allocation6-12 monthsAccounts per rep
Quota PlanningRevenue targetsAnnualQuota attainment

Real-World Example: SaaS Company​

Situation​

  • Current State: 50 AEs, 42.5 RRE effective capacity
  • Revenue Target: $50M annually
  • Problem: $50M / $1M quota per rep = 50 RRE needed
  • Gap: 7.5 RRE shortfall (15% below target)

Capacity Plan​

Q1 Actions:

  • Hire 8 AEs (4 backfills for Q4 attrition, 4 growth)
  • Start dates: 4 in Month 1, 4 in Month 2

Q1 Outcome:

  • BoQ: 42.5 RRE
  • Attrition: -3.2 RRE (15% quarterly rate)
  • Ramp progression: +2.1 RRE (existing reps advancing)
  • New hires: +0.8 RRE (partial quarter, still ramping)
  • EoQ: 42.2 RRE (gap widened slightly)

Q2-Q4 Trajectory:

  • Q2 EoQ: 44.5 RRE (new hires ramping up)
  • Q3 EoQ: 47.8 RRE (getting close)
  • Q4 EoQ: 51.2 RRE (✓ target achieved)

Key Insight: Took 4 quarters to close a 15% gap, even with aggressive hiring.

Common Misconceptions​

Myth 1: "Capacity planning is just counting people"​

Reality: Counting people = headcount. Measuring productivity-weighted capacity = capacity planning.

Myth 2: "We'll hit the target if we hire to headcount plan"​

Reality: Headcount doesn't account for ramp, attrition, or attainment variance.

Myth 3: "Capacity planning is only for large companies"​

Reality: Even a 10-person sales team benefits from understanding ramp and attrition impact.

Myth 4: "It's too hard to predict attrition"​

Reality: Historical data provides reliable ranges. Plan for the average, prepare for the worst.

Myth 5: "We can fix the gap next quarter"​

Reality: Recovery lag means gaps take 2-4 quarters to close, even with immediate action.

Benefits of Capacity Planning​

1. Revenue Predictability​

  • Align capacity with targets
  • Reduce "we missed because we were short-staffed" surprises
  • Confident forecasting

2. Proactive Hiring​

  • Hire ahead of attrition
  • Reduce reactive "emergency" hires
  • Better candidate quality

3. Budget Efficiency​

  • Right-size hiring spend
  • Avoid over-hiring or under-hiring
  • Justify headcount requests with data

4. Fair Quota Setting​

  • Quotas based on actual capacity
  • Account for ramp and attrition
  • Realistic attainment targets

5. Executive Confidence​

  • Leadership sees the plan
  • Understands capacity risks
  • Trusts revenue forecasts

Getting Started​

Step 1: Measure Your Current Capacity (Week 1)​

Calculate RRE for your current team:

For each employee:
  Annual Quota × Ramp % = Capacity Contribution

Sum all contributions = Current Capacity

Step 2: Calculate Historical Attrition Rate (Week 1)​

(Last 4 quarters total attrition) / (Average quarterly BoQ capacity) = Attrition Rate

Step 3: Build a Simple Forecast (Week 2)​

Next Quarter BoQ = This Quarter EoQ
Next Quarter Attrition = BoQ × Attrition Rate
Next Quarter EoQ = BoQ - Attrition + (Planned Hires × Avg Ramp %)

Step 4: Identify Your Gap (Week 2)​

Gap = Target Capacity - Forecasted EoQ Capacity

Step 5: Build a Hiring Plan (Week 3-4)​

Hires Needed = Gap / (Avg Quota × Avg Ramp in Quarter 1)

References​

  • Standard practice in modern sales operations (SaaS, B2B, Enterprise)
  • Also called: Sales capacity planning, workforce capacity planning, selling capacity management
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