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Capacity at Risk

Definition​

Capacity at Risk is a predictive metric that estimates how much sales capacity you're likely to lose to attrition in the next quarter, based on historical patterns.

Why It Matters​

  • Proactive planning: Know hiring needs before capacity is lost
  • Budget forecasting: Anticipate backfill costs
  • Risk management: Identify when attrition risk is elevated
  • Scenario planning: Model best-case, baseline, and worst-case futures

Formula​

Three Prediction Methods​

Capacity at Risk uses historical attrition rates applied to next quarter's beginning capacity:

Capacity at Risk = Next Quarter Beginning Capacity × Historical Attrition Rate

Three methods provide a range estimate:

  1. Trailing 4 Quarters (Baseline) ⭐ - Most balanced
  2. Prior Quarter - Most recent trend
  3. Same Quarter Last Year - Accounts for seasonality

Worked Example: North America East​

Starting Point​

  • Current Quarter: Q4 2025
  • Next Quarter (Q1 2026) Beginning Capacity: $7.0M
  • Standard Quarterly Quota: $300K per rep

METHOD 1: Trailing 4 Quarters (Baseline) ⭐​

Step 1: Sum total capacity at start of each quarter

Q1 2025 BoQ: $11.0M
Q2 2025 BoQ: $9.5M
Q3 2025 BoQ: $8.7M
Q4 2025 BoQ: $7.7M
-----------------------
Total: $37.0M

Step 2: Sum total attrition over 4 quarters

Q1 loss: $1.8M
Q2 loss: $1.2M
Q3 loss: $1.2M
Q4 loss: $0.8M
-----------------------
Total: $5.0M

Step 3: Calculate effective quarterly attrition rate

Rate = Total Attrition / Total Starting Capacity
Rate = $5.0M / $37.0M = 13.5%

Step 4: Apply to next quarter

Q1 2026 starting capacity = $7.0M
Predicted Q1 2026 attrition = $7.0M × 13.5% = $945K

Result: $945K at risk (3 people equivalent)

METHOD 2: Prior Quarter (Recent Trend)​

Step 1: Get prior quarter attrition rate

Q4 loss: $0.8M
Q4 BoQ: $7.7M
Rate = $0.8M / $7.7M = 10.4%

Step 2: Apply to next quarter

Q1 2026 starting capacity = $7.0M
Predicted Q1 2026 attrition = $7.0M × 10.4% = $728K

Result: $728K at risk (optimistic - assumes Q4 trend continues)

METHOD 3: Same Quarter Last Year (Seasonality)​

Step 1: Get Q1 2025 attrition rate

Q1 2025 loss: $1.8M
Q1 2025 BoQ: $11.0M
Rate = $1.8M / $11.0M = 16.4%

Step 2: Apply to next quarter

Q1 2026 starting capacity = $7.0M
Predicted Q1 2026 attrition = $7.0M × 16.4% = $1.148M

Result: $1.148M at risk (conservative - Q1 often has higher attrition)

Range Summary​

MethodRatePredicted Q1'26 AttritionPeople Equivalent
Prior Quarter (Q4)10.4%$728K2.4 people
Trailing 4Qs (baseline)13.5%$945K3.2 people
Same Quarter Last Year (Q1)16.4%$1.148M3.8 people

Interpretation:

  • Low bound: $728K (if recent low attrition continues)
  • Baseline: $945K (balanced historical average)
  • High bound: $1.148M (if Q1 seasonality repeats)

When to Use Each Method​

Trailing 4 Quarters ⭐ (Default)​

  • Best for: Baseline planning
  • Use when: You want a balanced, stable estimate
  • Pros: Smooths out quarterly volatility
  • Cons: May lag recent trends

Prior Quarter​

  • Best for: Short-term forecasts
  • Use when: Recent quarter was "normal"
  • Pros: Most responsive to recent changes
  • Cons: Can overreact to one-time events

Same Quarter Last Year​

  • Best for: Seasonal businesses
  • Use when: You have strong seasonal patterns
  • Pros: Accounts for Q1/Q4 spikes
  • Cons: Assumes patterns repeat year-over-year

Headcount Equivalent​

Convert dollar capacity at risk to people:

People at Risk = Capacity at Risk / Standard Quarterly Quota

Example:

Baseline Capacity at Risk: $945K
Standard Quota: $1.2M annual = $300K quarterly
People at Risk: $945K / $300K = 3.15 ≈ 3 people

⚠️ Important: This is capacity-weighted headcount, not actual departures. Losing 2 top performers could equal 3 people of capacity.

Status Thresholds​

Set alert thresholds based on % of beginning capacity:

StatusThresholdExample ($7.0M BoQ)
🟢 Good< 10%< $700K
🟡 Warning10-15%$700K - $1.05M
🔴 Critical> 15%> $1.05M

Current Example: $945K / $7.0M = 13.5% → 🟡 Warning

How to Use This Metric​

1. Set Hiring Targets​

Capacity at Risk: $945K
→ Need to hire 3-4 people next quarter
→ Assuming 2-month time-to-fill
→ Start recruiting now

2. Scenario Planning​

ScenarioAssumptionHiring Needed
OptimisticPrior Q trend (10.4%)2-3 hires
BaselineTrailing 4Q (13.5%)3-4 hires
ConservativeSame Q LY (16.4%)4-5 hires

3. Update Monthly​

As the quarter progresses, update with actual attrition:

  • If Q4 attrition ends higher than $0.8M, all three methods increase
  • Recalculate monthly to stay current

Best Practices​

  1. Display all three methods: Show the range, not just baseline
  2. Track actuals vs predicted: Validate which method is most accurate for your org
  3. Adjust for known events: Upcoming reorg? Comp changes? Factor those in
  4. Communicate uncertainty: This is a prediction, not a guarantee
  5. Plan for the mid-range: Budget for baseline, prepare for high

Common Pitfalls​

  • Treating prediction as fact: Actual attrition will vary
  • Ignoring outliers: One-time mass departure skews trailing 4Q
  • Not updating quarterly: Historical rates change over time
  • Forgetting leaves of absence: LOA is temporary loss, not attrition

References​

  • Predictive capacity planning is standard in enterprise sales ops
  • Similar to: Attrition forecast, turnover risk, capacity forecast
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