How Do You Measure Business Capacity?

If you ask the owner of a new small business, “How much do you want to increase sales?” they’ll likely answer: “As much as possible. Keep them coming!”

Enthusiasm abounds in the early life of a business, but capacity can’t be ignored. Capacity is a business’s maximum output in a given time; it is what a business gets done with the resources they have. Small business owners often have a blind spot that prevents them from seeing their true capacity, especially when it comes to Human Resources.

Larger organizations measure capacity using standard business measurements. Small businesses might use a P&L sheet, or a balance sheet, but usually they’re mostly relying on the owner’s intuition. They operate with a general idea of how much they produce and how many hours people work per week or month.
They usually don’t have a grip on these essential aspects of capacity:

• How much time is spent, by key personnel, in the production aspects of the business?
• How much time is spent on external functions such sales, marketing, phone calls, and client meetings?
• How much time is spent internally on emails, paperwork, office politics, and resolving employee issues?

As a result, businesses set wildly optimistic goals, that don’t reflect reality. Overestimating capacity leads to simply having too many orders to fill, compromising the ability to grow.

START AT THE TOP

To combat this problem, businesses have to first establish the capacity of upper level management. How much does the business rely on these people to act as the battery of the organization? If the leaders are away, do things stop happening?

Next, look at key personnel. How much sick time or comp time are employees allowed? Are capacity calculations allowing for their absences? Can the business function efficiently without someone? For how long?

Small businesses generally have a great bottom line assessment of what it is going to take in terms of money, supplies, or equipment to grow. They forget to look at the people it takes to keep the wheels turning, and end up stuck on the Great Small Business Plateau. Without recognizing the human resource element of capacity, businesses can’t achieve the growth they want and will continue to get knocked around by distractions. By illuminating these blind spots, small businesses can take into account those factors that have a tremendous impact on capacity. If you need help determining the capacity in your own organization, take an assessment today.