What is Sales Capacity Planning?

When you manage a sales team, there are a lot of responsibilities you expect to tackle. Forecasting, coaching reps, negotiating deals, hiring and firing — those are all duties you know you’ll shoulder when you sign up for the job.

Capacity planning is another one of those vital duties. The only thing is most companies don’t do it, because most sales leaders don’t even know what it is. That’s unfortunate, because it’s a concept that can save sales teams a lot of time, money, and headaches.

If you manage a sales team and aren’t familiar with capacity planning, you’re missing out on a major competitive advantage.

Capacity Planning

If you Google “capacity planning”, the first thing you get is this wikipedia definition:

“Capacity planning is the process of determining the production capacity needed by an organization to meet changing demands for its products. In the context of capacity planning, design capacity is the maximum amount of work that an organization is capable of completing in a given period.”

In real-person speak, that translates roughly to matching supply with demand as closely as possible. The term is most commonly used in IT and manufacturing, but as businesses become more and more obsessed with efficiency, the concept has spread into the world of sales as well.

How Capacity Planning Applies to Sales

The crux of sales management is to hit the sweet spot between not pushing your team hard enough and committing to an overly ambitious goal. Capacity planning is the tool managers should use to break their team’s ability to generate new bookings into quantifiable components and find their production sweet spot.

Sales teams apply capacity planning by quantifying individual sales performance, developing sales goals based on the aggregate of the total “production capacity” (bookings) of their sales reps, and then finding ways to increase that capacity through sales enablement or hiring.

Sales teams run into problems when they try to grow. They either hit the gas too early and end up adding headcount and increasing goal before their market is ready, or they leave money on the table by not expanding their sales capacity to meet demand for their product.

Why It’s Worth Your Time

Too often, managers resort to increasing goals and cracking the whip to drive performance. That sometimes gets the job done, but more often the whip cracking just discourages reps and ruins the culture of the sales organization as a whole.

Capacity planning is the stepladder that gets you from the current state of the world to where you want to be. It’s the process by which you measure and quantify the current capability of your sales team, compare that capacity to the sales goals you want to hit, and make an actionable plan to bridge the two.

A Few Tips to Leverage Sales Capacity Planning

A lot goes into sales capacity planning — for a little more depth, take a look at this blog post — but here are the 3 major points to help you leverage sales capacity planning for your company:

1. Break down your goals — Before you start trying to increase your team’s sales capacity, get an idea of how much you need to increase capacity by. The best way to do that is to set the company goal with the executive team and break it down to the component level of individual contributors. This post on setting sales goals provides more details on how to do that.

2. Use sales enablement to increase capacity — Adding headcount is the brute force method of increasing sales capacity. It’s more cost-effective to enable your existing team with sales tools and marketing support than it is to hire and train new employees every time you hit your production limits.

3. Don’t be afraid to revise — Once you have a model for how much revenue you can expect sales reps to bring in, don’t panic when things go sideways. This Mike Tyson quote sums up the reality of capacity planning: “Everybody has a plan until they get punched in the face.” The beauty of capacity planning is it not only helps you stay on course for plan A, it also gives you the structure you need to develop a data-backed plan B.

When you find yourself challenged to hit higher revenue goals, remember these tips, and remember the value of capacity planning as a whole. There’s no better way to diagnose the weaknesses of your sales team and set yourself up for success.