How do capacity models work
Workload based models
Given the amount of revenue that needs to be generated, and if the productivity of each person in the role is understood, then it’s easy to arrive at the number of additional revenues that need to be generated and the number of headcounts needed to generate it.
- For this model, you need to be able to have a good idea of what the activity levels, conversion rates, and productivity is like.
- Productivity profiles can be created per role or can be provided as input.
- Revenue-required input should already be understood to use this model to arrive at the revenue.
Funnel Conversion rate-based models
This again is the reverse of the revenue model in that, given the expected revenue at the bottom of the funnel, we can determine the coverage needed at the top of the funnel. Then based on how many reps are needed to generate that level of coverage, you can determine the number of people needed.
- The idea here is that there is an expected conversion rate from the top of the funnel to the bottom of the funnel.
- Therefore, based on the conversion rates, you can arrive at the number of people needed in this role.
Ratio Based Models
Ratio-based models are very common, specifically when dealing with overlays or support roles and managers. For example, for every 4 sales reps, hire a sales engineer. Or for every 10 sales reps, hire a sales manager.
- Where the headcount is based on a ratio based on another headcount
- It’s important to understand the ratios based on historic performance.
Potential based models
- The idea here is that the territories have a specific potential that can be achieved – e.g. SOM
- To achieve that potential – you can then figure out how many people you need to reach that base from a coverage perspective.
Budget Based models
- Based on the budget available for headcount, commissions, etc. you can arrive at how many people can be hired
- There may be monthly or quarterly restrictions on budgets
- There may be monthly or quarterly restrictions on how many people can be hired in parallel
Providing the number of people
As a custom time series with a month-by-month breakdown – optimize early or optimize late based on constraints.