Gross Capacity

Gross capacity refers to the total number of hours purchased from your team in a given time period based on their employment contract.

It represents the total capacity being paid for across a team in a given period of time, for the purpose of calculating other useful metrics such as Average Cost per Hour and Utilization.

Gross capacity is calculated by multiplying the number of team members by the number of standard working hours in a given time frame (usually 40 hours per week per person). It is a foundational metric used to determine utilization rates, forecast workloads, and plan hiring.

Importantly, Gross Capacity should include time that is paid for, but not theoretically available, such as paid time off, paid sick leave, paid holidays, internal/non-billable time, paid professional development, etc. 

Formula Example:

Gross Capacity = Days in Period x Daily Capacity in Period

Note that Gross Capacity is not the same as other variations on capacity such as available capacity, delivery capacity, billable capacity etc. —it includes all time that is paid for, regardless of how it is being allocated and used.

Why it matters for agencies

Understanding gross capacity is essential for effective workforce planning, revenue forecasting, and operational management. It sets the baseline for analyzing how efficiently time is being used across the team, and understanding the cost of Unutilized time allocated, time off policies, etc. 

Here’s why it matters:

• Enables accurate utilization tracking: This value is used as the denominator in an accurate Utilization calculation, taking into account the cost of time off, holidays and internal time.
  
• Enables accurate Average Cost Per Hour Calculation: This is also used as the denominator in an accurate Average Cost per Hour calculation, creating horizontal consistency in the modeling of staff costs independent of fluctuations in overhead and Utilization.
  
• Improves profitability and revenue planning: Combined with metrics like Average Billable Rate and Utilization, firms can quickly and easily model their revenue capacity, planned margins and analyze the impact of changes to their team.

How to optimize

Gross capacity is a fixed number—but how you use it is what drives performance. Optimization focuses on managing how time is allocated across billable and non-billable activities.

Here’s how to maximize your team’s gross capacity:

1. Track time consistently: Get an accurate picture of how hours are being used.
   
2. Separate delivery vs. non-delivery activities: Understand where time goes, including time spent directly on client work, vs time spent on non-delivery tasks such as administration and sales.
   
3. Monitor team availability: When calculating utilization rates and delivery availability, account for the cost of time off, holidays, and other paid time that is not available for revenue-earning work.
   
4. Keep a Payroll Grid: By maintaining an accurate record of your team composition, Gross Capacity, and time allocations towards delivery and non-delivery work, you’ll be able to quickly and easily assess your firm’s unit economics at any given moment.
   

Effective use of gross capacity allows agencies to improve efficiency, plan proactively, and ensure resources are aligned with business goals.

Resources to Explore

• Utilization Rate & Capacity Forecasting: Marketing Agency’s Guide
  
• Capacity Planning 101 for Agencies
  
• Finding the ROI in Process Improvements
  
• Agency Profitability Toolkit – Parakeeto