To sustain the growth of a business over time depends on the ability of the business owner to continually monitor and provide for capacity. What is capacity? Capacity is the ability of the business to provide excellent client experiences through the systematic functioning of their team members and the leveraging of technology while, at the same time, driving organic growth by adding more clients.

A lot of business owners have failed to learn the lesson of capacity and it has proven fatal to their growth aspects. In some cases, their businesses went backwards. The business owner who fails to learn the definition of capacity and interpret the levels in their practice that are critical, risks experiencing frustrating plateaus and inconsistent growth.

Each member of a team only has so much time and energy in a day to devote to the accomplishment of business goals. Technology has limits in terms of what it can do without human input. To maintain the capacity to grow, a business must know the number of team members it takes to create the growth and maintain excellence in customer experience. Understanding the number of hours and technology it takes to provide the excellent client experience inside the business is the foundational step to determining a business’ capacity. Once this is determined, the same analysis should be done to determine the hours and technology that must be leveraged to create a new client relationship. Once proper baselines are determined, critical ratios should be established and monitored to determine the overall needs in the business.

Capacity can be broken down into ratios by determining the number of hours in a year that it takes to provide the client experience to existing clients and the number of hours in a year it takes to continue to develop new clients for the business. For example, Business A has 300 households that require 10 hours per year for the outstanding level of client experience to be delivered to each household. 300 times 10 is 3000 hours to maintain the level of desired client experience. An employee or advisor working 40 hours per week, 48 weeks a year, only has 1920 working hours. Therefore, it would take two full time people to deliver this client experience. This would barely take care of the client experience needed for existing households–inhibiting or eliminating the ability for the business to grow.

The ratio above can be measured in hours per household or in households per team member. The ratio would be ten hours per household or a household to team member ratio of 150 to one. Either ratio will help a business owner understand when they would need to hire a new team member. However, maintaining the business is a role that all members of a team likely contribute to. Is the growth of the business equally driven by all members of a team? Unlikely. In any industry, there are people that drive the growth through acquisition of new clients or customers. The sole focus of this group of people is creating new customers or clients.

In some organizations they are called the salesforce. In others, they are called the distribution arm. In all organizations they are called critical. This part of any organization exists to fuel growth through new client acquisition. These producers drive on an inherent bent to create new business and are unique in their ability to create new relationships and fill needs. They aren’t necessarily the people that maintain long term relationships, have the capacity for detailed work or receive satisfaction from meeting the client’s servicing needs.

This part of the organization may be able to spend less of their time on the day to day needs of the client or customer and focus instead, on finding the pain points and solutions for the client to implement. The ability to narrow the client’s pain points and provide solutions to solve them is what drives this part or the organization. They may not be good at the detail work or finding people to solve technology or back office snafus. They exist to uncover needs and help to create solutions to those needs for their clients.

Maybe this part of the client relationship is 5 hours out of every year to fill this need. Take the same business from the example above. That would mean that one of these critical team members can serve 300 households in the same 40 hours as it takes per another team member to provide the client experience. This person still is part of the 150 to one ratio. The ratios would be as follows. Household to team member is 150 to one. Households to advisor (salesperson, producer) would be 300 to one. With the 1920 hours in a year this person has to work, they can drive new revenue with twice the number of households than those involved with the everyday client servicing needs. Therefore, one producer and one support person could meet the needs of the business in Business A’s scenario.

Maintaining excess capacity, the ability for a team member to absorb more work, enables growth to happen more quickly. The closer each team member gets to having their hours filled with work to service existing clients they less ability your producers have to find more ideal clients to serve. The less time spent finding new clients or opportunities with existing clients the less revenue growth to the practice. In the financial services world, financial advisors can become focused on trying to provide both the everyday servicing needs of clients and generating new business and that can paralyze growth. Building a structure to provide ongoing client service and enabling other team members to focus on driving growth can be an easy solution to implement if capacity is understood by the owners.

Capacity is only created where excess hours exist for either the team member or the producer. When the ratios equal the ability for each person to meet the needs both through support or production there is no excess capacity. The business will have a difficult time growing due to the time required to maintain the existing business. Clearly understanding the different roles in a business and understanding the time and effort required to maintain client experience and drive productivity will help business owners avoid fatal capacity issues.

If you would like some help understanding and driving higher levels of capacity in your business, let us know. We’d love to be of help.

Categories: Insights

by Tate Kerst


by Tate Kerst