Set one decision boundary before comparing scenarios
Records and assumptions to align
- Choose one business, customer cohort or delivery team and one finite horizon. (not complete)
- Use one currency, indirect-tax treatment, time basis and contribution boundary throughout. (not complete)
- Separate observed records, contractual commitments and user-entered scenarios. (not complete)
- State which delivery, support, acquisition and overhead costs are included or excluded. (not complete)
- Hold unrelated inputs constant when testing a sensitivity; do not improve every assumption at once. (not complete)
- Write the evidence trigger and stop condition before selecting a preferred scenario. (not complete)
| Input or boundary | Unit | Evidence class | Required check |
|---|---|---|---|
| Available team time | hours/period | Roster and leave record | Remove leave, internal and non-delivery time |
| Delivered client work | hours/period | Time or project record | Use the same team and period |
| Recognised service revenue | CU/period | Invoice or revenue record | State timing and indirect-tax basis |
| Delivery cost | CU/period | Loaded labour and direct-cost record | Do not substitute wages alone |
| Committed pipeline | CU and hours/period | Signed scope or explicit scenario | Keep unsigned opportunities separate |
Build a reproducible economic view
delivery contribution = recognised service revenue - included delivery cost; realised rate = recognised service revenue ÷ delivered client hours; capacity coverage = committed delivery hours ÷ available delivery hours
- recognised service revenue
- Revenue assigned to delivered work under the declared timing rule (CU/period) — invoice or revenue record
- included delivery cost
- Loaded labour and direct delivery costs inside the chosen boundary (CU/period) — payroll, contractor and cost record
- delivered client hours
- Hours consumed by the work represented in revenue (hours/period) — time or project record
- committed delivery hours
- Hours required by signed or otherwise defined committed scope (hours/period) — scope record or labelled scenario
- available delivery hours
- Team time left after declared non-delivery categories (hours/period) — capacity record or scenario
Keep realised rate, utilisation, contribution and capacity coverage separate. Each answers a different question and can move in a different direction.
- Freeze the team, service boundary and month or quarter.
- Reconcile available hours after leave, internal work, sales and administration.
- Map delivered hours to the revenue and delivery costs for the same work.
- Calculate contribution and realised rate without using headline list prices.
- Translate committed scope into hours by delivery period.
- Compare committed hours with available capacity and isolate any gap.
- Test rate, scope, sequencing and capacity separately before combining changes.
Worked example: one agency month
Invented scenario: 800 available delivery hours, 640 delivered hours, 96,000 CU recognised revenue, 58,000 CU included delivery cost and 720 committed hours for the next comparable month.
| Step | Inputs and arithmetic | Result and interpretation |
|---|---|---|
| Delivery contribution | 96,000 - 58,000 | 38,000 CU |
| Realised rate | 96,000 ÷ 640 | 150 CU per delivered hour |
| Delivered utilisation | 640 ÷ 800 | 80% of this defined capacity |
| Next-period capacity coverage | 720 ÷ 800 | 90%; 80 hours remain before a buffer |
| Case | Changed input and arithmetic | Outcome | What to investigate |
|---|---|---|---|
| Scope overrun | Delivered hours rise to 720 for the same 96,000 CU | Realised rate falls to 133.33 CU/hour | Review change control and write-offs |
| Rate change | Revenue rises to 102,400 on 640 hours | Realised rate becomes 160 CU/hour | Check acceptance and collection timing |
| Pipeline gap | Committed hours fall to 560 of 800 | Coverage falls to 70% | Test timing, sales capacity and flexible resourcing |
Choose the next test, not a guaranteed answer
| Observed signal | Possible interpretation | Bounded next action |
|---|---|---|
| High utilisation but weak contribution | Rate, scope or delivery-cost boundary may be wrong | Reconcile project write-offs and loaded cost |
| Strong pipeline but capacity shortfall | Timing or scope may exceed delivery capacity | Sequence work, re-scope or test resourcing cases |
| Capacity available but pipeline weak | Hiring is not the first arithmetic response | Test sales timing, conversion evidence and cash runway |
- Treating list rate as realised rate.
- Comparing pipeline value with capacity hours without a delivery-hours bridge.
- Calling every opportunity committed revenue.
- Using wages instead of loaded delivery cost.
- Combining a rate rise, utilisation gain and conversion gain into one optimistic case.
Route each agency decision to its calculation owner
| Decision | Align first | Calculation owner | Result does not prove |
|---|---|---|---|
| Set a mixed-team rate | Revenue, delivered hours, loaded delivery cost and productive capacity for one period | Agency Blended Rate | A market rate or customer acceptance |
| Translate demand hours into capacity | Demand hours, productive hours per person and selected utilisation scenario | Utilisation to Headcount | That the agency should hire or how a worker should be classified |
| Align quote wins with delivery | One quote cohort, probability convention, average delivery hours and available capacity | Quote Win Capacity | Forecast wins, signed revenue or delivery feasibility outside the scenario |
| Price recurring support | Expected usage, coordination, reserved availability and service-level operating cost | Recurring Support Plan Pricing | A universal service promise, response time or contract term |
| Set an agency retainer | Included capacity, delivery burden, overage and target-margin scenario | Agency Retainer Margin | Customer demand, renewal or unlimited availability |
| Price campaign delivery | Agency revenue, client media pass-through, delivery cost and explicit scope reserve | Agency Campaign Margin | Incrementality, ROAS, campaign outcome or a media recommendation |
Route to the calculation owner
- Agency Blended Rate Planner
Set a blended team rate
- Utilisation to Headcount Planner
Translate billable demand into headcount
- Quote Win Capacity Planner
Align quote wins with delivery capacity
- Recurring Support Plan Pricing Planner
Price recurring customer support
- Agency Retainer Margin Planner
Set an agency retainer from included capacity, delivery cost, overage and target margin
- Agency Campaign Margin Planner
Price agency campaign delivery after media handling, scope reserve and target margin
Questions to resolve before acting
- Is higher utilisation always better?
- No. Higher utilisation can coexist with weak realised rate, scope write-offs, rework or an unsafe delivery buffer. Read it with contribution and service commitments.
- Should weighted pipeline count as committed work?
- Not automatically. Keep signed or otherwise defined commitments separate from probability-weighted opportunities and state the convention.
- Does a capacity shortfall prove the agency should hire?
- No. First test timing, scope, rate, contractor, sequencing and downside cash cases. Staffing classification and legal questions sit outside this article.
Sources and calculation owners
- Agency Team Capacity & Revenue methodology — Margin101: Capacity, commitment and revenue-period boundaries.
- Agency Blended Rate methodology — Margin101: Mixed-team rate and productive-capacity calculation owner.
- Project Quote Builder methodology — Margin101: Scoped project cost and quote boundary.
Run the next calculation
- Agency Team Capacity & Revenue Planner
Compare team billable and revenue capacity with committed pipeline
- Agency Blended Rate Planner
Set a blended team rate
- Agency Retainer Margin Planner
Set an agency retainer from included capacity, delivery cost, overage and target margin