It is implied that the purpose of any business in the service industry is to satisfy their customers, but these companies are still indebted to their bottom line. By implementing more precise capacity planning, businesses can ensure they meet consumer demand without overextending their resources while providing a positive customer experience. Employing a strategy for the capacity planning process may require some planning in advance, however, this is a small investment compared to the returns companies can expect to see with the cost savings and value generated by optimizing their resources.

Establishing effective resource management routines not only reveals new growth opportunities but ensures that there is capacity to thoroughly explore those opportunities as well. The overwhelming majority of companies (80%) applying effective capacity planning can act on opportunities within hours instead of weeks—an eternity in this fast-paced market. The guiding philosophy of resource efficiency grants businesses the ability to juggle multiple projects at once while still being able to complete them on time and on budget.

Planview’s Professional Services Automation Solution Demo: Drive profitability and streamline quote-to-cash

Watch the solution demo • Planview’s Professional Services Automation Solution Demo
Professional Services Capacity Planning
Professional Services Capacity Planning

What Is Capacity Planning?

Any business is going to have a capacity for what it can produce, deliver, or maintain in its inventory. Capacity planning in professional services entails an advanced method of maximizing resources—from permanent employees to partners or contractors on an as-needed flex basis—to align optimal business capacity with customer demand. This is accomplished by identifying and applying only the necessary resources required to complete a project. This includes matching the employees with essential skills to the right project while simultaneously considering opportunities for employee development. Ideal capacity planning considers successful outcomes for both customers and employees. Businesses use capacity planning to strategically reconcile their current resource supply with future demand to consistently deliver on their promises and protect their brand.

Simply put, capacity planning is the process of determining which professional service resources and skills may be required to complete a project. Capacity is determined on short-term daily or weekly periods, mid-term timeframes of one to three years with seasonal variation, and long-term timelines that require forecasting analytics. Precise capacity planning helps companies make promises so that they can continue to, guarantee customer satisfaction.

The Importance of Resource Management

Resource management has become a synonymous term for capacity planning. The more precise these capacity models are the fewer resources go to waste which means that businesses cannot afford to guess—especially given how costly resource planning mistakes can be. Poor capacity planning has led to 77% of businesses overcommitting their resources. Many of these models depend on a company’s ability to effectively perform predictive forecasting to determine which services will be in demand, which enables better team capacity to meet those needs.

One of the major benefits of capacity planning is that it allows companies to be more agile in their decision-making since it is driven by real-time analytics. In terms of investing in the capacity planning process, companies may see a 30% increase in resource utilization and speed up decision-making by 27%. This agility leads to greater resiliency which is more important than ever after a turbulent economy still recovering from the pandemic and inflation.

Resource capacity planning ensures a business has all the resources to complete a project and reveals when they can take on more work. Monitoring employee capacity—as well as the contractors they work with—also helps prevent employee burnout which can be its own productivity killer.

Read next: How to Find the Right PSA Tool for Your Business

The 3 Main Approaches to Capacity Planning

There are pros and cons to any method of approaching capacity planning—it is simply a matter of choosing which one best suits your business’s appetite for risk.

  1. Lag: The lag approach means making reactive adjustments which can result in playing catchup on a project. This may mean that resources are not used as efficiently which can also lead to missed opportunities and falling behind on other project commitments. This option can benefit companies that already have an agile production system in place, enabling them to catch up to demand quickly as the market shifts.
  2. Adjustment: This strategy involves constantly monitoring project requirements and making minor adjustments as needs arise. This level of monitoring can be more labor intensive and result in a disruptive number of adjustments for the workforce who need more time to adapt to a routine. Despite some of those challenges, this approach offers the most balance between reducing waste without sacrificing their ability to grow further with new opportunities.
  3. Lead: For more proactive companies, they may prefer to alter resources before any impending increases or reductions in capacity requirements. This requires the most accuracy when it comes to making predictions regarding future demand, which is viewed as a bigger risk. However, this can also be an advantage for companies that are able to pivot earlier to adjust capacity and eventually enable growth in the long term.

Some professional services organizations may need to implement both variable staffing and flex staffing strategies.

Variable staffing

Partnering with an external firm that is conveniently located can help bridge skill gaps quickly as they are needed rather than unnecessarily maintaining the payroll for such specialized roles full-time which can be detrimental to profitability.

Flex staffing

This method involves establishing a network of contractors that simply match existing workforce skillsets in the company that can be counted on as a supplemental source of labor when demand outweighs internal capacity. This helps avoid employee burnout when there are spikes in demand.

Benefits of Capacity Planning for Professional Services Organizations

Businesses that want to remain competitive must plan to scale their operations to match their growth which inevitably involves capacity planning. Scaling a business with insufficient resources will lead to performance and delivery issues. This level of future planning requires more than just an understanding of current demand levels, especially when services that defy demand calculations are involved. The key to a successful capacity strategy is to match long-term supply with the prediction of future demand levels to avoid costly project delays and unhappy customers.

With proper capacity planning, any company can accelerate innovation and growth to increase profit margins while decreasing risk. This also allows companies to continue to provide quality customer service as they grow.

Capacity Planning Challenges Faced by Professional Services

Capacity planning can present unique challenges when it comes to providing professional services. In this line of business, demand is based on what is sold compared to a traditional PMO where demand is prioritized based on existing capacity and funding. When it comes to professional services, customers will only wait so long before taking their business elsewhere. This is the main reason why professional service providers need to strictly manage their resources which necessitates accurate forecasting and visibility into the anticipated demand.

Another challenge with capacity planning is that there are levels of assumed productivity for workers that can fluctuate as people spend time away from project objectives to complete training or other administrative duties. Employees will also have varied skill sets and levels of productivity that need to be managed. Some specialized positions may be in high demand, which creates bottlenecks in the project and the possibility of different pay rates that need to be accounted for.

Factors that Improve Capacity Planning

Historical trends

The adage goes that history tends to repeat itself and the same can be true of resource managers who study past data to understand upcoming future trends to inform their capacity planning decisions. This allows managers to plan well in advance based on expected growth or slow periods.

Project type

Companies with multiple business models and various project types will invite a more complex forecasting environment. This complexity can easily be more of a strength than a weakness when businesses are equipped with the right tools that turn data into insights. Considering the resource needs of certain kinds of projects can help with allocating skilled labor where and when it is needed to prevent backlogs or having to hire prematurely.


Some projects may have virtual components while others require extensive on-site travel. Neither should be a factor that prevents a deal from going through, but they certainly must be considered as it will have an impact on the planning for when resources or personnel need to be on site.


One of the main objectives of capacity planning is to operate within budgeting and timeline constraints. Demonstrating a sense of urgency should not mean overpromising because it will only result in under-delivering. Managers will need to monitor their timeline goals to ensure they stay on target throughout the project since delays usually drive-up labor costs over the planned budget.

Weighted probabilities

Project managers may base their decisions on simulated scenarios to help predict future outcomes more accurately. Not every possible outcome will have a precedent in history that can be studied for future applications or predictions. With the widening access to incredibly powerful data-driven financial tools, there is no need to base decisions on unreliable guesses.

Read next: PSA Software vs Project Management Software: What’s The Difference?

The 7-Step Capacity Planning Process

  1. Assign a Capacity Planning Manager – Someone in a leadership role with strong communication skills needs to be able to take charge and oversee the details of capacity planning to ensure congruency between sales and delivery teams.
  2. Integrate CRM & PSA Systems – It is important to drive early visibility into sales demand. Integrating customer relationship Management (CRM) systems with professional services will lead to even better business adaptability.
  3. Determine the Best Capacity Model – Decide on the capacity model that will best suit your business and build around it.
  4. Choose the Right Partner(s) – It will be important to prepare which partners your organization will need to support a variable staffing model in advance.
  5. Build a Network of Contractors – Businesses can count on contractors for jobs roles they may not need to keep on staff full-time to save on payroll but should make sure those relationships are well-established. This allows them to quickly address peak demand scenarios.
  6. Establish Future Demand Forecasts – Companies need to evaluate their data to make predictions for future demand before they can expect to align their resources properly.
  7. Monitor Actual Resource Usage – Make sure to frequently inspect the progress and productivity not just to identify room for improvement, but to prevent team burnout as well.

Capacity Planning Powered by Predictive Forecasting Is the Future

In a marketplace that has undergone unrelenting and unpredictable changes over the last couple of years, it is no surprise that the market correction involves emphasizing a form of predictive analytics to improve capacity planning. Many of the businesses that survived the pandemic had to commit to being ruthlessly efficient just to stay afloat. Better resource management is no longer just nice to have—it is a necessity for future-proofing a business in an increasingly unstable market.

Successful capacity planning will always provide a competitive advantage because of its reduced time-to-market solutions and cost-effective growth that is the most compatible with scaling up. By following the 7-step guide to capacity planning—any business can get started taking advantage of the benefits of better resource management.

Next Steps

The right PSA software plays a pivotal role in making engagements more predictable and profitable, customers more satisfied and loyal, and professional services organizations more successful and competitive.

Learn more about Planview’s PSA software solution by requesting a demo.