Organizational Capacity: How big can your business grow?

Introduction:

Are you a home service business owner struggling to achieve your growth goals? Do you feel like you’ve hit a wall and don’t know how to take your business to the next level? Well, look no further! In this blog post, we’ll discuss how building organizational capacity is the key to achieving your goals. But first, let’s ask ourselves: what exactly is organizational capacity? How can it help your home service business reach its full potential? And most importantly, how can you start building it? Join us as we dive into the world of organizational capacity and discover the secrets to unlocking your business’s full potential.

Here’s a simple explanation: Using your current service offering and current service area… If you were the best leader you could be, every one of your employees were rockstars, you had all the leads and closed all the jobs, what would your sales be in 5 years? That is your current organizational capacity.

Mastering your abilities as an individual leader as well as the capacity of each department is essential before adding services or service areas. Be a constant student of leadership. Identifying the areas in your business that require improvement will allow you to be better-informed expanding or tackling organizational capacity planning. Failing to assess individual and departmental capacity will lead to a misguided expectation for growth. Following these steps will ensure you have the necessary resources and skills to expand into new markets or add new services, every time.

Organizational Capacity:

Organizational capacity determines how large a company can grow. Every business has organizational capacity. It might be $100k or $10T. With a little bit of analysis you can determine what yours is. Here’s how: Start by considering factors such as the number of potential customers in the area, the target market, and the current and desired customer base. 

Residential Formula: 

• Total Households in your (current) service area: 
• Total Households over $X income < That is your avatar
  • Note: This is market-by-market but most markets are $100k – $125k
• What % of those ‘avatar’ customers do you want to target?
  • A general rule to follow:
    • 3% Beginning target. Don’t make any changes before getting here
    • 5% Where you want to be
    • 7% Exceptional 
    • 10% Unicorn

Commercial Formula: 

The entire game changes when getting into commercial / industrial

• Total Commercial properties you can service in your service area
• Number of current commercial client decision makers
• Number of desired commercial client decision makers
• What % of those commercial contacts do you want to target?
  • A general rule to follow:
    • 3% Beginning target. Don’t make any changes before getting here
    • 5% Where you want to be
    • 7% Exceptional 
    • 10% Unicorn

Expanding Organizational Capacity:

One of the most common ways to increase organizational capacity is through adding complementary services to the existing portfolio. This will allow the business to serve more customers and increase their lifetime value. Another way is location expansion, which can be achieved through franchising or licensing, or by adopting a general manager model where one person owns multiple locations.

Organizational capacity should be viewed as an expansion method, with awareness of each department’s success and individual capacity being crucial in determining the potential for growth. It is important to maximize individual and departmental capacity before considering organizational capacity. By doing so, businesses can avoid expanding into new markets or adding new services before they have mastered the markets and services they offer today. Therefore, when looking to expand a business, the organizational capacity should be evaluated first to determine the potential for growth.

Be sure to search for our articles on individual and departmental capacity. Your ability to scale will be dependent on your individual abilities, then your departments, then your organizations. Start with yourself and work your way up from there. 

Go out there and CRUSH IT !
MG