Agency capacity planning: from available hours to hiring decisions, with a 13-week plan

The short answer

Capacity planning compares the billable hours your team can deliver with the billable hours your clients need, week by week, far enough ahead to act. Thirteen weeks (a quarter) is long enough to hire a contractor or move a deadline, and short enough that the numbers mean something.

1. Available hours: contracted hours, less leave, public holidays and expected sickness.
2. Billable capacity: available hours × each role's target utilisation.
3. Demand: signed work and retainers, plus pipeline weighted by how likely it is to close.
4. The gap: demand − capacity. Then choose: move dates, bring in contractors, hire, or decline.

The rest of this guide works through each step and a 13-week example for a studio split between Sydney and London, and ends with a hiring trigger you can apply to your own numbers.

Capacity, demand and utilisation

• Capacity is the time people can work, after leave and holidays. Billable capacity is the part of it you plan to spend on client work.
• Demand is the client work you need to deliver, in hours, in the week it has to happen.
• Utilisation (utilization in US spelling) links the two: billable hours ÷ available hours. Our utilisation guide shows how to set a target from your costs rather than from a published benchmark.

Plan in hours, not people. "We need another designer" is a conclusion; "we are 128 design hours short over four weeks" is a number you can act on in several ways.

Step 1: available hours per person

Start from each person's contract and take away the time they will not be working. The rules differ by country:

For capacity planning, use the leave people have actually booked for the weeks ahead, plus an allowance for leave not yet booked and for sickness. Over a year, everyone's leave has to land somewhere: a quarter in which nobody has booked any is a quarter that will lose hours later.

Public holidays only count when they fall on someone's working day. A part-timer who does not work Mondays loses nothing to a Monday holiday. The 2027 leave planner lists every region's dates.

Step 2: billable capacity by role

Multiply each person's available hours by their target utilisation. Use a different target for each role: production staff (designers, developers, writers) can usually bill more of their time than leads, account managers and founders, who also sell, review and manage. In the example below we use 70% for production staff and 40% for leads. Use the targets you worked out from your own costs.

Then take off a small allowance for sickness and other unplanned absence. We use 2%, which is about 5 days in a year of roughly 250 working days. Replace it with your own team's history.

Step 3: demand

Put demand in the week the work happens, not the week it was sold.

• Signed projects: the remaining estimate, spread across the weeks of the plan. Update it from actual hours each week; a project running over needs more hours later.
• Retainers: the monthly allowance spread evenly across the weeks, unless you know a client's busy months.
• Pipeline: each likely deal's hours × your honest probability of winning it. A 100-hour-a-week project at 50% adds 50 hours a week. Revisit the probabilities each week; old deals rarely get more likely.
• Internal work you have committed to: a website rebuild or a pitch. It is not billable, but if it uses billable people, take it off their capacity.

Correct estimates as the work happens. Suppose project A has 540 hours left on its estimate, but the work done so far has taken 15% longer than estimated. Plan on 540 × 1.15 = 621 hours, not 540, and tell the client now if the dates move. An estimate that is never corrected is the most common reason a plan says "fine" until the week it doesn't.

Step 4: the gap and your options

Gap = demand − billable capacity. A positive gap means you are short of hours. Look at it two ways: single weeks, and 4-week blocks. A single short week is usually a timing problem; a short block is a capacity problem.

Worked example: a 12-person studio in Sydney and London

The studio has 7 people in Sydney (6 production staff and a lead, on 38-hour weeks of 7.6 hours a day) and 5 in London (4 production staff and a lead, on 37.5-hour weeks of 7.5 hours a day). The 13 weeks run from Monday 22 March to Friday 18 June 2027, which takes in Easter in both cities [4] [7]. Billable capacity uses 70% for production staff, 40% for leads and a 2% sickness allowance. Leave is what people have booked, all by production staff. The demand figures are illustrative:

• retainers: 150 hours a week throughout;
• signed project A: 90 hours a week in weeks 1 to 6, then 40 in weeks 7 and 8;
• signed project B: 60 hours a week from week 5;
• pipeline C: 100 hours a week from week 7, at 50% likely (50 weighted hours);
• pipeline D: 80 hours a week from week 10, at 25% likely (20 weighted hours).

In a full week with no holidays or leave, the studio has 453.5 available hours and 288.9 hours of billable capacity: (6 × 38 + 4 × 37.5) × 70% + (38 + 37.5) × 40% = 294.8, less 2%.

Reading it in 4-week blocks

• Weeks 1 to 4: capacity 977.7, demand 960. Easter week (week 2) is 71.2 hours short, but weeks 3 and 4 have 48.9 spare each. This is a timing problem: plan with the clients to move week 2's work into weeks 3 and 4.
• Weeks 5 to 8: capacity 1,071.7, signed demand 1,100 (2.6% over) and total demand 1,200 (12.0% over). Signed work alone is 28.3 hours short, and with the pipeline it is 128.3. This is the block to act on now: line up a contractor for about 130 hours, and start with the signed shortfall.
• Weeks 9 to 12: capacity 1,039.2, signed demand 840, total demand 1,100 (5.9% over). The shortfall depends entirely on pipeline C and D closing. Nothing to commit yet, but if C closes, this block becomes short.

Before booking the contractor, check the margin on their hours. With illustrative figures in one currency: 130 hours at a contractor rate of $110 an hour costs $14,300. If that work bills at $175 an hour, it brings in $22,750, a margin of ($22,750 − $14,300) ÷ $22,750 = 37.1%, before the time your own team spends briefing and reviewing. If the margin is thin, moving dates or re-scoping may be the better answer.

Plan by skill and city, not only in total

The example adds up the whole studio, which hides two things.

• Skills are not interchangeable. Spare developer hours do not fill a design gap. Once the totals work, split capacity and demand by skill (design, development, content, account management) and check each one. A studio can be 5% over capacity in total and 30% over in design.
• Cities are partly interchangeable. Work that can be handed over overnight can move between Sydney and London, which is useful when one city has a holiday and the other does not: Sydney's Additional Day for Anzac Day on 26 April 2027 is a normal working day in London. Work that needs a client's working hours cannot move so easily. Our guide to running one team across time zones covers handovers and the overlap between cities.

Running the weekly review

The plan is only as good as its last update. A 20-minute review once a week, with whoever schedules work and whoever sells it, is enough:

1. Actuals: replace last week's planned hours with the hours logged, and correct the remaining estimates on projects that are running over or under.
2. Absence: add leave booked since last week, and check for public holidays in every city in the next 13 weeks.
3. Pipeline: update each deal's probability and start date. Remove deals that have gone quiet.
4. Next 4 weeks: look for timing problems, like week 2 in the example, and move work while there is still time to tell clients.
5. Next 13 weeks: run the hiring trigger, and decide on contractors for any block that is short.
6. Record the decisions, so next week's review starts from what was agreed.

A hiring trigger

Hiring is slow and hard to reverse, so it needs a rule written down before the busy quarter, not a feeling during it. This one is a method, not an industry standard. Tune the numbers to your margins and how fast you can hire.

Start hiring when two 4-week blocks in a row, outside Easter and Christmas, show signed work above billable capacity and total weighted demand more than 10% above it. When only one block does, or when the shortfall depends on pipeline, use contractors and check again in four weeks.

Applied to the example: weeks 5 to 8 meet the rule (signed +2.6%, total +12.0%). Weeks 9 to 12 do not, because signed work is 19.2% below capacity. So the studio does not hire yet. It books a contractor for weeks 5 to 8, chases pipeline C, and runs the test again in four weeks with the new numbers.

Why both conditions? Signed work above capacity says the problem is real, not hopeful. Weighted demand above 10% says it is big enough that extra hours from the existing team will not cover it. Requiring two blocks in a row filters out one big project that ends.

Template

A spreadsheet with one tab per stage is enough:

1. People: name, role, city, weekly hours, hours per day, working days, target utilisation.
2. Absence: one row per person per week: public holidays on their working days, leave booked, and a sickness allowance.
3. Capacity: available hours and billable capacity per person per week, summed by role and by city.
4. Demand: one row per project, retainer or deal: hours per week, probability (100% for signed work), weighted hours.
5. Plan: the 13-week table above, with 4-week block totals and the hiring trigger worked out in two cells.

Update the absence and demand tabs every week, from the leave calendar and from actual hours, and roll the 13 weeks forward. Our free utilisation calculator has a capacity mode that does the people and absence tabs for you, with 2027 public holidays for each region.

Common mistakes

1. Planning on contracted hours. Easter week in the example has 40% fewer available hours than a normal week.
2. Treating pipeline as signed. Weight it, and keep signed and weighted demand in separate columns so you can see what the gap depends on.
3. One utilisation target for everyone. A lead at 40% and a designer at 70% are both doing their jobs.
4. Ignoring holidays in other offices. Each city loses its own holidays, on different days. Check every office's list, not just your own.
5. Planning once a quarter. A 13-week plan is useful only if it rolls forward every week.
6. Hiring for a single project. When it ends, the new hire becomes a cost looking for work.