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Edmonton Business Coach | Operating at 100% Capacity is a Myth
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100% impossible to operate at 100% capacity. All of the time. Something unforeseen will always happen.
Yeah, I can see why with the two can be and [inaudible] cause it’s not,
hi, thanks for joining us for another episode of ask Sperl CPA again, as the evident business coach, we’re talking about how operating at a hundred percent capacity is a myth. So again, as the business coach, we’re talking about how operating at 100% capacity is a myth. I have Michael here with me again. Uh, you know, Michael would have you been learning since you, you started with us so far? In fact, Tim, we’ve been learning a lot. Yeah. Yeah. Um, how have you been learning about the, the content? Hey, yeah, the values and everything had to company. It’s, it’s interesting and funny interests. Cool. Yeah. So I have the quote here from Zig Ziglar, one of my favorite authors, and he says, getting knocked down in life is a given. Getting up and moving forward, however, is a choice. Uh, the statistic that we have are 50% of all Canadian businesses will go out of business in the first five years and 29% of these failed businesses will list running out of cash. If you are excited for some of the top Edmonton Business Coach services then reach out to these guys as soon as you can!
Is one of the primary reasons for their failure making runny at a cash as the second most common reason for business failure and the story that we have here at business or is they run out of cash because they plan on achieving a revenue number that was based on 100% of their capacity. So they come in with this model that done some projections on the revenue and expenses, but a lot of times that was based on a hundred percent capacity. So Michael, what are the questions that these business owners should be asking? If a business provides a service, is it possible to fill their calendar 100% of the time? Then my experience when we talk, start talking in both longterm, it is 100% impossible to operate at a hundred percent capacity. All of the time. Something unforeseen will always happen. Um, you know, whether that’s, you know, customers canceling or you know, if you had some sort of labor issues within the organization or supply chain issues or whether business owner gets sick or scale or, or you know, the city starts tearing up the sidewalk outside and the customers can’t park it is, you know, 100% impossible in any business to operate at a hundred percent capacity forever. Please contact these amazing professionals to get some of the best Edmonton Business Coach today!
Something will always go wrong to interfere with that. If a business sells a product, well they sell out 100% of their partner. Yeah. Same thing. So if the first one is more about, you know, service industry, can you fill your calendar all the time? Um, but in the second one, if it’s a product, you’re never gonna sell 100% of that product. Again, there’ll be some sort of, you know, manufacturing issue. There’ll be a deficiency. People will return stuff. Um, you know, things will break and shipping. Like you’ll never sell out of 100% of a product, just like you’ll never feel 100% of the spots. And in a service-based time business, does it normally take days, weeks, months or years to reach capacity and normally it takes years to reach capacity. So you know, you see, um, you know, people think, well how long is it gonna take to get to this a hundred percent capacity especially when it comes to Edmonton Business Coach.
I want to sell it out around my product or I want to fill my calendar, my service based business, it’s not going to be days. It’s likely not gonna be weeks. It’s likely not in your be months, it’s years before you’re operating at that hundred percent capacity for whatever you have. If you have space or number of staff or employees, it’s likely years before you start to get to that capacity number. Do most business plans you see assume capacity too early? Almost all the time. It is. It is like without fail, we see business plans come in. Imagine they come in with a business plan for a restaurant, then the restaurant seats, oh I don’t know. The restaurant seats, a hundred people and a, they think they can, you know, have 80 seats filled at any given time. And they come in with this business plan in September.
They’re doing the build out in October. They’re doing a build out in November. They’re hiring a staff and December they launched the restaurant and then all of a sudden December in their projections, it’s, it’s the revenue just goes from zero to $100,000 a month and that never happens. And then it stays at 100%. Again. It never happens. It’s always zero, zero, zero, zero. Then the launch date happens and then it’s, you know, 10,000 the first month and then it’s 20,000 the next month, and then it’s, you know, or 10,000 and then it’s, you know, uh, 12,000 and the 14,000 and 16,000 and 18,000 and they’re going to get to that $100,000 a month. Um, but you know, it, it happens gradually after the start date. You never go from zero to 60 on that. That’s a very rare occurrence. Uh, it’s certainly the exception, not the norm.
And even if you do get to capacity, something happens and you scale back again anyways. Is this why businesses often run out of cash in the first five years? Yeah, usually it’s, from my experience, it’s one of the very common reasons. So business owners, you know, they, they do do their homework and they are, you know, making an effort of ’em lots of time. And you know, they’re there, they’re doing some revenue projections, they’re doing some expense projections, but normally that revenue projection that they have is completely out of line. Not that they can’t get there, but just they underestimate the time that it’s gonna take to get there. So normally they had this huge growth potential, you know, whether they’re looking at, you know, you know, doubling the size of an existing business or starting from an app scratch business and the number that they’re picking often won’t be unreasonable. Use the guys for the top Edmonton Business Coach today!
Just the time period that it’s going to take to get there to move that needle is usually much longer than they consider. Is it possible to maintain a hundred percent capacity over the long term? No. Or the long term, no matter what, even if we, you know, slowly, gradually get up to that, they’ll always be something, you know, they’ll, they’ll get to that capacity. If you have, if you can produce a hundred widgets a month, you know, you might get two selling a hundred visits a month and then one customer returns a bunch of them or you know, you break a bunch of them in production. Um, they’re a rental company. You get everything rented out. Uh, but then, you know, three months later, uh, people don’t need the stuff anymore. It’s longterm. It’s never going to be a one to 100% capacity issue. You should always plan in those projections.
Uh, you know, something different. Alright. Will the business owners personalis casual offhand temporality affect capacity? Yeah. They, they start to act like they’re never going to take time off. And you know, when you’re starting a business, you probably should think that I’m going to work, you know, really long, really hard hours. It’s, I’m not going to be getting the same vacation time, but you know what, if you get sick, um, you know, uh, what if someone has a baby? Um, it’s, it’s, you know, there are certain things that are going to affect that capacity on a personal level. Um, you know, you’re not going to be a robot, right? And you’re not going to run every single day and that’s sometimes going to affect the capacity. So again, it’s one more number that, you know, one more thing that you should be considering a y 100% capacity all the time is not possible. Work with these guys if you are ready for some of the top Edmonton Business Coach services!
Well, staffing issues often temporarily effect capacity almost all the time. Unless you have a one person business, unless the capacity is just you one of those issue that’s going to effect capacity of staffing. People are going to go on vacation, you’re going gonna some business owners will struggle to find the right people at the right times. Just because you get more work doesn’t mean you might have the team ready to go and advanced. And you know, sometimes you know, productivity, a certain people will fall off at times. You know, it, it’s not linear in nation. It is not linear, um, uh, growth all the time. You know, there’s a little bit of curves and a little bit of ups and downs in the eventual trend of going up, but staffing issues is going to be one of those things where it, you know, people aren’t robots.
Um, it will be one of those uncertain things that you can do some things strategically to move the needle forward longterm, but you certainly can’t guarantee on that progress being linear. Well, customer’s turnover often temporarily effective really to January revenue. Yeah. I always have a clients and they’re excited and it’s hard for me sometimes to, to crush their dreams on this issue, but this is always happens where they come in with a client and they have a couple of major clients, especially in some businesses and they say, oh, don’t worry. They’ll always buy. Um, business is tough. Even if they like you, they might have problems with their customers. Right? Um, so the customers are never forever, right? They’ll scale those at times. They’ll want to purchase more at times. They’ll want to purchase less. Uh, at times they’ll want to fire you a in businesses come in to me and say, that relationship will never change. Use these guys for all the top Edmonton Business Coach services!
They will always buy at least that. And it’s a movie that I’ve seen over and over and over again. And they’re usually right in the short term, everything goes exactly how they tell me in the short term. But when I started looking at two years, five years, 10 years of what’s happening, there’s always some turnover in the customers. Uh, so no relationship is guaranteed forever. And it’s a false assumption to consider that. And you shouldn’t stake your business on that. It should. Businesses always project revenue with less than a hundred percent capacity. Yeah. So we look at the business plans that we assembled, we looked at, you know, eventually we look at what, what is that capacity? It’s going to take a while to get to that capacity. And even on that scale up, we’re never going to get here. You know, we’re, we’re just lying to ourselves as a business owner, whether maybe it’s 99% in some business they can operate at capacity.
It’s never a hundred. Maybe in other businesses it’s 75% of capacity. Um, let’s say you’ve got a daycare and you have kids that sign up, but guess what, you know, like your family of three gets transferred. They pull all their kids at a daycare one month and they have to move to Toronto because that’s where the new job is. Um, guess what? You’ve got a hold of three people and maybe the person on your wait list can’t fill it in time. So even when we do the projection a, it’s going to take a while to scale up to that level of productivity. And when you get there, we never go to 100%. And then in a projection, I think it’s, um, you know, recipe for disaster. Um, because even if you can get to that a hundred percent capacity number, it is going to scale back down. Just contact the guys now if you want to find the top Edmonton Business Coach
So rather than trying to predict those scales up and the natural flows up, and now we always just pick a number that, you know, in the middle of those fluctuations up and down. So you think about a restaurant and you could get, there’s 80 seats and you know, we’re never going to get more than 70 seats filled in the dinner hour because something will happen. A water main will break. A client’s offices will flood. That’s happened to us recently. Um, but it’s always going to be less than 100% capacity over the longterm. So you should never plan to get to that capacity. You should always plan on getting to a percentage of your capacity and your business plan and that percentage will depend on, on the individual business and the industry. So I think that’s what we have here today. Thanks so much for joining us. As always, please hit the like and subscribe button. So we continue to deliver your tips on how to beat the odds and business and as always, look forward to any comments that you have below, uh, so we can respond back and use your input for future videos. Thanks very much.