Capacity Planning

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Reaching Capacity
As your business grows you may run up against limitations imposed by the size of your facilities, the number of your employees, or both. It's critical that you anticipate and plan for these occurrences. If you're unable to grow to meet increasing demands, you may lose customers and profits to your competition.

Facility Requirements
It's critical that your facilities are the right size. Unnecessarily large facilities may create a drain on your finances and slow your growth. Small facilities may require you to relocate or expand before you're financially able. Do not underestimate the effect a small facility can have; cramped quarters can be an enormous efficiency problem for workers.

When you decide that it's necessary to expand or relocate, you'll need to begin the search for a new facility. It's important to choose a facility that meets not only your needs, but those of your customers as well. You need to consider the location of your new facility carefully, as well as the condition and utility of the structure itself.

New Employees
It's also crucial to have the right number of employees to promote and support growth. Having too many employees not only slows financial growth, but can cause workplace inefficiency if your workers are idle. That said, you don't want to overwork your employees. Aside from the costs of overtime, tired and irritable employees will have poor morale, which could cost you more than just money.

Determining whether you need new employees is a cost/benefit question. The obvious hard cost is in the form of wages and benefits, but you should also consider the time and effort required to train new employees. On the other hand, the benefits of having new workers are sometimes hard to quantify. Will new employees free up time for you to market your services? Will they directly increase production or allow you to serve more customers or clients? Are there new roles that need to be filled in order to provide new or better services? If you can't answer yes to one of these questions, you probably shouldn't hire anybody.

Remember: expansion is a sign of a healthy business.