Strategic Long-Term Capacity Planning for Professional Services

Lucija Bakić

November 17, 2023

If you’re looking to support your agency’s future growth, the time to invest in long-term capacity planning is now.

Keep reading to learn about different capacity planning types and their benefits. We’ll also provide you with tips and best practices to ensure effective capacity planning implementation. To find out more about the best strategies for managing your capacity in a professional services setting, check out our Guide to Capacity Planning.

Key Takeaways

  • There are two main types of capacity planning: long-term and short-term capacity planning.
  • Strategic long-term capacity planning is essential in predicting future demand and aligning resource capacity, while short-term focuses on allocating current capacity effectively.
  • Long-term capacity planning involves processes such as demand forecasting, talent management, contingency planning, and cost management.
  • Leveraging technology is crucial for supporting the entire capacity planning process and resource allocation.

What Is Long-Term Capacity Planning?

Long-term capacity planning is a strategic approach focused on addressing future capacity requirements over a period of a year or more. It aims to ensure optimal productivity and efficiency by aligning resource capacity with future demands.

The process of developing a long-term capacity plan usually involves multiple connected stages:

Firstly, the company defines its purpose and more precisely it identifies the target customers’ needs and the necessary technology for meeting them. The second step focuses on determining key areas: market research, innovation, productivity, physical and financial resources, profitability, manager’s performance and development, performance and attitude of non-managerial staff. The third phase includes identifying means for measuring results, while within the fourth stage the constraints and the limits are met or exceeded.

Source: Typology and Characteristics of Strategic Planning

The benefits of capacity planning include more effective allocation of resources with minimized costs, better resilience to both internal and external disruptions, as well as more balanced service delivery. In short, efficiency capacity management has a sweeping influence on all management levels.

Check out some capacity requirement planning examples to see how this affects service industries vs production companies.

Short-Term vs. Long-Term Capacity Planning

While long-term capacity planning focuses mostly on forecasting or looking into an agency’s future, short-term capacity planning resolves customer demand by managing current capacity. It’s usually carried out on a day-to-day to weekly basis, depending on your agency’s capacity planning strategies.

Though the specific benefits of the two approaches differ, both contribute to the overall goal of capacity planning — optimizing your capacity according to actual demand.

Short-term capacity planning can:

Long-term capacity planning can:

  • Anticipate and resolve future capacity requirements
  • Align capacity planning with operations strategy

Without the proper management of immediate needs, it’s not possible for a business to look ahead. The opposite is true, as well — faulty strategy will greatly hamper an agency’s ability to successfully carry out its capacity planning process. Therefore, a balance between the two approaches is necessary.

Strategic Goals and Capacity Planning

In practice, strategic planning and long-term capacity planning are often synonymous terms. They both include gaining an understanding of overarching agency objectives and applying them to your capacity plans.

For example, for a marketing agency, strategic capacity planning would include considering factors such as: marketing objectives, target market segments, intentions for positioning, revenue objectives, desired market share in key markets, competitive strategies, etc.

By gathering historical data from previous projects, as well as assessing resource scheduling compared to actuals, agencies can create a picture of their future. They can also predict whether certain projects will be profitable or influence their sales team strategy according to underutilized future services.


This process allows professional services firms to prepare for future workloads, optimize resource allocation, and avoid potential service delivery issues.

One of the things we do is we go back into Productive and take a look at similar projects that we’ve done before. A similar proposal from the past might have said “this is going to take us 100 hours”, but the reality might have been 60 or 160 hours. That reality is what’s going to drive the new proposal or the lack of even trying for that business.

Lore Hamilton,
Program and Scrum Manager AT Rietta

Check out some PSA software examples and benefits for businesses to learn more.

Implementing a Long-Term Capacity Plan

The essential steps of successfully implementing a capacity planning strategy are:

  • Leveraging Software: Investing in modern software to support streamlined workflows and advanced agency insights.
  • Managing Your Talent: Investing in your human resources through optimized workload scheduling, benefits, training, and retaining initiatives.
  • Strategizing Costs and Capital Investments: Evaluating and planning out the financial aspects of agency expansion through best practices.
  • Supporting Operational Efficiency and Scalability: Continuously optimizing processes and systems to ensure efficiency and scalability.
  • Risk Management and Contingency Planning: Developing comprehensive risk management strategies and contingency plans to address and mitigate potential disruptions.

We’ll discuss each of the steps of capacity planning in more detail in the following sections of the article. But first, let’s discuss forecasting, and why it’s necessary for professional services.

Why Is Demand Forecasting Necessary for Planning in Professional Services?

There are notable differences in capacity management for manufacturing and professional services — the biggest being that, for client-facing agencies, so much of this process is tied to intangible factors, such as time, employee skill, and service quality. This complicates the process of measuring current capacity, not to mention aligning it with market demand.

Economic uncertainty and industry volatility don’t help, either. According to recent research, in 2022 as many as 75% of professional services buyers have canceled at least some existing projects or scrapped new ones, while around 60% have paused most existing project work (Financial Review).

All of this makes accurate demand forecasts necessary. Despite its difficulty, certain methods are available in order to gauge and adjust your capacity to future trends: this is the utilization rate, which measures how efficiently your human capacity is used. Additionally, agencies can lean on the forecasting of multiple financial metrics, including revenue and profit margins as well as other key capacity planning metrics.

We’ve always known, on a monthly basis, how we’re doing as a company. But knowing on a per project level, in real time—we never really had that visibility. You guys do a good job of providing that. If you look at it on a yearly basis, it does give us the ability to look, per client and per project where do we really stand.

Orion Jensen,
CEO at Clear Launch

Leveraging Technology for Effective Capacity Planning

Research shows that as many as 8% of agencies use manual, error-prone methods, such as spreadsheets, instead of agency project management tools. Out of the agencies that invest in software solutions, as many as 25% use separate software that only performs one function (The 2023 Global Data Report on Agency Valuations).


Despite this, the impact of comprehensive agency software on your agency can be significant. Take, for example, Productive, the all-in-one solution for integrated project, resource, and financial management. With one tool, you can marry data across various agency activities and generate extensive reports for simplified single and multi-project management.

We used to have a project management tool, a time tracking tool, a support tool, a way we handled opportunities and sales-driven processes. Those were all separate tools that we had, and it wasn’t good. It also meant that all that data was being lost every time we switched between tools, or we had to find a way to normalize the data between them. And now, the fact that it’s all in one, it’s really a game changer.

Bryan Casler,
Vice President of Digital Strategy AT 4SITE INTERACTIVE STUDIOS

By collecting data on your previous projects, software solutions can help you create estimates and forecast future performance more easily. To go back to Productive, you can set up your capacity plan with the Resource Planning feature, and then easily reschedule billable hours and generate immediate insights into how this impacts your project performance (budget burn or overall profit).

All of this goes to show that technology is essential for enabling project managers not only to react to immediate issues but also to proactively identify future needs and communicate them transparently to clients.

We also have an article on capacity planning in IT, so check that out to learn more about managing your infrastructure.

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Talent Management for Future Capacity Planning

Seeing as people are an agency’s most valuable currency, applying long-term strategies to your talent management is essential to ensuring a balance of capacity with anticipated demand.

The rapidly changing and highly competitive worldwide marketplace is causing firms to turn to their human resources for survival and competitiveness. Because there is a greater understanding that an organization’s workforce cannot be turned around on a dime, long-term human resource planning is gaining currency.

Nowadays, some of the main issues that agencies face are talent churn rates and lack of skilled labor. Research shows that the estimated cost of employee turnover can be steep — about 20% of the employee’s annual salary (American Progress).


Some long-term strategies for ensuring employee satisfaction are:

  • Ensuring balanced workflows with good resource scheduling
  • Providing benefits for a better work/life balance
  • Investing time in capacity development to grow their skill sets

The latter is an essential part of succession planning or the strategy of identifying and developing key talent to ensure continuous service delivery. In an era of relentless change, a well-prepared team can become an agency’s biggest asset.

Planning Capital Investment Decisions in Service Agencies

Capital investment decisions, especially long-range ones such as international expansion or diversifying into new avenues, can have significant effects on an agency. Deciding which investment strategy is appropriate is only one step of this process — making sure that your strategy is implemented so that it’s aligned with broader capacity planning is key for future success.

For example, deciding to invest in a new market due to demand research, only to neglect to support it with the proper resources (i.e. language speakers or appropriate skill sets) can result in failed initiatives.


Some strategies to support your capital investment decisions are:

  • Comparing projects to ensure that you’re prioritizing the right opportunities
  • Tracking key metrics during all stages of a project’s lifecycle
  • Enabling accurate and efficient forecasting for timely tactical shifts
  • Implementing a unified approach for progress tracking to simplify reporting, i.e. using a single all-in-one tool
  • Adopting a flexible mindset that favors iteration and continuous improvement
  • Avoiding and mitigating capacity planning challenges

The Role of Operational Efficiency and Scalability in Planning

Both operational efficiency and scalability are essential factors in ensuring that your agency’s planning strategies are successful. While good strategic capacity planning has a positive impact on both, individual strategies for agency operations and scalability also inform and shape the broader capacity planning process.

Operational efficiency includes:

  • Optimizing utilization of current resources, meaning that you’re able to get the most out of your resources without building excess capacity
  • Cutting down on operational costs with streamlined processes, from high-level initiatives such as hiring to administrative tasks such as client invoicing
  • Simplified management of project budgets and overall agency costs with capacity planning tools

While scalability includes:

  • Implementing systems for handling increased demand, such as applying different capacity planning methods (lead strategy, match strategy, or lag strategy)
  • Supporting resource optimization with initiatives for employee onboarding or skill-building
  • Investing in software with extensive features that can support your agency’s growth

Capacity Planning and Risk Management

Long-term capacity planning is associated with a variety of potential difficulties, necessitating efficient risk management and contingency planning techniques.

We can categorize potential risks into three categories:

  • Internal risks: Caused by employee behavior or high-level mismanagement, can be controlled and eliminated by monitoring organizational processes and establishing rules for desirable professional conduct.
  • Strategy risks: These risks are incurred by various strategic initiatives, and are as such impossible to fully eliminate. Project managers and agency professionals should instead work to develop frameworks for preventing risks from materializing or containing them in case they occur.
  • External risks: Like strategy risks, external risks cannot be controlled or fully prevented. These include various economic shifts and market changes. Management of external risks should focus on identification, forecasting potential trends on the basis of analogous situations or historical data, and mitigation of their impact with agency resilience strategies.

Specific risk management strategies may vary from industry to industry. For example, for a consulting agency, good practices may include accepting engagements only when you’re certain you have the expertise to deliver high-quality services, determining which professional standards should be applied, and solidifying the scope of work in writing to manage client expectations.

Takeaway: Long-Term Planning Strategies for Agencies

Long-term capacity planning is an essential strategic tool for professional service agencies. It includes developing solid strategies for processes such as demand forecasting, risk management, human resources planning, and daily agency operations.

Successful capacity planning ensures that your agency can reach its strategic goals, gain market share, and increase profitability, all while maintaining sustainable practices.

Good practices for capacity planning are best supported by specialized software. All-in-one tools that support managing, forecasting, and tracking capacity can significantly improve outcomes on both current and upcoming projects.

Want to learn more? Find out more about a key concept in the production process: finite capacity meaning and its importance.

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Lucija Bakić

Content Specialist

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