# company capacity efficiency capacity faq What is my company capacity? How is that calculated?

Your company capacity can be best defined as this:

Company capacity is what your company should earn in revenue, if it accurately estimated all its job costs, and finished its jobs on-time.

Your next question is likely, "Well, how do you know that?".  The answer is in your own numbers.

To calculate your company's capacity, we need one number that's not in you budget - what's your average chargeout rate per hour.  What we're looking for here is "On average, what's your hourly rate for labor that you charge your customers?"  The industry average is somewhere between \$35/hr and \$50/hr depending on the type of work and the location/region of the contractor.

To calculate your company capacity, we do this:

1. Assuming you charged all your labor hours correctly - your field labor budget tells us how many "crew" or "billable" field hours are available, so we multiply that number by your average hourly rate to estimate what you should earn in revenue from labor.  (Total field hours x Average Chargeout Rate/Hr = Total Potential Revenue From Labor)
3. Next, you should recover all your material costs in your estimates, so we take your material cost total, add overhead and profit - using your budget's overhead recovery system and target net profit to calculate what you should earn in revenue from installed materials  (Material Costs + Overhead Markup on Materials + Budget's Net Profit Margin)
4. Repeat the same for your subcontractor costs  (Subcontactor Costs + Overhead Markup on Subs + Budget's Net Profit Margin)
5. Finally - add equipment rental costs, plus profit (Equipment Rentals + Budget Net Profit Margin)

And there you have it.  Those are all your job costs.  If you markup those job costs, the way you are supposed to, for overhead and profit, you will arrive at your capacity - what you should earn in revenue based on your costs.

Your efficiency rating is your Forecast Sales divided by Your Company Capacity.  Basically it tells you the % of revenue you hope to earn vs. the percentage of revenue you should be earning if your company was firing/estimating/executing on all cylinders.  The difference between your capacity and forecast revenue is waste and inefficiency.