TPRO Capacity Underutilization
I have calcualted TPROs capacity utilization to estimate maximum future revenues. I made one major assumption: All 280 engineers are FTEs (full time equivalents). Here goes.
First, I backed out materials "markups" from revenues for Q1. THis is 40%, so 40% of 11.5 million subtracted from 11.5 million is 6.9 million. Thus, 7 million (rounding up) is the revenue generated by engineering services billables. Then I added the million bucks in billables lost ebcause of reassingment of billing engineers to the y2k software writing. So, my "adjusted" Q1 revenues is 8 million.
Second, I calculated capacity by looking at Man-Hour units (number of FTEs times the number of hours in a quarter). I made my seocnd major assumption, 40 hour work weeks, just like Gartner does. So, 280 X 96 days x 8 hours = 215,040 ManHours. Q1 work was all core business work so that's about $90/hour. 215,040 X $90 = $19.353 million in potential billables if everybody billed 4oh per 40 hour work week.
Third, I divided 8 million by 19.353 million and got 41%.
So, TPROs billables were 41% of potential billing hours. Now, the accuracy of this depends on FTEs. If some or most of engineers are part timers, the FTEs would be less than 280 and the calcualtions would ahve to be redone. Nonetheless, the 41% figure is a good news/bad news kind of thing. The good news is, if TPRO can put all of its workforce in both y2k and base business work, billable hours can potentially more than double, up to $30 million a quarter. And that's a normal work week and that doesn't count new hires (target = 400) or subcontractors. THe bad news is, isn't this inefficient usage of staff currently?
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