How Much More Can Your Service Team Handle? Understanding Available Revenue Capacity (ARC)
As an MSP leader, you’re always looking for ways to grow—without overextending your team or sacrificing margins. One of the clearest indicators of how much more your service department can handle is a metric called Available Revenue Capacity (ARC). It shows you how much additional service revenue your current team can take on before you need to hire or risk burnout.
Let’s dig into what ARC means and how you can use it to make smarter, data-driven decisions.
What is ARC?
Available Revenue Capacity (ARC) tells you how much more in services you can sell before your Service Salary to Service Revenue ratio (SS:SR) exceeds your target. For top-performing MSPs, a healthy SS:SR target is often 33%. In other words, you should aim to spend no more than 33 cents on service salaries for every $1 of service revenue.
Why It Matters
If your actual SS:SR is above the 33% target, you might be overspending on labor—or not generating enough revenue for the size of your team. But this also presents an opportunity. You may have room to grow revenue without hiring if you can operate more efficiently and bring that ratio back down.
Example: $40,000 in Untapped Revenue
Let’s say:
- Service Revenue = $1,000,000
- Actual SS:SR Ratio = 37%
- Target SS:SR Ratio = 33%
Here’s how ARC is calculated:
ARC = Service Revenue × (Actual SS:SR – Target SS:SR)
ARC = $1,000,000 × (0.37 – 0.33)
ARC = $1,000,000 × 0.04
ARC = $40,000
This means your service department has $40,000 in theoretical available capacity—you could sell that much more in services and still be within your target SS:SR, assuming the team can operate at peak efficiency.
How to Use This Insight
ARC helps you:
- Plan for growth: Identify when you can grow without needing to hire.
- Set smarter goals: Align sales targets with operational capacity.
- Optimize staffing: Use ARC to determine when it’s truly time to add headcount.
- Boost profitability: Lower your SS:SR by increasing revenue without increasing salaries.
Bottom Line
ARC is a valuable tool to help MSPs grow strategically. If your SS:SR is over your 33% target, you might not need to hire immediately—you may simply need to improve efficiency, streamline delivery, or boost service pricing.
Think of ARC as a pressure gauge for your service department: it shows how much more your team can take on—profitably and sustainably.
