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C2

Margin–Capacity Trap

Composite / composite / 3 to 6 months

What it detects

Margins are compressing while utilization is already maxed, there is no operational lever to escape the problem.

When it fires

Growth Destroying Margin (S8) + capacity-ceiling constraint (fires when utilization >= ~[redacted]% AND ceiling within [redacted] months, not the hiring-capacity signal)

Why it matters

If you can't grow revenue (maxed on delivery capacity) and you can't cut costs (margins already thin), you're trapped. Adding capacity costs money you don't have margin to support. Not adding capacity means you can't grow out of the problem.

What it looks like in practice

Every consultant is fully booked. New deals are being turned away or delayed. But the work you are doing has [redacted]% margin, below the [redacted]% floor. Hiring another person makes the margin problem worse. Not hiring means you can't grow revenue. You're stuck.

Severity levels

  • HIGH

Thresholds

  • UTILIZATION_CEILING

Exact thresholds, formulas, and severity bands are omitted from this public view. The full methodology, with every figure, is available in the authenticated app.

Why these together

Margin compression on its own has an operational answer (add capacity, reprice the work) and a capacity ceiling on its own has a financial one (hire, and let margin absorb the cost). When both bind at once neither lever is free: adding capacity costs margin the company does not have, and not adding it means revenue cannot grow out of the problem. The composite fires when Growth Destroying Margin is active and the capacity-ceiling constraint is binding; the constraint is a constraint rather than a base signal, so it does not appear in the list below.

Built from these checks

  • Growth Destroying Margin: the margin read. It establishes that gross margin is compressing toward the floor while revenue grows, the side of the trap that removes the cut-costs lever; the utilization side comes from the capacity-ceiling constraint.

Sources

SEE IT ON REAL NUMBERS

The exact thresholds, the formula, and your own figures are in the authenticated app. See it against a real, simulated dataset for Integra Executive Services, our public demo company, or connect your own QuickBooks Online account.

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