Revenue per Employee

Date created: Oct 6, 2019  •   Last updated: Oct 18, 2021

What is Revenue per Employee?

Revenue per Employee is a measure of the total Revenue for the last twelve months (LTM) divided by the current number of Full-Time Equivalent employees. This ratio is among the most universally applicable and is often used to compare companies within the same industry.

Alternate names: Sales per Employee

Revenue per Employee Formula

ƒ Sum(Revenue LTM) / Count(Full-Time Equivalents)

How to calculate Revenue per Employee

If a company employs 50 people and has a revenue of $7.5M annually, their Revenue per Employee ratio is $150,000 on an annual basis. If they begin working on a new product line and hire an additional 25 employees, based on the same revenue, their Revenue per Employee ratio will be $100,000 annually.

Revenue per Employee

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What is a good Revenue per Employee benchmark?

There is no one right comparison value. Revenue per Employee benchmark data varies significantly, with company age, industry, and overall revenue.

Revenue per Employee by Company Revenue

Revenue per Employee by Company Revenue

KeyBanc, Jan 2019
Revenue per Employee by Industry

Revenue per Employee by Industry

Based on public S&P 500 companies Jun 2017
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Revenue per Employee visualization example

Compare your Revenue per Employee year-over-year to compare your most efficient performance periods to time periods that could be improved. Use this information to refine your hiring and staffing plan to reach the optimal Revenue to employee ratio. Take a look at the chart for an idea of what tracking your data could look like:

Revenue per Employee

Bar Chart

Here's an example of how to visualize your Revenue per Employee data in a bar chart and compare your performance to previous periods.
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More about Revenue per Employee

Not only will this ratio change from industry to industry, but geography, subsidies, and, of course, company revenue stage will all produce differences. Geography and subsidies, which have an impact on labour costs may allow a company to hire more employees and potentially invest less in automation. Early stage companies often have a very low and volatile Revenue to Employee ratio, until they see their investments produce predictable revenue.

As an internal KPI, this ratio is often used alongside Profit per Employee and Expenses per Employee. Monitoring these metrics over time is a good way to track growth or decline in overall efficiency. However it should be noted that this metric is only loosely correlated with total revenue, growth rates or market caps (so, don't over rotate on this one!).

Note that this metric only looks at the number of employees and doesn’t account for labour costs. Refer to Payroll to Revenue Ratio, Gross Margin %, and, to some degree, Profit Margin % to get the complete story.

Revenue per Employee Frequently Asked Questions

What does a low revenue per employee mean?

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You might be in an industry that requires a high number of employee in proportion to your revenue. If your revenue per employee is low when compared industry benchmarks, it may indicate you need to revise your hiring practices. Conversely, high revenue per employee could indicate overworked employees.

How often should you track revenue per employee?

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Generally, you should review your revenue per employee at least every quarter. This lets you quickly identify drops in efficiency and gives you time to plan your hiring. Using a free analytics tool such as PowerMetrics can help you stay alert to fluctuations in your data.