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.
How to calculate Revenue per Employee
ƒ Sum(Revenue LTM) / Count(Full-Time Equivalents)
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.
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.
More about this metric
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.
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