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Calculating The Batting Average For Your Business Team!

Revenue per employee is an equation used by companies to calculate the amount of revenue that each employee earns for the business.

This metric has been a darling of investors for years. Shareholders relish seeing a steady upward trend.

Are we optimizing our workforce’s potential efficiency?

Can we expand our workforce?

Are we utilizing our personnel with the same level of effectiveness as our rivals?


 

This equation takes the overall revenue from the last twelve months and divides that by the current number of employees. The result is an average value per person which represents part of the total revenue.


For those who like to stay ahead of the game, this value can be the key to unlocking a winning strategy when combined with other data.


However, be warned that employee turnover may throw a wrench in the revenue-per-employee calculation, as it’s based on the present headcount.


Employee turnover not only shrinks the number of folks working for a company, but it can also put a dent in revenue due to the costs associated with turnover. And, to add insult to injury, this can lead to a skewed revenue-per-employee figure.


 

The age of the company can also play a role in revenue per employee.

Younger companies, like fledgling birds leaving the nest, often have a lot of roles to fill but not a lot of cash to fill them with. The revenue per employee in a newer company is going to be disproportionately low.

Finally, consider the industry that you are in when analyzing your revenue per employee. Don’t forget: revenue per employee is not the same as profit per employee. So while it may be tempting to think you’re making bank, remember that other expenses (like rent, utilities, and pizza) can quickly eat away at those profits.

Revenue per employee measures the amount of revenue a company generates for each employee. It gives an indication of how productive a company’s workforce is in generating revenue.

Profit per employee, on the other hand, measures the amount of profit a company generates for each employee. It takes into account not only the revenue generated but also the expenses incurred to generate that revenue. It gives an indication of how efficiently a company is using its workforce to generate profits.

In simpler terms, revenue per employee tells you how much money each employee is making for the company, while profit per employee tells you how much money each employee is making for the company after accounting for expenses.


 

What’s a Good Revenue per Employee? Each industry has its own unique challenges and quirks — A good Revenue per Employee benchmark ranges between $43,000 of revenue per employee for companies making less than $1 million total revenue, to $230,000 per employee for companies earning $50 million or more of total revenue.

It is important to remember that revenue per employee is only valuable when used in conjunction with additional data points. In other words, without context, it is essentially useless.


How to Improve Revenue per Employee There are two ways to go about it: either make more dough or cut down on the folks dough-rolling. While the latter might sound like a tempting shortcut, it’s important to remember that a smaller workforce can sometimes mean smaller returns.

If you want to keep your employees, it’s time to put on your thinking cap and get creative about boosting your revenue.

One way to start is by making sure everyone on your team is in a role that best suits their skills and abilities — nobody wants to feel like they’re stuck in the wrong job.



Based on the graphic - Apple is the clear winner when it comes to revenue per employee, as the company generated over $2.4 million per employee, in 2022.


 



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