What is the Revenue per Headcount Metric?

Analyzing revenue per employee data can be useful in many ways. Revenue per sales and marketing employees, subscription revenue per total employees, and total revenue per total employees, are all common benchmarks used to diagnose more effective and less effective performance.

Keep in mind there are several nuances to this simple analysis which must be considered when benchmarking. A few examples include percent of revenue coming from non-subscription sources like services, percent of contractors in overall workforce, and the geographical location of the employee base.

This metric is annualized and can use any trailing twelve month period for the total revenue. The employee count on the last day of the revenue period is the standard used for employees when benchmarking. Some analysts use an average headcount across the period which makes perfect sense, other than there is more difficulty in benchmarking this method.

The below chart depicts five years of data for a few well known SaaS companies across a couple different sectors. Salesforce is the leading example of efficiency captured but has plateaued in recent years. HubSpot is on the other end of the range and scaling nicely with this metric.

Of course, these are public company comparisons which have already scaled to the point they were able to make it to the public market.

If while benchmarking your 2022 performance, or 2023 forecast, you find yourself in the range of $220K (HubSpot) and $360K (Salesforce), you are in a healthy neighborhood. Lower revenue and scaling B2B SaaS company benchmarks are much lower in the $100K to $150K range.

A common mistake is when a less mature B2B SaaS company attempts to emulate these market leading benchmarks simply by cutting costs and therefore sacrificing growth.

Note how ServiceNow and HubSpot are both consistently trending up over time as they gain operating efficiencies. That is a good sign.

If your revenue per employee is flat and not gaining efficiencies that could be fine if your business is mature and metrics are high like Salesforce ($360K).

However, if you are flat at $100K or $150K, that could be a sign of either under investing in growth to drive revenues, or operations inefficiencies.

Photo credit to Pascal Swier

If you need help thinking through this or other leadership challenges, let’s have a discussion to see if I can help in some way.

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