Planning & reporting
Revenue per employee
Revenue per employee is the revenue a business earns for each full-time equivalent employee over a period.
Revenue per employee = Revenue for the period ÷ Average full-time equivalent employees
Worked example
| Revenue for the year | $6,000,000 |
| Average full-time equivalent employees | 40 |
$6,000,000 ÷ 40 = $150,000 per employee
Why it matters
People are the largest cost in most service businesses. Revenue per employee shows whether growth comes from each person producing more or simply from hiring more, and it is an early check on whether a hiring plan is ahead of demand.
Common mistakes
Where it misleads
Using year-end headcount in a growing company, which understates the figure because new hires only worked part of the year.
Leaving out contractors who do the work of employees, which flatters the result.
Comparing across industries: a software company and a home services company have very different normal ranges.
Related terms
Keep reading
- Operating marginOperating margin is the share of revenue left after the cost of goods sold and all operating expenses, before interest and taxes.
- EBITDAEBITDA is earnings before interest, taxes, depreciation and amortization: a measure of operating profit before financing, tax and non-cash charges.
- Driver-based forecastingDriver-based forecasting builds a forecast from the few operational numbers that cause the results, such as leads, conversion rate or price, instead of typing in each line.
Stop calculating it by hand.
Dear CFO keeps your statements, forecasts and metrics current from the systems you already run.