Why Revenue and Profit Per Employee is an important KPI
Each year, Fortune magazine releases its Fortune 500 list of US companies.
This year Walmart, Exxon Mobile, Apple, Berkshire Hathaway, and Amazon made the top 5. The average profitability was 8.0%, up from 6% last year.
The average revenue/employee of the 500 is $477,351 (2018 – $453,901), roughly 3.7x mid-sized firms. In 2018 – revenue/employee was $126,000 for mid-market firms!
Profit/employee averaged $38,327. And once again, Apple’s profit/employee of $450,992 (2018 – $390k) was almost equal to the other 499’s revenue/employee – amazing!!
Find a firm on the list in your related industry and see how you compare.
Always worth looking at the leaders in your market space and understanding their ratios in comparison.
Why 4x Rev/Emp over Mid-Market Firms?
It seems crazy that these “elephants” would be almost 4x more efficient in generating revenue per employee vs. the “Gazelles” Scale Ups. Why?
People, Pricing, and Process.
First, they are able to attract top talent and have corporate universities to train them (smart talent vs. cheap labour).
Second, they have a brand strategy that gives them pricing power.
And third, they focus on keeping their processes lean.
When fully implemented, Scaling Up (Rockefeller Habits 2.0) does the same for mid-market firms. It’s why tracking Revenue, and more importantly, Gross Margin Dollars/Employee, is critical.
Is this KPI heading in the right direction for your company?
With thanks to Verne Harnish for pointing these out to me.
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I hope you have enjoyed these insights. Have a great week and stay growth-focused!
Best Wishes,
Jonathan
