Trendline

Share this post

Revenue per employee in Software

www.trendlinehq.com

Revenue per employee in Software

Comparing 81 public SaaS companies

Jan 29
5
6
Share this post

Revenue per employee in Software

www.trendlinehq.com

Hello,

Thanks for subscribing to Trendline!

Most of the news in the tech industry these days is about layoffs.

Ultimately this is a question about employee costs and how well a company is managing them.

One way to answer this question is to use a simple, but powerful metric -

Revenue per employee (=Revenue / Full time employees of a company)


Before we see the data, I want to point out that like most metrics, this one has limitations.

  • Firstly, not all revenue is created equal and one can argue that gross profit per employee is a better measure than revenue per employee

  • Secondly, the metric doesn’t account for external contractors/ consultants used by the company (quite large in some cases)

Nevertheless, it can give us some good insights when we compare companies against each other.

CJ, who is a CFO agrees.

Twitter avatar for @cjgustafson222
CJ Gustafson @cjgustafson222
If I could only choose one metric to evaluate a company... I'd chooose revenue per employee Why? It cuts through all the noise. And there's no hiding.
Image
3:00 PM ∙ Jan 25, 2023
131Likes16Retweets

Let’s look at this metric for publicly listed SaaS companies.

I find this chart fascinating to look at!

What stands out to me are:

  • While there is a big range, most companies are <$500K revenue per employee. This is quite low compared to tech companies in other industries, e.g. Social Media.

    For instance, the worst run social media company - Twitter, had revenue per employee of $680K. Google and Facebook are above $1.5M revenue per employee.

    I covered this in detail, in a post when Musk acquired Twitter.

Trendline
Did Twitter have too many employees?
Hello, The news of mass layoffs at Twitter have shocked many on the internet. The layoffs were expected after Elon Musk took over, but a 50% reduction in staff is quite extreme. Even if layoffs were necessary to save the company, I personally think the…
Read more
5 months ago · 2 likes · Trendline
  • Secondly, while there isn’t a very strong correlation (I checked, its about negative 11%), the higher growth SaaS companies tend to have slightly lower revenue per employee - this makes sense as these companies are likely adding headcount for future growth.

  • 54% of the companies are stuck at revenue per employee <$300k (across all growth categories). CEOs of these companies need to manage headcount closely, esp. to get through the current difficult macro conditions.

Loading...

📢 What else should you read

Building wealth long term is hard.

It requires constant effort to stay on top of new trends that will shape the future.

But what if you don’t have hours to research every day? Or don’t know where to look?

The Daily Upside makes it easy.

Its a free newsletter designed to get you smarter about markets and building wealth.

Founded by a team of bankers and journalists, it delivers business news that is crisp and fun to read.

Join 750,000+ readers, incl. wall street MDs, by subscribing below.

Subscribe to The Daily Upside


That’s all for this week. Thanks for reading! 👋


Not a subscriber yet? Subscribe below

6
Share this post

Revenue per employee in Software

www.trendlinehq.com
Previous
Next
6 Comments
Semir Jahic
Writes More value.
Feb 9

Just discovered this newsletter via Mostly Metrics. Super insightful chart. I did a similar analysis recently looking at B2B tech incl. Oracle. I'll be writing about it in my next edition of more value.

Expand full comment
Reply
5 replies by Trendline and others
5 more comments…
TopNewCommunity

No posts

Ready for more?

© 2023 Trendline
Privacy ∙ Terms ∙ Collection notice
Start WritingGet the app
Substack is the home for great writing