Revenue per FTE – an introduction
For a SaaS business, a key metric that you should be paying attention to is revenue per full time employee (FTE). This metric is important as it measures the amount of revenue that each employee generates for the company.
What is revenue per FTE?
Revenue per FTE is a metric that measures the amount of revenue that a company generates per full time employee (using full time equivalent), normally expressed as an annual value. Some businesses may wish to calculate the monthly amount for trend comparison.
This metric is important as it can help a company to determine the productivity and efficiency of its employees. It could also be used to make a simple extrapolation of how much revenue it should generate as it grows headcount.
Why is revenue per FTE so important?
This metric can help a company to identify areas where it can improve its efficiency and productivity. For example, if a company has a low revenue per FTE, it may indicate that it needs to improve processes, looking for efficiency gains in the existing processes, or where technology can improve or replace people. Revenue per FTE can be easily benchmarked against other SaaS businesses.
What is a good Revenue per FTE?
A good revenue per FTE will vary depending on the industry and the size of the company, with other metrics being monitored in conjunction to this. Naturally, the higher the revenue per FTE, the better it is for the business as you are generating more from a smaller number of resources.
Looking at some examples below, a good annual revenue per FTE would be in the £125k to £200k range based on some other successful fast-growing businesses. Larger more established businesses may also achieve more than this.
- Salesforce (Large Enterprise): A leading CRM provider, has a revenue per FTE of around £380k. This higher-than-average figure is due to the company's large customer base, efficient sales team, and mature business model.
- Adobe (Large Enterprise): A diversified software company with a strong cloud offering, has a revenue per FTE of around £270k. This figure is influenced by the company's diverse range of products.
- Atlassian (Mid-sized): An Australian software company that develops products for project management and team collaboration, has a revenue per FTE of around £230k. Their focus on self-service sales contribute to this figure.
- Slack (Mid-sized): A business communication platform, had a revenue per FTE of around £200k before it was acquired by Salesforce. This figure was driven by the company's rapid growth, strong customer adoption, and efficient sales process.
- Monday.com (Small, fast-growing): A work operating system for teams, has a revenue per FTE of around £100k to £150k. The company's strong growth trajectory and focus on innovation contribute to this figure.
- Asana (Small, fast-growing): A work management platform, has a revenue per FTE of around £120k. As the company continues to grow and gain market share, this figure is expected to increase.
What does revenue per FTE look like?
How do you calculate revenue per FTE?
The formula to calculate Revenue per FTE is:
Revenue per FTE = Revenue / Number of full-time equivalents
Revenue per FTE worked example:
If a SaaS business has £250,000 revenue and 10 FTEs, revenue per FTE rate would be calculated like this:
Revenue per FTE = £250,000 / 10 = £25,000
Revenue per FTE is a metric that can help SaaS businesses to determine the productivity and efficiency of their employees. It’s also a good benchmark metric. A higher revenue per FTE is generally better, but a low revenue per FTE may not necessarily be a bad thing, especially for companies that are in the early stages of growth. By tracking revenue per FTE, SaaS businesses can make informed decisions about their hiring, processes, and overall growth strategy.