Revenue Per Employee

Revenue Per Employee?

Revenue Per Employee is the ratio of revenue generated per employee of a company on an average; this ratio gives an idea about how the company will perform in a specific quarter – especially considering the revenue vs cost of each employee of the company.

Revenue Per Employee Formula

Revenue per employee is an essential financial ratio calculated by dividing revenues generated for a specific period by the number of employees in a company. It helps as a measure of average financial productivity for each employee of the company.

Revenue Per Employee

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For eg:
Source: Revenue Per Employee (wallstreetmojo.com)

Revenue Per Employee - Facebook, Google, Amazon

Source: Ycharts.com

This ratio helps determine how productively a company is able to utilize its employees and contribute to its business growth. If a company has higher revenue per employee formula, it means that the company is generally doing well and trying to make optimum utilization of available manpower in the form of its employees. However, labor-intensive companiesLabor-intensive CompaniesLabor intensive implies those tasks which require a heavy workforce for accomplishment. In the production of goods and services, the industry is considered labour intensive if the manufacturing process relies more on human resource than machinery.read more typically tend to have lower ratios as compared to those who require a lesser amount of labor. This is why, generally, this ratio is employed to compare the performance of companies within an industry.

When we compare to this per employee of Facebook, Google, and Amazon, we note that Facebook has the highest annual this employee at $1.929 million per employee! Google has this employee of $1.457 million, and Amazon has a revenue of $392,034 per employee.

Revenue Per Employee Examples

Example #1

Here, we would consider four firms from the same industry for calculating this ratio and see how they compare against each other.

Name of CompanyRevenues for FY 2017 (in Million US$)Number of EmployeesSales Per Employee Ratio
Company ABC25,00080,000312,500
Company XYZ46,00090,000511,111
Company EFG23,000105,000219,048
Company UVW39,00075,000520,000

Compared on the basis of sales per employee ratio, Company UVW comes out on top, followed by Company XYZ, Company ABC, and Company EFG in the descending order of ratio values. This broadly indicates which company was best able to utilize its employees in terms of productive assets during a specific financial year.

Example #2 – Tech Industry

The below table provides you with the details of sales per employee of top Tech companies.

S. NoNameSales Per Employee (Annual)
                1 Facebook 1,928,831
                2 Points International 1,637,766
                3 Alphabet1,457,056
                4 VeriSign1,199,892
                5 Criteo881,309
                6 InterXion Holding824,043
                7 Blucora730,627
                8 AutoWeb690,238
                9 Twitter681,914
              10 Shutterstock665,747
  • We note that Facebook has the highest sales per employee.
  • All of this list above makes more than half a million sales per employee.
  • Interesting to note that Twitter is on the list with $681,914 per employee.

Example #3 – Auto manufacture Industry

Below is the list of top manufacturing companies with their Sales per employees.

S. NoNameSales Per Employee (Annual)
                1 Ferrari1,100,416
                2 Ford Motor778,045
                3 General Motors718,953
                4 Tesla661,273
                5 Toyota Motor638,522
                6 Honda Motor Co615,978
                7 Fiat Chrysler Automobiles538,122
                8 Blue Bird486,424
                9 Tata Motors406,627
              10 Kandi Technologies Group245,715
  • We note that Ferrari has the highest sales per employee with approx. revenue of $1.1 million per employee.
  • Fiat, on the other hand, makes around $538,122 per employee.
  • In general, the top tech company’s revenue per employee is more than the manufacturing companies revenue per employee.

Example #4 – Banking Industry

Below is the list of top banks with their revenue per employee, Formula.

S. NoNameSales Per Employee (Annual)
                1 East-West Bancorp 502,428
                2 UBS Group498,720
                3 Westpac Banking493,447
                4 Credit Suisse Group432,640
                5 Bank of America417,952
                6 JPMorgan Chase403,485
                7 Bank of N.T Butterfield401,880
                8 Royal Bank of Canada388,697
                9 ING Groep386,020
              10 Bank of Montreal377,244
  • Overall, banks also make far fewer sales per employee as compared to the tech industry
  • JPMorgan makes an Annual revenue of $403,485 per employee.

Use and Relevance of Revenue Per Employee Formula

Other Similar Ratios:

There are other similar ratios which are calculated by dividing net income instead of revenues from the number of employees to try and see how a company fares in terms of employee-based productivity. Revenues are an easily understood term and often used in financial ratio calculations, which helps explain its relevance in calculating this ratio.

Role of Employee Turnover Rate:

It must also be remembered that the employee turnover rate impacts this financial ratio as well. Employee turnover rate is the percentage of the total workforce that voluntarily leaves a company for a year and needs to be replaced. This should not be confused with employee attrition, which refers to employees who have either retired or were terminated by the company.

The relevance of Sales Per Employee

Keeping in mind all these factors, only the average number of employees is usually utilized for calculating sales per employee ratio formula. Employee represents a unique asset to a business, and if the concept of asset utilization is applied carefully in nurturing employees with a high level of productivity, a company can potentially perform much better than its peers. Such companies tend to have relatively better sales per employee ratios within their specific industry.

How to Use this Ratio?

The ratio by itself is of little use without any frame of reference; hence it should be read against the historical ratios for the same company over a number of years to be able to see if the ratios are rising or falling. This would help indicate improving or declining levels of employee productivity. Then again, the ratios should be compared with industry peers and how they have performed over the years.

Revenue Per Employee Formula Calculator

You can use the following calculator.

Revenue
Current Number of Employees
Revenue per Employee Formula
 

Revenue per Employee Formula =
Revenue
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Current Number of Employees
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Calculate Revenue Per Employee in Excel (with excel template)

Let us now do the same example above in Excel. This is very simple. You need to provide the two inputs of Revenue and Number of Employees.

Revenue per Employee Formula in Excel
Revenue per Employee in Excel

You can download this template here – Revenue per Employee Excel Template.

Revenue per Employee Formula Video

 

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This has been a guide to Revenue per employee ratio, its uses along with practical examples. Here we also provide you with Sales per employee Calculator with a downloadable excel template.

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