Revenue per employee (RPE) is a way to measure how productive an organization's employees are. By tracking this metric on an ongoing basis, you'll be able to keep tabs on how each person contributes financially and improve collaboration within groups and departments.
Revenue per employee is calculated by dividing revenue by the number of employees at the end of a given period, such as a quarter or year. The formula looks like this:
Revenue per employee
=
Revenue ÷
Number of employees
For example, if your manufacturing company makes $10 million in annual sales and has 100 full-time employees, this would mean an RPE of $100k per employee ($10m / 100). RPE is often used as a benchmark for comparing companies across different industries.
If you're managing a maintenance team (or any team), revenue per employee is a metric that helps you understand how much revenue each employee generates. It's also an excellent way to gauge the effectiveness of your sales team, as well as whether you should be hiring more people or not.
If your organization has ten employees and brings in $1 million in annual revenue, then each person brings in $100k annually. But if only one person brought in all those dollars (and nine others were inactive), then there needs to be something fixed with either the culture or strategy of the company.
A good revenue per employee is a sign that you're using your resources well and effectively. The average revenue per employee for companies in the United States is $200k, but this number fluctuates depending on the industry and company size. A small business may have a lower revenue per employee than a large corporation because it has fewer employees to divide its total revenues amongst.
When deciding whether or not you should hire more people for your company, consider how much money each new hire would bring in as opposed to how much work they would do. If your current staff members are doing all the work themselves while bringing in only $50k each year (or less), it might be worth hiring more people later.
A bad RPE is different from company to company. If your revenue per employee is too low, there are a few things that could be going on:
By tracking revenue per employee, you can get a clearer picture of which members are performing well and which ones need more attention. This also gives each team member more incentive to work hard because they know their contribution towards company goals.
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