A Startup's Minimum Revenue Per Employee

In a couple of weeks I am going to be teaching a class on Data Visualization for Businesses (you should come!) and as part of the class prep I started thinking about key metrics that my students may want to visualize.

After weighing some of the options, I settled on Revenue Per Employee, which has been on my mind recently. I want to understand what is the minimum revenue per employee that quickly growing companies can sustain?

I decided to put together a quick plot of a few key stats based on the 2013 Inc. 5000 List. You can play with the interactive chart here. In his excellent SaaStr blog, Jason Lemkin points out that everybody lies about business info, but agrees that this data is probably in the ballpark.

I took all of the data and threw it into a Google Motion Chart, which I find to be the easiest way to quickly inspect data across a bunch of different dimensions (though not as pretty or powerful as d3). I only included Advertising, Media, and Software companies, since I believe their major expenses are people and many of those start-ups are pulling from similar pools of people.

Google Charts lets you easily play with which data is displayed on each axis, so it's easy to look at the data a bunch of ways. First I looked at Revenue Per Employee vs. Number of Employees, but all this showed was that some of the companies are either really crushing it or may need to reconsider their reporting.

I played around with the data in a few other combinations (you should too here). There's plenty of interesting stuff in the data. For example, you can clearly see the $2 Million revenue cut-off to get into the list when you look at revenues per employee.  The graph of revenue per employee below shows that the average fast growing company in these areas is generating $230k - 310k per employee in revenue. For fast growing companies with over $2 million in revenue, that seems to be fairly consistent no matter how many employees the company has. But software companies (in yellow) lag far behind the other industries on this metric: they typically generate 25% fewer revenues per employee, and a few smaller ones are operating on under $100k per employee. I believe much of that is due to the increased interest in funding software companies over the last few years (allowing money-losing companies to grow), though some might also be due to lower operating costs.

This is actually the exact opposite of what I expected. I assumed that software companies would be more scalable and generate more revenue per employee, but the numbers don't bear this out.

You can see all the code here. Follow me on Twitter if you're interested in future projects/posts.