Your average sales volume produced per employee is an easy calculation to determine if the people on your payroll generate and support more or less in monthly revenues.
If the average revenue per employee decreases, you are likely experiencing a decrease in profit production. If your goal is to make more money, you best do this when your talent base grows sales and profits faster than their wages increase.
Revenue per “ALL” Employees is an easy Cover Your Cost Calculation that tells you the average sales volume being produced per employee. Know this number because the people on your payroll have a cost. You hired these people to generate and support the revenues that produce profits. The only way your employees benefit you is when you can collect more in sales than the amount it costs to keep them on the payroll. Put another way, the more productive your total talent base, the greater your profit return.
It’s essential to look at revenue per employee—instead of profit per employee—because the revenue you generate is a direct result of your employees. If they aren’t doing their jobs, then there is no revenue to collect and, therefore, no profit either.
The formula for calculating your Revenue per “ALL” Employees
Net Sales / # of Full-time Employees
A company earning $100,000 in sales per employee will struggle against a company earning $1,000,000 in sales per employee. This is because the more employees you have on your payroll, the higher the risk of costly mistakes, so you need to push this number up continuously.
Higher Creates Opportunity: the more sales dollars you can retain per employee, the more cash you have to pay expenses and leave you a profit.
Lower Creates Challenges: the lower your sales dollars retained, per employee, the more likely you lose money unless you keep other expenses very low.