Is added headcount producing added value?
A plain test of whether added headcount is producing added value. If revenue rises while this figure falls, the business is getting bigger without getting stronger.
Get a finance reviewWhether the work being won is actually worth doing, once the cost of delivering it is accounted for.
See all KPIs →Total revenue ÷ Average full-time equivalent headcount
Varies widely by sector. Design and architecture practices typically sit lower than IT services and software businesses, so compare with your own sector and your own trend.
Total revenue divided by the average number of full-time equivalent staff over the same period. Part-time staff are counted pro rata, and regular contractors are usually included where they do work that employees would otherwise do.
It is a plain test of whether growth is making the business stronger or just bigger. If revenue rises while this figure falls, each new hire is bringing in less than the last, and margins will follow. It also gives a quick check against peers, and helps judge whether a planned hire is justified by the work already secured.
Use average headcount across the period, not the number at the year end, or a recent hire will distort the result. Be consistent about contractors: include them or exclude them, and say which. Read it alongside gross margin, since a business that passes large third-party costs through its revenue will look more productive than it is. The trend over several years matters more than any single figure.
Most owner-managed businesses don't, or they work it out in a way that flatters the result. We'll calculate it from your own numbers and show you what it's telling you.
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