How to Increase Revenue Per FTE: Tips For HR

What does revenue per FTE mean for your company’s operations? This important measure provides insight into your organization’s effectiveness and output. Imagine knowing precisely the value each full-time employee contributes to your organization. This is the strength of revenue per FTE.

Businesses in today’s competitive environment require any possible advantage to succeed. Revenue per FTE gives us that advantage. It’s calculated by dividing a company’s total revenue by its number of full-time employees. This ratio provides valuable insights into how productive your employees are. Also, it reveals how efficient you can be at an operational level.

Consider this: companies with higher revenue per full-time employee typically run more efficiently. They take pride in cutting costs and improving productivity. Apple and Facebook announced high revenue per full-time employee figures, with $1.9 million and $1.6 million, respectively.

Nevertheless, revenue per full-time equivalent (FTE) is not only the domain of mega tech companies. It is a tool that can benefit any business, from the biggest to the average. Revenue per FTE can be a key performance indicator for start-ups and established enterprises in strategic decision-making.

Intrigued? You must be. Revenue per FTE is not just a figure – it serves as a guide for your business strategy. Let’s explore the revenue per FTE meaning and learn how to compute, analyze, and utilize this impactful measure.

Table of Contents:

1. What is Revenue per FTE?
2. Why is Measuring Revenue per FTE Important?
3. What are the Factors Affecting Revenue per FTE?
4. How to Calculate Revenue per FTE?
5. What are the Best Practices for Improving Revenue per FTE?
6. How to Evaluate Revenue per FTE?
7. Wrap Up

First…

What is Revenue per FTE?

Definition: Revenue per FTE (Full-Time Equivalent) is a metric used to measure a company’s efficiency. It calculates how much revenue each full-time employee generates.

To calculate FTE, divide total revenue by the number of FTEs. This metric helps assess productivity and compare performance across departments or companies.

Higher revenue per FTE indicates better utilization of resources. It’s useful in various industries to track financial health. Companies can use it to identify areas for improvement.

In short, FTE is a quick way to gauge how effectively a business generates income through its workforce.

Why is Measuring Revenue per FTE Important?

Measuring revenue per FTE is like taking the pulse of your business. It tells you how effectively your team contributes to the company’s bottom line. When you know this number, you can do the following:

• Optimize workforce utilization: This metric reveals how effectively your employees contribute to revenue. Understanding this can reveal areas where your workforce may be underutilized or overburdened, helping you make adjustments for efficiency.
• Identify growth opportunities: Analyzing revenue per FTE pinpoints areas within your business with growth potential. Whether it’s improving productivity in certain departments or reallocating resources, this insight can lead to significant financial gains.
• Benchmarks performance: Revenue per FTE allows you to compare your company’s performance against industry standards or competitors. This comparison helps you understand where you stand in the market. Also, it provides insights into what you can do to stay competitive or even lead the pack.
• Drives better decision-making: Armed with revenue per FTE, you can make informed decisions about hiring, resource allocation, and strategic planning. It provides a clear picture of how each employee contributes to the overall success, guiding you toward profitability decisions.

What are the Factors Affecting Revenue per FTE?

With revenue per FTE, several factors shape how much each employee contributes to your bottom line. Let’s break down what can influence this metric:

• Industry and market conditions: Your industry and the current market environment can heavily impact revenue per FTE. For instance, tech companies might see higher figures due to the nature of their business. Conversely, more labor-intensive industries might have lower numbers.
• Organizational structure: A well-structured organization with clear roles and responsibilities often leads to higher efficiency and, consequently, a better revenue per FTE ratio.
• Technology and automation: Your company’s tools and technology can significantly boost productivity. Automation, for instance, allows employees to focus on higher-value tasks, driving up revenue per FTE.
• Employee productivity: The more productive your employees are, the higher the revenue per FTE. Factors like skill level, motivation, and work environment greatly affect how much each employee can generate.
• Management practices: Good management practices, such as effective leadership, can greatly enhance employee output. Consequently, this improves your revenue per FTE.

How to Calculate Revenue per FTE?

Revenue per FTE calculation gives you valuable insight into how efficiently your team generates income. Let’s walk through the steps:

1. Determine the total revenue: Figure out your company’s total revenue over a specific period, like a quarter or a year. This number represents all the income generated from your business activities.
2. Calculate Full-Time Equivalents (FTEs): Next, calculate your company’s number of Full-Time Equivalents (FTEs). An FTE represents one full-time employee. Part-time employees are combined to make up full-time equivalents. For example, two half-time employees equal one FTE.
3. Calculate revenue per FTE: Now, it’s time to do the math. Divide the total revenue by the number of FTEs. The formula looks like this:

Revenue per FTE = Total revenue / Number of FTEs

What are the Best Practices for Improving Revenue per FTE?

Improving revenue per FTE is all about getting the most out of your team while keeping them motivated and engaged. Here are some best practices to help boost this important metric:

1. Offer learning and development opportunities: Invest in your employees’ growth. Training and development help them acquire new skills, leading to increased productivity and better results.
2. Improve hiring practices: Focus on bringing in top talent. Hiring skilled and motivated employees ensures you have the right people to drive revenue.
3. Use technology to automate processes: Embrace automation to handle repetitive tasks. This allows your team to focus on more valuable work that can directly impact revenue.
4. Encourage collaboration and teamwork: Cultivate a culture of collaboration. Employees who work together effectively can achieve more, leading to higher productivity and revenue.
5. Focus on customer satisfaction: Happy customers are more likely to return and recommend your business. Prioritizing customer satisfaction can lead to increased sales and, consequently, a higher revenue per FTE.
6. Consistently track performance: Regularly monitor your team’s performance. Tracking key metrics can help you identify areas for improvement and make data-driven decisions to boost revenue per FTE.

How to Evaluate Revenue per FTE?

Data analysis: the modern-day puzzle solver’s dream (or nightmare). Numbers everywhere. Spreadsheets galore. Eyes glazing over.

Enter data visualization, the superhero of the analytical world. It transforms mind-numbing figures into eye-catching graphics. This is especially crucial when tackling revenue per FTE analysis.

Excel, the trusty sidekick, tries its best. But let’s face it – its visualization game is weak.

Basic charts? Check.

Groundbreaking insights? Not so much.

That’s where ChartExpo swoops in. This powerful add-on takes Excel’s data-crunching prowess and adds a visual punch. Suddenly, your revenue per FTE data isn’t just visible—it’s vivid, clear, and ready to tell its story.

Let’s learn how to install ChartExpo in Excel.

1. Open your Excel application.
2. Open the worksheet and click the “Insert” menu.
3. You’ll see the “My Apps” option.
4. In the Office Add-ins window, click “Store” and search for ChartExpo on my Apps Store.
5. Click the “Add” button to install ChartExpo in your Excel.

ChartExpo charts are available both in Google Sheets and Microsoft Excel. Please use the following CTAs to install the tool of your choice and create beautiful visualizations with a few clicks in your favorite tool.

Example

Let’s analyze this revenue per FTE benchmark data using ChartExpo.

• To get started with ChartExpo, install ChartExpo in Excel.
• Now Click on My Apps from the INSERT menu.

• Choose ChartExpo from My Apps, then click Insert.

• Once it loads, scroll through the charts list to locate and choose the “Multi Axis Line Chart”.

• Click the “Create Chart From Selection” button after selecting the data from the sheet.

• ChartExpo will generate the visualization below for you.

• If you want to add anything to the chart, click the Edit Chart button:
• Click the pencil icon next to the Chart Header to change the title.
• It will open the properties dialog. Under the Text section, you can add a heading in Line 1 and enable Show.
• Give the appropriate title of your chart and click the Apply button.

• You can change the precision value of the Number of FTEs to zero:

• You can add the dollar sign with “Total Revenue”:

• You can add the dollar sign with “Revenue per FTE”:

• Click on Settings and change the “Data Representation” as follows.

• Change the Legend shape of “Total Revenue” to Column and click the “Apply” button.

• Change the Legend shape of “Number of FTEs” into a Line and Circle and click the “Apply” button.

• Click the “Save Changes” button to persist the changes made to the chart.

• Your final Multi Axis Line Chart will look like the one below.

Insights

• The company’s revenue varies annually, peaking in July.
• Revenue per FTE is highest in November, reflecting efficiency.
• More FTEs generally lead to higher total revenue.

FAQs

What is good revenue per FTE?

Good revenue per FTE indicates strong efficiency. It shows that each employee contributes significantly to revenue. A high figure suggests effective resource use. The number varies by industry, but generally, higher numbers are better.

What is revenue per FTE KPI?

The revenue per FTE KPI measures the average revenue generated by each full-time employee. It evaluates employee productivity and operational efficiency. A higher KPI indicates effective use of workforce resources. It helps gauge an organization’s financial performance.

How do you calculate profit per FTE?

To calculate profit per FTE, first find total profit by subtracting expenses from revenue. Then, divide this profit by the number of full-time employees. The result shows the average profit generated by each employee. This metric indicates workforce efficiency.

Wrap Up

Revenue per FTE is a key metric for measuring a company’s efficiency. It shows how much revenue each full-time employee generates. This metric provides insight into workforce utilization and helps identify areas for improvement.

Calculating revenue per FTE is simple. You divide total revenue by the number of full-time equivalents. The result tells you the average income each employee brings in. It’s a useful tool for assessing productivity.

Various factors influence revenue per FTE. Industry and market conditions play a big role. Organizational structure, technology, and employee productivity also impact this figure. Effective management practices are crucial, too.

Improving revenue per FTE requires a strategic approach. Investing in employee development is important. Hiring talented staff boosts performance. Moreover, using technology to automate processes increases efficiency.

Collaboration and teamwork should be encouraged. A positive work environment enhances productivity. Focusing on customer satisfaction drives sales, and regular performance tracking ensures ongoing improvement.

In summary, revenue per FTE is a vital measure of business health. It helps companies understand how effectively they’re using their workforce. By improving this metric, businesses can boost their profitability and achieve long-term success.