Sales per Person
“Sales per person” (sometimes referred to as “sales per employee” or “revenue per employee”) is a financial metric used to measure the average revenue generated by each employee of a company. It’s a useful tool to assess a company’s efficiency in terms of workforce productivity. This metric is particularly insightful when comparing companies in the same industry or assessing the impact of organizational changes over time.
Sales per Person = Total Sales (or Revenue) / Number of Employees
Example of Sales per Person
Let’s delve into a fictional scenario to better illustrate the concept of “sales per person.”
Scenario: “Green Groves Farm” and “Tech Titans Inc.” are two very different companies in different sectors.
Green Groves Farm:
- Industry: Agriculture
- Focus: Organic vegetable farming
- Total Sales for 2023: $1.2 million
- Number of Employees in 2023: 60
Tech Titans Inc.:
- Industry: Software Development
- Focus: Enterprise software solutions
- Total Sales for 2023: $12 million
- Number of Employees in 2023: 20
Sales Per Person Calculation:
For Green Groves Farm:
Sales per Person=Total Sales / Number of Employees
Sales per Person = $1,200,000 / 60
Sales per Person = $20,000
For Tech Titans Inc.:
Sales per Person = Total Sales / Number of Employees
Sales per Person = $12,000,000 / 20
Sales per Person = $600,000
Interpretation: From the calculation, we can see that:
- Each employee at “Green Groves Farm” contributed an average of $20,000 to the total sales in 2023.
- Each employee at “Tech Titans Inc.” contributed an average of $600,000 to the total sales in 2023.
While “Tech Titans Inc.” has a much higher sales per person ratio, it’s important to understand the context. Software development generally requires fewer employees to produce high-value products, resulting in higher sales per person. In contrast, farming is labor-intensive, so even with a larger workforce, the sales per person might be lower.
This example highlights why comparisons of this metric are more insightful when made among companies within the same industry, as different industries have vastly different business models and capital structures.