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Comparing revenue per employee between different industries doesn't make any sense, since profit margins vary so wildly. For example, a healthcare distributor l
by qq66 13y ago
Comparing revenue per employee between different industries doesn't make any sense, since profit margins vary so wildly. For example, a healthcare distributor like McKesson has $122 billion in revenue, but since they're just distributing goods they are spending 95 cents of every revenue dollar in buying those goods. Their profit margin is under 2%. Meanwhile, software companies, especially with digital delivery, have COGS of 10% or less, leaving room for operating margins of 20-30%. Thus a software company makes the same profit per employee as McKesson with one-tenth of the revenue.
- jlaurito 13y agoAgreed. I limited the sample to Advertising, Media, and Software only for just that reason: they have similar (though not identical) expense structures.
- diziet 13y agoSoftware companies not in the ads/media industry or those not operating as marketplaces will always have less revenue. Whereas companies that are especially in the business of providing advertising will typically handle much larger revenue streams. So a SAAS company vs an ad network could see dramatically different revenues at similar sizes. Strangely enough, a SAAS company is not necessarily more profitable at similar revenue.
- dopamean 13y agoIsn't this an argument against comparing profit per employee since it is the margins that vary so greatly between industries? Also, it seems you are mixing terms here. You started talking about revenue and ended talking about profit.
- alphakappa 13y agoHis/Her point is that profit is what matters. If you can get the same profit per employee with wildly varying numbers for revenue, then it's pointless to use revenue as a metric.
- pbreit 13y agoIt makes sense here since these are all tech industries with high gross margins. There are few or none even remotely like McKesson in the set.
- qq66 13y agoA lot of media companies have huge pass-through costs, mainly ad inventory.