The average UK employee generates £118,000 of revenue per year for their employer, according to research from our MBA-qualified business coach, Louis Lines.
The £118,000 includes every business in the UK, from steel and electricity production to your local bar or library and everything in between.
In a growing business, one of the challenges often faced by owners is assessing your team’s performance and deciding if employees generating enough revenue.
In light of this, Lines has interrogated national data to find out how much revenue is generated per employee across the UK.
He has analysed businesses with different level of employment and taken a look beneath the surface into some specific sectors to help owners benchmark their business against competitors.
At first glance, it would be fair to assume politicians and economists alike could grab onto the coattails of this figure, foreseeing the positive PR that comes with it. However, that does not make it an overly useful figure to business owners trying to analyse their own situation - fear not, that comes later.
Figure 1 begins to breakdown the data by business size looking at director-owned business with just one or two employees banded through to large 500+ employee international corporations.
Immediately apparent from this data is the steady increase in revenue per employee up to Band Four with 10-19 employees. This is a range where SMEs can be most productive and generate more revenue per employee than their larger counterparts in Bands 5-7.
This productivity is primarily driven by the lower management requirement in smaller business where the majority of staff can sit in productive operational or revenue generating roles.
Again, whilst this information begins to answer the question it doesn’t necessarily help an entrepreneurial business owner in making the decision whether to take on another employee or in benchmarking their business against competitors within their sector.
In order to create a benchmark for individual businesses to measure against competitors a deeper dive into the data is required. In this instance, business owners need to know two things - (i) how much revenue are businesses in my sector generating per employee, and (ii) could my business generate enough revenue with another employee to justify the operational expenditure?
In contrast, should the business look for operational efficiencies before making the commitment to another employee?
In Figure 2, Lines pulled the data for 25 sectors that broadly represent Accounts and Legal’s client base, ranging from restaurants and bars through to software developers and online retail. He has broken the data down between micro business with less than 10 employees and small business with between 10-50 employees.
The chart also illustrates how revenue per employee changes across the sectors with staff heavy businesses, such as restaurants and bars, typically generating only £37.5k and £48.5k per employee respectively. On the contrary, sectors with less manpower, like online retail or software sales, generate £150.5k and £147k respectively.
The sector we operate in - legal, accounting and bookkeeping services - shows average revenue per employee for a small (10-49 employees) business of £91,600 per annum. This figure sits almost in the middle of the table and reflects the fact accounting and legal firms rely on human capital with specific knowledge and are reliant on people rather than machines.
With this figure of in mind, an accounting firm with 30 employees should generate £2.7m (£91,600 x 30 employees) worth of revenue each year.
As a working example, assume a fictional accountant has 30 employees and is generating £2.5m each year in revenue. The firm’s management team want to grow the firm but can’t decide whether to invest in another employee or an IT system that boost efficiency.
When taking revenue per employee into account it is clear the business is only generating £83,300 (£2.5m/30 employees) in revenue per employee, nearly 10% less than the average in their sector.
This can help inform management decision making, suggesting they might look for further efficiencies in the business before taking on another employee.
Our team of accountants use real-time data to help you make the best-informed decisions for your business and its progression. Looking for an accountant who can see beyond the balance sheet? Talk to our team about how our bespoke services can help realise your business’ full potential.