Revenue per head in software
Two metrics we use to compare software businesses are revenue per employee and operating expense (opex) per employee. In our view it’s a great measure of operational efficiency. What is a reasonable amount of rev/head and opex/head in SaaS? The data from the last 19 SaaS IPOs is below.
Headcount. The median headcount of these companies at IPO was 933 with the average coming in slightly higher at 1,129. The largest company was Docusign (2,255 employees) and the smallest was Datadog (474).
Revenue per head. Rev/head on median was $218k with a range of $118k to a whopping $595k. Interestingly, the company with $595k of revenue per head was Dropbox who has a very large consumer and SMB customer base.
Opex per head. Opex/head on median was $200k with a range of $139k to $458k (again Dropbox).
The difference is small. The difference between revenue/head and opex/head is quite tight (only $17k when comparing the median) and indeed once you factor in COGS, 17 out of these 19 companies are not generating positive EBITDA. The goal for any software company is to make the spread between revenue/head and opex/head as wide as possible so long as the former is greater than the latter.
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