A useful metric for SaaS businesses is the amount of Annual Recurring Revenue (ARR) per employee. A high revenue per employee implies the efficiency of the business and is a proxy for it’s ability to break-even or become profitable (the majority of expenses for tech companies is people). As the business starts to scale, revenue per employee is expected to increase.
The table below shows the result of a survey by SaaS Capital looking at the median ARR per full time employee in 2022 for venture backed companies.
|ARR||Median Revenue per Employee|
- SaaS churn benchmarks are another useful measurement for figuring out the efficiency of a SaaS business (if churn is high, the amount of growth required to replace old customers goes way up)
- Burn multiples along with revenue per employee can be a short-hand way of keeping burn in check—e.g. set a headcount cap until you hit the revenue goal to stay on track