Revenue Per Employee: The Metric Your AI Spend Depends On

Most agency owners don't track revenue per employee. It’s a metric that, up until AI entered the chat, hasn’t been part of anyone’s standard report. It’s not something any of your carriers would have brought up, many accountants don’t look at this metric, so many agencies have skipped over it.

Here's why that's about to be a problem. Many agencies are currently increasing, or considering increasing, their spending money right now on AI tools, workflow automation, or virtual employees. Each of these expenses is investing in the same thing in your agency: that you can do more with the staff you already have. Revenue per employee is the number that tells you whether the bet is paying off.

In a recent podcast episode, Carey Wallace puts it simply:

“It’s the metric that really gives us an idea of the capacity inside an agency.” - Carey Wallace, founder of AgencyFocus

Capacity is the metric you’re investing in to impact every time you approve a subscription or leave a seat open after someone retires. This is how you check what you’ve got.

How to calculate revenue per employee at your agency

Take your agency revenue and divide it by your total employee count, owners included.

The first question we typically get when calculating this is: Do owners count in the total count of the agency? The short answer is, for most agencies, yes, owners should be included in the count. The only exception is if they are an owner in name only and have no responsibility in the agency at all.

This number gives us an idea of how efficiently the agency is operating with its current staff size. We then compare that number to the benchmark for agencies your size. The comparison will be an indicator of two things – either you’re overstaffed, or you aren’t operating efficiently. Both show up the same, so a bit further digging is required if this number is vastly off the benchmark.

“Those numbers aren’t always good or bad. They just tell the story of your agency." - Lindsay Sexton, co-host of Business Refocused

Plenty of agencies are overstaffed on purpose. They hired ahead of the growth they’re planning for, and their revenue per employee reflects a decision they made deliberately. Missing the benchmark isn’t automatically a problem. Missing it without knowing why is where agencies can get into trouble.

Once you have an indication of where you compare on revenue per employee, you can break it down: revenue per CSR and staffing vs. benchmark (how many employees you have in each category compared to other agencies in your size will help determine why the number is off. Those get more specific, and more useful for individual conversations.

Why this number is moving faster than the rest

What’s changed is how agencies build capacity. Virtual employees shifted the math a few years ago, and now automation and AI are shifting it again, and a lot of the agencies that went deep on a virtual employee strategy for service are looking hard at technology instead.

There’s going to be a big difference in this number between agencies who make effective changes vs. those who don’t. Those who make changes effectively will have their revenue per employee become better than the average (so a higher revenue per employee) and those who do not will see a decrease.

The questions to ask before you fill the next open seat

Carey framed three of them, and they’re the ones worth writing down.

As people retire, can you leave some of those roles unfilled? Not every seat needs a replacement if the work moved somewhere else.

Can you grow revenue with the exact staff you have today, because of what you’ve already invested in technology or virtual employees?

Or are you still adding headcount every time you add revenue? Because if you are, the investment isn’t doing what you bought it to do, and your revenue per employee will tell you that before your P&L does.

What to do about it

Run the number twice. Calculate revenue per employee for your last full year, then for the year before. This will show you where your agency is headed as a direction based on the decisions that were made in the last year.

Reflect on your staffing and compare it to the number. Include factors like having a heavy virtual employee model, hiring ahead of growth, betting on automation, all of it. If you can’t explain the gap between your number and the benchmark using that paragraph, you’ve found something worth looking into.

From there, other metrics can tell you why this number is either lower or higher than the benchmark. That’s where a general capacity question turns into a specific conversation that you can take action on.

Put it on your dashboard with a target attached. Decide what you expect revenue per employee to look like 24 months out given what you’re spending on technology and staffing, then check it quarterly against that expectation instead of against last year.

Where this leaves you

Every agency owner we talk to is spending on something right now, whether that’s a tool, a virtual employee, or a process rebuild. Very few of them have a metric that they’re using in order to measure the effectiveness of it. Revenue per employee is the shortest path to that answer, and you can calculate it this afternoon.

The harder part is knowing what your number should be given the agency you’re building. If you want to see where you sit against agencies your size, and what the rest of your operating metrics say alongside it, an agency health check will get you there.