The book tells a bit about 101 entrepreneurs, their companies, and the advice these entrepreneurs would give someone just starting a small business. For a few of the companies profiled, Norman mentions both the company revenue and the number of company employees. Whenever I see this type of information for a company, I usually calculate the simple ratio of Revenue Per Employee. Revenue Per Employee is a key ratio for start-up companies. A low Revenue Per Employee in comparison to similar companies is a bad sign, often boding possible failure.
Companies usually fail for one of two basic reasons.
Either, the companies fail at marketing their product or service and generating sales. Else, companies fail to keep the costs to produce and market their product sufficiently low. There is a lack of basic revenue. But, if you are an outsider evaluating a business for investment, calculating Revenue Per Employee gives some measure of whether or not the business is generating adequate sales relative to its assets and people. As with all ratios, Revenue Per Employee puts similar, but different-sized companies, measured by their revenue, on a more equal footing to compare their relative efficiency.