Revenue Per Employee Benchmarks for Private SaaS Companies
December 4, 2020
In a recent post, we explored private B2B SaaS company spending benchmarks. That analysis revealed a difference in spending patterns based on how a company was funded. For example, equity-backed companies spend approximately 45% more on sales, marketing, and R & D than bootstrapped companies. However, the biggest difference is that equity-backed companies are spending 67% more on general and administrative costs than their bootstrapped peers.
A common metric by which SaaS companies track their performance is annual recurring revenue (ARR) per employee. As was the case with the last post, the data and analysis below on ARR per employee comes from our 9th annual survey of more than 1,400 SaaS companies, which was completed in February.
Median ARR per Full-Time Equivalent (FTE)
The chart below shows the median ARR per employee broken down by company size and funding type, equity-backed or bootstrapped. For example, the chart shows that equity-backed companies with $1 million to $3 million in ARR have a median ARR per employee of $67,247. Meanwhile, bootstrapped companies of the same size show a median ARR per full-time equivalent (FTE) of $110,000.
There are two clear takeaways from this chart. The first is that revenue per employee grows as company size increases, clearly demonstrating the scalability of the SaaS business model. The trend holds for equity-backed companies and bootstrapped companies alike. The second takeaway is that bootstrapped companies show higher revenue per employee than equity-backed companies.
Continuing the example above, the median ARR per FTE for bootstrapped companies is 64% higher than for equity-backed companies. The pattern holds true at each company stage, although the delta does narrow as companies exceed $10 million in ARR.
That said, the lower ARR per employee is not a complete indictment on raising equity. From our research on growth rates, we know that venture-backed companies are growing faster than bootstrapped companies. In a new research piece about to be released, we look at the spending and growth of the two types of companies to attempt to normalize and compare their performance directly.
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