Great read, Kyle! However, I believe the underlying assumption/thesis for these numbers is that you're building in the low-cost geographies and selling in developed western markets.
Do you've by what factor these numbers would change if you're building in a low cost geo (i.e. India) and selling in a similar low cost geo (i.e. South East Asia)?
Good q. Yes, that is an underlying assumption given the dataset (US + Western Europe focused). It's hard to handicap how different these look for low cost geos... might be a 50-70% haircut depending on the local market.
I was confused by the sudden popularity in ARR per FTE and thought it was mostly driven by VCs and venture-backed startups…and now I’m even more confused.
I don’t understand why a bootstrapped business would pay so much attention to a metric which pretty much just serves as a benchmark to other companies rather than focus on profitability or ARR per compensation $ as you suggest.
I find it helpful as a framework for making investments in sales, marketing, product, etc. Instead of thinking in terms of “I already had X headcount approved” or “This could improve our growth rate”, you can get specific about whether the steady-state will unlock more efficient growth.
How does that changes if you have a meaningful % of your FTEs based off-shore employees vs all US based?
If it's 100% of shore vs 100% US, do you still expect the same? What if it's 50/50 or 20/80 or 80/20...
I don’t have great data here, unfortunately. Hope to collect that next time!
Same question here @kyle. 90% of our developers are offshore. Would they included in ARR calculations
Great read, Kyle! However, I believe the underlying assumption/thesis for these numbers is that you're building in the low-cost geographies and selling in developed western markets.
Do you've by what factor these numbers would change if you're building in a low cost geo (i.e. India) and selling in a similar low cost geo (i.e. South East Asia)?
Good q. Yes, that is an underlying assumption given the dataset (US + Western Europe focused). It's hard to handicap how different these look for low cost geos... might be a 50-70% haircut depending on the local market.
Thanks Kyle! Appreciate your response.
Wouldn't profit by employee be a better metric?
Venture backed startups are rarely profitable (they’re investing in growth) so it revenue per employee helps indicate future profitability potential
Great read, Kyle! Thanks for putting it together
I was confused by the sudden popularity in ARR per FTE and thought it was mostly driven by VCs and venture-backed startups…and now I’m even more confused.
I don’t understand why a bootstrapped business would pay so much attention to a metric which pretty much just serves as a benchmark to other companies rather than focus on profitability or ARR per compensation $ as you suggest.
I find it helpful as a framework for making investments in sales, marketing, product, etc. Instead of thinking in terms of “I already had X headcount approved” or “This could improve our growth rate”, you can get specific about whether the steady-state will unlock more efficient growth.