There are several modeling techniques that can drive revenue off of headcounts, including:
- Sales per employee (SPE) modeling: This technique involves calculating the revenue generated per employee in a given period. By tracking and analyzing SPE, businesses can identify areas where productivity can be improved or where additional resources may be needed to maximize revenue. In these types of models, you can define quotas and how long it takes a new employee to reach a given quota. This was one of the first cohort modeling styles I built in this account executive driven financial model. Later on I did a SaaS model driven off headcount ratios.
- Workforce optimization modeling: This technique involves analyzing employee productivity and identifying ways to optimize resources, such as by reducing employee turnover or improving training programs. By optimizing the workforce, businesses can increase revenue without necessarily adding more headcount. I've never modeled anything from this perspective before.
- Resource allocation modeling: This technique involves analyzing the skills and capabilities of employees and allocating resources accordingly to maximize revenue. By assigning tasks to the most qualified employees, businesses can increase efficiency and productivity, leading to higher revenue.
- Sales forecasting modeling: This technique involves using historical data and other factors to predict future sales trends. By accurately forecasting sales, businesses can adjust their headcount accordingly to maximize revenue. You can do this with the sales team hiring plan template I built.
- Professional services firm: Here you can forecast the amount of new talent added and then that talent bills out work. As the professional services firm, you place them in positions where they earn and then the billings go to the firm, which then pays the professional some lower rate. As you scale more professionals and types of professionals, revenues go up. This also involves quota inputs and a schedule for how long it takes a new professional to reach it. Additionally, you will want to have a churn function in this type of model to account for professionals leaving over time. This business model is common for Law and CPA firms, but can apply to all sorts of industries. I built a professional services firm financial model that utilizes the techniques mentioned above.
- A sub-type of this would be something like a plumbing business. The best financial forecasting I've done in that space was driven off new plumbers added (up to three types) and then defining all their attributes for the activities involved in providing services to customers and any related costs. The model could arbitrarily scale up revenues based simply on plumber headcounts over time.
- Customer Repurchases: For this modeling technique, you are actually looking at customer headcounts and their spending pattern behavior over time in order to forecast revenues. It is not employee headcounts being measured here, but it is a bit similar.
Overall, these modeling techniques can help businesses make informed decisions about their headcount and resource allocation to drive revenue growth.
One final similar template would be this sports agency financial model that drives off the headcount of athletes added over time and their corresponding expected career earnings. It involved defining schedules for the % of base earnings earned over their career as well as sponsor earnings potentially lasting longer than the playing career.
Article found in Accounting and Finance.
