VeraSage

Ron Baker

Ed,
Can you clarify what, exactly, was the “new system” the customer implemented?

Without knowing that, I’m going to answer PPE is more important than RPE, and the reason goes back to the market share myth we constantly invoke.

It seems everyone measures everything by revenue--you know, growth for the sake of growth, the same ideology as the cancer cell.

But as the New Equation states at the top of this Web site, profitability is more important than revenue.

Yet, even this makes me uncomfortable, since profit measurement can be so distorted by any first year accounting student.

How about Price Premium Per Employee (PPPE).

Ed Kless

Hi, Ron. The new system was a new ERP and supply chain management system. I think it is irrelavent to my question.

I agree that RPE can be subject to the market share myth and that profit can be distorted.

I guess my argument for RPE would be to define revenue as Peter Drucker implied - it is some percentage of the value created for a customer. In this view we could increase revenue by capturing a greater percentage of the value created with better pricing.

Tom "Bald Dog" Varjan

Ed,

I believe RPE is more important. This is why.

Or at least gross profits (revenue minus the firm’s normal operating expenses).

But if one month partners decide do buy themselves some new Mercedeses, net profit drops drastically.

So, $1 million gross revenue, minus operating costs, minus the Mercedeses, and the net profit is down to $50,000 for the whole firm.

Also, I feel, revenue is more in alignment with the value the firm contributes to clients.

Chad Bordeaux

Ed,
I think it depends on a number of factors.  I used to work in a telecom company and we always tracked RPE and RPSE (Revenue per Sales Employee). 

Since we were a start-up, RPE was destined to increase over time - assuming low customer turnover.  The fact that it skyrocketed year-over-year was not big news - although the Exec’s liked to throw the increase percentages around.  RPSE should increase in the same manner.  A better stat would have been new-Revenue per Sales Employee.

I think another useful stat would have been RPCSE (Revenue per Customer Service Employee).  The Revenue number is comparable only to ongoing cost - i.e. CS Employees.  The ongoing cost of the Initial Sale is for the most part gone after the first year.  So you are comparing total revenue to total employees that may or may not have an effect on the ongoing cost of maintaining this revenue.  You should be interested on the cost to services these customers - or the average amount of revenue that you are able to service per customer service employee.