Gross Profit Per Employee

[AGinVT]

Hi everyone. I have been trying to track down some data on gross profit per employee in our industry and haven't found much in the way of new information. There was a post from 2010 on Signs 101, but I'm sure a lot has changed since then.

I'm curious if anyone has done these calculations and if they would be willing to share or if they have found a good source for these numbers?

I know that the size of the business, location of the business and business model (small do it all shops, large scale signage, electric signage etc), can have a major effect on these numbers, so if you can also share the number of full time employees you have and what type of specific work you handle, I would love to know.

Our shop is in the try to do it all space, (signage, business materials, apparel, vehicle wraps etc) and we're at a stage in our growth where we're trying to figure out how healthy we are as we grow, so we can direct our efforts/hiring. We've been in business for over 30 years, but still always looking to learn more and Signs 101 has been a great source in the past. Thank you in advance for any insights you can provide.

 

[AndersonSignCo]

I can't imagine that the fundamentals of calculating gross profit per employee would change over the last 15 years, probably hasn't changed ever

The simplest way to determine gross profit per employee is Gross Profit/Number of Employees

If you are looking for a breakdown of how much each employee makes the company, you would have to know your profit centers and how much time each employee spends in those profit centers. If your record keeping is good, then you should be able to determine Gross Profit per profit center/Man Hours or Gross Profit per profit center/(Man Hours/2000).

Disclaimer: I am not a very good businessman, but I do like numbers and good data. I'm sure there's more to this topic.

 

[Andrew Heiner]

Are you asking how to figure your profit per employee or are you asking a industry standard? I shoot for $120 gross per employee per hour. Do we get that... yes and no.
Chat gtp had been very helpful for comparing numbers / figuring who has or has not been profitable. I really recommend tracking everything. The more info you have the more insight you can get.

 

[AGinVT]

I guess my post wasn’t clear. I know how to do the calculations. I was just curious what the numbers look like for other companies in the industry. Trying to see what the average is.

I’ve seen everything from $100K to $350K in revenue per employee, but haven’t been able to track down anything that’s definitive.

 

[AGinVT]

Sorry, I guess my post wasn’t clear. I know how to do the calculations. I was just curious what the numbers look like for other companies in the industry. Trying to see what the average is.

I’ve seen everything from $100K to $350K in revenue per employee, but haven’t been able to track down anything that’s definitive.

 

[kcollinsdesign]

$100k would be on the low end (vinyl shops, small scale printers), $350k would be on the high end (fully automated fabrication shops, technical installation services).

A simple calculation would be to determine your "burdened" labor rate (pay plus cost of benefits, payroll tax, share of workers comp and general liability insurance), multiply by days or hours worked in a year, then triple that (round up). It's rough but it will get you in the ballpark.

Sign of the Times used to publish that information on an annual basis (in a rather comprehensive survey combined with a measured analysis). Industry pros used to look forward to getting that useful report (that was before the internet, a lot has changed)!

 

[AGinVT]

$100k would be on the low end (vinyl shops, small scale printers), $350k would be on the high end (fully automated fabrication shops, technical installation services).

A simple calculation would be to determine your "burdened" labor rate (pay plus cost of benefits, payroll tax, share of workers comp and general liability insurance), multiply by days or hours worked in a year, then triple that (round up). It's rough but it will get you in the ballpark.

Sign of the Times used to publish that information on an annual basis (in a rather comprehensive survey combined with a measured analysis). Industry pros used to look forward to getting that useful report (that was before the internet, a lot has changed)!

Thank you. Great stuff.

 

[mbasch]

We try for 125-150k per employee and have always been in that range. Of course it really depends on the product mix you are selling, your average order size, and how much hand holding your clients need. Some products and some projects are more profitable than others so it can vary widely based on your market niche, product mix & customer mix for any individual year. We track, on a weekly basis, and share overall revenue and cogs with our team. These are 2 areas they can truly impact (increase sales, manage costs of goods) and bonuses are based on annual target so we all stay focused.

 

[AGinVT]

We try for 125-150k per employee and have always been in that range. Of course it really depends on the product mix you are selling, your average order size, and how much hand holding your clients need. Some products and some projects are more profitable than others so it can vary widely based on your market niche, product mix & customer mix for any individual year. We track, on a weekly basis, and share overall revenue and cogs with our team. These are 2 areas they can truly impact (increase sales, manage costs of goods) and bonuses are based on annual target so we all stay focused.

This is exactly the kind of feedback I was hoping for. Thank you for taking the time to respond.

Hand holding definitely impacts our admin costs. So many projects are custom and there is so much education needed to get on the same page with the client. We have been trying to create sharable pdfs that help clarify and limit some of the time sucks, like artwork requirements, rough vehicle coverage pricing, vehicle drop-off requirements etc. I know it's all part of sales, but I don't want the staff sinking too much time into dead ends or questions that we face on a daily basis. I'm curious what other shops have done to try to automate some of these processes.

We are currently trying out a company wide sales initiative, based on growth over 2025 numbers. It was originally intended for anyone involved directly with sales, but we decided to expand it to production too (12 total employees). Seems to be having a positive effect. We spent so many years just trying to keep up with demand, so a lot of this is still a bit new to us.

 

[kcollinsdesign]

Administrative costs and sales time are the hardest things to control. You need to sit down and take into account every single cost and come up with a plan to cover overhead (which usually, if you are running efficiently, comes to around 30% – 35% of gross receipts for most small sign shops doing under $2M – $3M/anuual gross sales). If you are looking for a 20% profit at the end of the year, that calls for at least an additional 50% – 55% margin tacked onto ALL the costs (including overhead and paying the sales person).

Years ago our industry paid salespeople by commission (usually a percentage of profits, often calculated by job). The salesperson, to some extent, could spend whatever time they wanted to on a job. It's their money. That method of compensation seems to be out of favor these days, and structured sales processes and salaried sales people (like the one "AGinVT" may be trying to implement, perhaps with sales "bonus" incentives) are now the norm. This generally works well for large companies, but can be difficult for a small, custom shop. That's one of the reasons owners of so many small sign shops take on the sales burden. It's their money.

 

[victor bogdanov]

I'm at about $500k per employee, machines do most of the work, most of the work is print now. I can't imagine being under 100k per employee, That would be sitting around not doing anything

 

[kcollinsdesign]

I'm at about $500k per employee, machines do most of the work, most of the work is print now. I can't imagine being under 100k per employee, That would be sitting around not doing anything

Machines and automation can change the equation dramatically! Fully automated printing and fabrication facilities will have a much higher income/employee ratio than a traditional custom sign shop that requires intensive hands-on labor. Those giant AI farms make millions of dollars and only require a handful of people to operate! We are living in a time where human labor is becoming obsolete.

 

[Vassago]

You also need to split staff into groups.. Some focus on different areas.. That way you can pay what's needed to staff who perform better.. Plus it gives you an idea of how your business is performing and how to improve it

 

[mbasch]

I'm at about $500k per employee, machines do most of the work, most of the work is print now. I can't imagine being under 100k per employee, That would be sitting around not doing anything

Great example of differences....selling product vs selling projects. Selling projects takes a lot more man power automation is more difficult. Selling products means you can streamline an automate with less skilled labor. At the end of the day, your target revenue per employee is determined by your profit per employee. If you want to make 100k profit per employee because your a 3 man shop and want to make 300k per year, you are going to need a whole lot more revenue and higher margin projects. If you have 10 employees and want to make 300k per year, you only need profits of 30k per employee.

 

[jfiscus]

I would focus more of the data/metrics towards dividing out "product categories", and seeing what product types or categories are your most profitable, and then focusing growth towards those areas. Employees can be relocated to those areas and other areas phased out. Then, worry about hiring. I see a lot of numbers above that seem to show Gross numbers, not Profit; that can vary wildly per business.

 

[Kalispel]

I target $320k in revenue per employee.
I target a 35% gross margin.
That is $112k of gross margin per employee
Actual numbers vary with workload and job quality but are generally close.

 

[AGinVT]

I would focus more of the data/metrics towards dividing out "product categories", and seeing what product types or categories are your most profitable, and then focusing growth towards those areas. Employees can be relocated to those areas and other areas phased out. Then, worry about hiring. I see a lot of numbers above that seem to show Gross numbers, not Profit; that can vary wildly per business.

Good advice. We have been actively calculating the margins on our products for years, so we can focus on the more profitable areas, but it is tough, because we have been providing some of these products and services for over 30 years. We have been slowly learning to say no and raise our minimums, but it's not always easy with long-time loyal customers.

Hiring is definitely tougher the more we grow. We have a really strong core group, but the efficiency typically declines as our numbers grow, which is a tough pill to swallow as starting wages continue to rise. This is one aspect that I'm sure varies wildly from state to state. A state like Alabama pays $7.25/hr, but up here it's $14.42 and a 16 year old working at McDonalds starts at $18/hr.

 

[ChaseO]

Good advice. We have been actively calculating the margins on our products for years, so we can focus on the more profitable areas, but it is tough, because we have been providing some of these products and services for over 30 years. We have been slowly learning to say no and raise our minimums, but it's not always easy with long-time loyal customers.

Hiring is definitely tougher the more we grow. We have a really strong core group, but the efficiency typically declines as our numbers grow, which is a tough pill to swallow as starting wages continue to rise. This is one aspect that I'm sure varies wildly from state to state. A state like Alabama pays $7.25/hr, but up here it's $14.42 and a 16 year old working at McDonalds starts at $18/hr.

I agree with this entire message. Pay even from county to county can be wildly different over here in the sticks. But saying No and trying to raise numbers to certain customers is a huge challenge for me, especially when I set the bar too low to begin with.

 

[TopFliteGraphics]

Good information in this thread.

 

[binki]

We have always worked on a per hour basis. We look for a gross of $300/hr.