Fully Understand & Unlock the Power of Sales per Employee

Kinsella Group_Blog

 

Sales Per Employee is a meaningful metric for executives in the MedTech sector because it measures how effectively a manufacturing firm utilizes its employees.  Because labor utilization varies greatly throughout our industry, this ratio is most effectively measured in comparison to that of your competitors.

The Kinsella Report on Medical Contract Manufacturing provides this valuable information, in addition to a number of other key metrics for our industry.  In our most recent survey, average Sales Per Employee for reporting companies was $179,994. We have first-hand knowledge that sales per employee can reach levels in excess of $400,000 per employee in the MedTech sector.

Revenue per employee is often a function of staff and operator training, tenure of employees, degree of operational automation and manufacturing policies.

Companies that invest in employee training report benefits in enhanced quality output and longer tenured employees. A complaint sometimes heard is money invested in training can create employees who are “poached” by competitors. The counter argument is that an untrained employee costs money in errors, quality issues and plant floor efficiency. Better to lose a trained employee than retain an inadequately trained one who may lead to lost customers.

Determinants of Sales per Employee:

  • The most impactful determinant of Sales Per Employee is the degree of automation a Company employs. High degrees of automation can lead to substantially higher Sales Per Employee. In this instance investment in sophisticated equipment and robotics can be very costly, but the impact on output per employee and profitability can be dramatic.

 

  • Manufacturing policies can also impact Sales Per Employee. Some producers with long standing customers feel comfortable predicting orders beyond those actually received and will “run ahead” of  orders in some cases eliminating a setup of complex machine tools thereby having the impact of increasing profit on a particular job and increasing Sales Per Employee. This of course carries a risk of inventory being produced that is not sold so such polices rely on the predictability of customer future actions.

 

  • Finally, enhanced training, automation and employee retention can reduce the reliance on recruiting experienced operators as revenue volumes increase.

Sales Per Employee is a valuable metric. A focus on the means to achieve a high Sales Per Employee will enhance profitability and lead to a superior result on eventual exit.

Benchmarking your Company’s Sales Per Employee is important. We suggest you participate in The Kinsella Report annual survey to be in the best position to benchmark your performance as regard this metrics and others.

 

Kinsella Group, Inc is an investment bank focused exclusively on the MedTech and medical contract manufacturing markets.  Kinsella Group has been representing buyers and sellers in this space for over 20 years, working to exceed desired outcomes.  For more information, please contact Bob Kinsella at robert.kinsella@kinsellagroup.com or by calling (312)229-1357.

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