Winning business models of the future will be flexible. By this, I mean that these businesses will be able to double sales with one-third the number of employees. This may sound impossible, but it is not. Remember Armor All, the tire shining product. In the 1990’s, Armor All did over $300 million in sales with only five employees. By outsourcing all non-essential elements of their operation, Armor All created a business model that was quickly scalable up and down. Their business model enabled them to create rapid growth in sales without rapid growth in employees.
There is nothing wrong with having employees. However, let’s face it, complexity of a business rises with the number of employees. If you can grow sales without growing employees, your business will be much easier to run. Some businesses require an employee-intensive business model. However, a non-employee intensive model is a better model in most cases.
Below are examples of different industries and their respective sales per employee. Ask yourself, would you rather be in an industry with three million dollars sales per employee or one with one hundred thrity five thousand dollars sales per employee?
Specifically, industry #35, package delivery, only generates $135,098 per employee. UPS is included in this category. An average driver makes $24.69/hour plus the cost of benefits. By the time a truck, on-board computer, and other items are added, the cost per driver easily excceds $100,000 per employee.
There is nothing wrong with UPS’ business model. However, it is more difficult to be successful in a business model with such a small gap between revenue and cost. Particularly if that cost is something inflexible like payroll.
| Fortune Magazine | ||
| July 20, 2009 Edition | ||
| Rank | Industry | Sales per Employee |
| 1 | Petroleum Refining | $ 3,044,000 |
| 2 | Wholesalers: Health Care | $ 2,027,600 |
| 3 | Energy | $ 1,360,705 |
| 4 | Diversified Financials | $ 1,307,001 |
| 5 | Food Production | $ 1,268,695 |
| 6 | Trading | $ 1,025,257 |
| 7 | Health Care: Insurance and Managed Care | $ 1,001,605 |
| 8 | Insurance: Life, Health (stock) | $ 960,056 |
| 9 | Utilities | $ 910,711 |
| 10 | Insurance: Property and Casualty (Stock) | $ 753,100 |
| 11 | Mining, Crude-Oil Production | $ 697,695 |
| 12 | Shipping | $ 666,363 |
| 13 | Banks: Commercial and Savings | $ 653,314 |
| 14 | Chemicals | $ 639,935 |
| 15 | Telecommunications | $ 522,884 |
| 16 | Entertainment | $ 515,563 |
| 17 | Metals | $ 490,863 |
| 18 | Pharmaceuticals | $ 483,817 |
| 19 | Network and Other Communications Equipment | $ 471,031 |
| 20 | Tobacco | $ 445,043 |
| 21 | Motor Vehicles and Parts | $ 439,042 |
| 22 | Industrial Machinery | $ 411,165 |
| 23 | Household and Personal Products | $ 377,281 |
| 24 | Beverages | $ 345,714 |
| 25 | Food Consumer Products | $ 340,879 |
| 26 | Building Materials, Glass | $ 336,281 |
| 27 | Airlines | $ 327,138 |
| 28 | Aerospace and Defense | $ 304,323 |
| 29 | Engineering, Construction | $ 298,990 |
| 30 | Computers, Office Equipment | $ 292,773 |
| 31 | Electronics, Electrical Equip. | $ 282,660 |
| 32 | Food and Drug Stores | $ 279,669 |
| 33 | Specialty Retailers | $ 279,386 |
| 34 | General Merchandisers | $ 189,092 |
| 35 | Mail, Package, and Freight Delivery | $ 135,098 |
Learn more about all forms of business models at http://businessmodelinstitute.com
