Revenue per employee is the benchmark MSP owners quote at conferences. It is simple, easy to compare, and useful. It also has a blind spot big enough to hide a problem: it does not care how much of that revenue you keep.
Revenue per employee is total revenue divided by full-time equivalent (FTE) employees. It shows how much revenue each person supports, which is a fair read on scale.
What it misses is the quality of that revenue. A dollar from a thin-margin resale line counts exactly the same as a dollar from a high-margin managed service.
Because you can raise it without adding people or profit, just by adding low-margin revenue.
Illustrative example, not a benchmark: an MSP with 20 FTEs earns $4 million in revenue at a 40% gross margin. That is $200,000 of revenue per employee and $80,000 of gross profit per employee. Then it adds $1 million of licensing resale at an assumed 10% margin, with no new hires. Revenue per employee jumps 25%, to $250,000. Gross profit per employee rises only about 6%, to $85,000. The scoreboard says a huge win, but the business gained a sliver of profit for a lot more revenue to bill, collect, and support.
Chase the revenue number alone and you can grow into a less efficient company.
Gross profit per employee is gross profit divided by FTEs. Define it once and keep it consistent, because MSPs calculate gross profit in two common ways:
Either works. Switching between them does not. Then:
Use both numbers, for different jobs. Revenue per employee shows scale. Gross profit per employee shows efficiency.
Then break gross profit per employee down by service line. If it falls as your resale mix grows, you will see exactly where the efficiency went.
The number is only as good as your cost data. Unbilled seats and creeping vendor prices quietly change the cost side, and the metric drifts with them. Gradient Reconcile compares your vendor invoices with your agreements, so the gross profit behind the metric reflects what you actually pay and bill.
What is a good gross profit per employee for an MSP?
There is no single benchmark that fits every MSP. Calculate your own using one consistent definition, trend it over time, and compare against peers only if they use the same definition.
Should I stop tracking revenue per employee?
No. It is a useful measure of scale. Pair it with gross profit per employee so you can see whether growth is also making the company more efficient.
How does resale affect these metrics?
Resale tends to raise revenue per employee quickly because it adds revenue with little extra labor. Because its margin is usually thin, it adds much less to gross profit per employee.