This article contains general information and is not intended to provide information that is specific to American Express, or its products and services. Similar products and services offered by different companies will have different features and you should always read about product details before acquiring any financial product.
Companies may be interested in eliminating wasteful programs and fully funding profitable investments. That requires knowing how various programs are performing. While financial statements summarize a company's performance, efficiency metrics offer an additional layer of financial intelligence. The following five metrics analyze efficiency from multiple perspectives – including sales, operations, and capital utilization.
1. Burn multiple
Analyzes the relationship between operating expenses and revenue generation.
Net burn (Total Cash Outflows - Total Cash Inflows) / Net new annual recurring revenue
Establishes the relationship between expenses and revenue growth
Expressed as a multiple – for example, 1.5x
2. Revenue per employee
Connects the workforce size and its ability to generate revenue.
Annual revenue / Total employee count
Captures workforce performance and productivity
Expressed as dollars – for example, $500,000 per employee
Varies widely by industry and business model
3. Payback period
Quantifies how long it takes for revenue to offset the associated acquisition cost.
Customer acquisition cost / Annual gross profit per customer
Measures time to recover customer acquisition costs
Expressed in months – for example, 12.5 months
4. Capital efficiency
Examines how effectively capital translates into revenue growth.
Revenue growth / Capital consumed
Captures revenue generated per dollar of invested capital
Expressed as a multiple – for example, 0.6x
5. The SaaS Magic Number
Focuses on sales and marketing expenditure in relation to revenue growth.
Net new annual recurring revenue / Sales and marketing expenditure
Expressed as a multiple – for example, 1.5x
Measures the performance of sales and marketing
Making Sense of Efficiency Metrics
While these metrics can apply to most businesses and sectors, the most common use cases include:
High-growth companies focusing on burn multiple closely
Service businesses focusing on revenue per employee
Subscription businesses paying close attention to the payback period
Businesses with extensive assets focusing on capital efficiency
B2B companies using the SaaS magic number often
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