Key Takeaway: Divide last year's revenue by the people on your payroll. Your model sets that number, so it sits in a band. Three levers move it: redesign the work, raise the price, or move work off payroll. Pick the one you can run this quarter.
By Samer Azar
Dear reader,
Costco's hot dog has cost $1.50 since 1985. In a 2018 keynote, Craig Jelinek, then Costco's chief executive, remembered telling founder Jim Sinegal they were losing money on it.
Sinegal's answer: "If you raise the effing hot dog, I will kill you. Figure it out." So Costco built its own hot dog plant.
When you can't move the price, you move the work behind it. Costco stocks fewer than 4,000 products per warehouse, and its annual report says it doesn't try to keep pay low.
Their filing: fewer things to stock, and no squeeze on pay.
It still turns over $807,141 for every person it employs. Walmart turns over $339,601. Where Walmart needs 100 people, Costco needs about 42.
That gap is the business model showing up in a ratio. Revenue per person sits in a band your model sets, and it only moves when you change the model.
The lender file I promised last time moves to next issue. Another page of it is below.
First, what you told me
The who-are-you poll has run three times and the shape held: most of you run services or software businesses, and the rest lead finance teams. That poll is retired.
This week's question is about the newsletter itself. Each issue has a few parts, and I'd rather spend the words where you actually read.
Which part of the CFO Lab do you want more of?
One tap, no typing. I'll share the shape of the answers next issue, and the issues after that will lean toward what wins.
Worth your time this week
Gen grew revenue 11% and still asked marketing for double-digit savings. Good Morning, CFO on a $1.3 billion software business whose finance chief puts growth and cost discipline in the same room. Daily reporting replaced the weekly deck, so money moves between channels faster.
Half of CEOs credit AI for their productivity gains, and almost a quarter see them absorbed before profit. EY-Parthenon asked 1,200 CEOs in August and September. Their line worth keeping: gains turn into value only through deliberate decisions on operating model, talent and capital.
Companies are hiring younger finance chiefs they can keep for 15 or 20 years. Good Morning, CFO on the shift toward first-time CFOs, and the public case of a seat filled too early. Useful before you decide when the finance hire comes.
Your model sets the band
Aldi turns over £357,810 for every person on its payroll. Tesco turns over £219,301. Same country, same shelves, same shoppers. Where Tesco needs 100 people, Aldi needs about 61.
You can work out your own number on paper. Take the last 12 months of revenue and divide it by the people on your payroll over the same 12 months. Count them the same way every time, by head or by full-time equivalent.
Take an illustrative business with €2,000,000 of revenue and 9 people. That's €222,222 per person.
Now write your sector next to your number. Companies that run the same kind of business cluster in a band, and gross margin does most of the work.
So compare yourself inside your band, never against a business that runs a different model on purpose.
The full breakdown, with every rung of the ladder, is in the video.
3 levers that move the band
Every company here moved its band by changing its model, and each one put the reason in writing.
Lever | Company | What they filed | What it did per person |
|---|---|---|---|
Redesign the work | Aldi | "the preservation of low operating costs in order to achieve price leadership", on a core range of about 2,000 lines where Aldi puts a large supermarket at 20,000 to 30,000 products | About 61 people for every 100 at Tesco |
Raise the price | Ferrari | In May 2013, a limit of about 7,000 cars a year | 2.4 cars per person a year against Ford's 26 vehicles, at €524,000 a car |
Move the boundary | McDonald's | In 2015, a model that "will require a less resource-intensive support structure" | 465,000 employees in 2006, 210,000 in 2018 |
Costco belongs in the first row too: it couldn't raise the hot dog, so it built the plant.
McDonald's handed its restaurants to operators and kept the brand and the property. Last issue covered why that makes it a landlord.
Nobody gets out of their band by working harder inside it.
The rule of this issue, from the video
Your lender reads the direction
In the lender meetings we sit in, the bank never asks for this ratio. It works the number out from your file and doesn't mention it.
It reads the direction more than the level. A number below your band is survivable. Having no answer for it is what hurts you.
Watch the basis too. Tesco turns over £219,301 per person on its payroll and £324,454 per full-time equivalent. Same company, same year, a 48% spread.
If the comparison runs per full-time equivalent and you hand over headcount, you volunteered the worse number. So have the answer ready before anyone asks: the lever you're pulling and when it starts.
That's the second page of the lender file, after last issue's four columns.
Pick one lever this quarter
Back to your paper: your number, and the band next to it.
Decide which lever you can run this quarter. Cut the work, raise the price, or move the work to someone paid on what it produces.
So, one question you can answer from memory: which of the three levers could your business actually pull?
Picking the lever is the hard part, because you have to see your own model from outside it.
If you want us to work out which lever your model can run this quarter, apply for a strategy session.
An agent that checks your ledger first
Files from building the AI CFO. Ask it to look over one account before close, and it comes back with what doesn't add up.
What you get is a pre-close check on any account: one plain question, and an answer that shows the monthly run rate and flags anything that looks wrong.
On our demo company we asked the AI CFO to look at payroll. It found the two salary accounts in the ledger, Engineering at €35,000 a month and Sales at €18,000, flat from November to March.
Then it flagged October. Both accounts carried two identical entries on the same day with the same reference, so October payroll was booked twice.
It also noticed there were no admin or management salaries anywhere, so €53,000 a month is probably not the whole payroll.
The rule: it works only from what is in the ledger. When we asked for a number the ledger couldn't support, it said so and asked for the missing input instead of guessing.
The finance lead clears every flag before the month closes.
Demo company. The October flag is the part that matters.
Steal it:
Inputs: 12 months of one account from your ledger.
The test for each line: the same amount every month, and no reference used twice.
The human: the finance lead clears every flag before close.
If you close the books for someone, forward this to whoever reviews your month-end.
Your spreadsheet is now Claude Code
Do not get intimidated. Do not put this off for later.
Know who the knocker-upper was? Before alarm clocks existed, there was a person whose job was to walk through town with a long stick, tapping on windows to wake people up for work. That job disappeared overnight when alarm clocks became cheap.
Spreadsheets are the long stick. Claude Code is the alarm clock.
Don't be a knocker-upper.
Reply with the lever your business could actually pull. One line is plenty. I'll report the shape of the answers next issue.
Reply and let me know what's on your mind finance / AI / growth-wise. I read every one.
Take care of your cash, and it takes care of almost everything else.
Samer
Next issue: what a lender wants to see in the file, built on the two pages you already have.
If you work in finance, you know a founder stuck in the wrong band. Forward them this issue.
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I'm building Cash Actions in the open, for founders who want the drift caught while it is still small.
And one I read every week:
Frequently asked
How do you calculate revenue per person?
Take your revenue for the last 12 months and divide it by the number of people on your payroll over the same 12 months. You can count by head or by full-time equivalent, but use the same basis every time and say which one you used. On one company in one year, Tesco's two answers sit 48% apart.
What is a good revenue per employee?
There is no universal good number. Revenue per person sits in a band set by the business model, and gross margin does most of the work: Aldi keeps 5.2% of sales as gross margin and NVIDIA keeps 71%, so they will never share a band. Compare yourself with businesses that run the same model as yours.
Why does Aldi need fewer people than Tesco?
Aldi redesigned the work. Its core range is about 2,000 lines, where Aldi puts a large supermarket at 20,000 to 30,000 products. Fewer things to order, unpack, price and count means less work for every pound sold. Where Tesco needs 100 people, Aldi needs about 61, and Aldi turns over £357,810 per person.
How do you raise revenue per person without cutting people?
Change the model with one of three levers. Redesign the work, as Aldi and Costco did. Raise the price, as Ferrari did when it limited sales to about 7,000 cars a year. Or move work off your payroll, as McDonald's did when it handed restaurants to franchise operators. Working harder inside the same model leaves the number where it is.