Yes, Everyone Has To be 2x as Efficient As They Used to Be. It’s Just Math.

#SmallBusiness

How The World Works:

2020: Grow Like Crazy, Burn Doesn't Matter
2024: Grow Almost as Fast, But Be Wildly Efficient

e.g., https://t.co/vwnFotOlYn

Now at $800,000,000 in ARR, growing 35% pic.twitter.com/7EvYbQRjH6

— Jason ✨Be Kind✨ Lemkin  🇮🇱 (@jasonlk) February 23, 2024

I know a lot of folks in tech are still frustrated in 2024 — and feel they’re being asked to do more with less. But is it really true?

Actually, yes, it’s true.  You are being asked to do more than in years past.   And it’s going to likely be permanent.

Because beyond WFH, RTO, and all the tactical changes of the past few years, the biggest structural one really is — The March To $400,000 in Revenue Per Employee.

The New Normal: 700 Employees at $200,000,000 in ARR

Many SaaS and Cloud leaders are already there — especially the highest performers, from Cloudflare to Canva to ServiceNow.   The rest are marching there.  Even SMB leaders like Monday are there.  Monday just crossed $800,000,000 in ARR with less than 2,000 employees.

In fact, almost every SaaS leader at scale is hitting $300,000 in Revenue Per Employee at the pre-IPO phase.  In 2021? It was half that or less.   $100k in Revenue Per Employee was pretty common for Unicorns, or even far less.

And because of that, until recently, everyone racked up big losses. Not just unicorns and startups, but almost every public SaaS company had negative operating margins.  Unicorns funded it with massive rounds.  SaaS startups that IPO’d funded it with IPO proceeds.  But … that’s now mostly in the past.

No longer. Growth is still King, But Profitability is Now Queen. Or something like that.  Now, you have to have both.  Yes, you have to grow at top rates.  But once you’re at scale, you also need to be profitable.  That means $300k-$400k in revenue per employee.

So folks aren’t in most cases literally working 2x harder than 2021. That’s not practical or what any of us are seeing IRL.

But as a group, everyone has to be twice as efficient as 2018-2022 when everyone got away with $100k-$150k in revenue per employee. Not every individual will work twice as hard as 2021, but everyone together, has to be 2x as effective. 2x as efficient.

It’s the only way to hit $400,000 in Revenue Per Employee at scale. It’s the only way to IPO now with any tolerable valuation.

It’s just math.

(double time image from here)

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Jason Lemkin, Khareem Sudlow