Revenue Per Head Is The Only Metric That Matters
- Dan Greenberg
- Dec 3, 2025
- 5 min read
Revenue is increasing! Pipeline is improving! Sales cycles are getting shorter! Those are all good things, but scaling a sales organization eventually means maturing the organization to the point where revenue is balanced with cost, and the biggest cost in any organization is people.
It is not the case that margins have to be positive at every point in the business growth cycle, and it is not even the case that margins have to be improving at every point in the growth cycle. However, scaling a revenue organization in a world where the only way to increase revenue is by adding headcount is not a viable path.
As I wrote about in more detail a couple of weeks ago, in my November 20th post, Sales Always Get Incrementally Harder. This means that it will consistently cost more money to make a sale as your business grows, and this means that if your organization is only able to scale revenue by scaling headcount, eventually your margins will go belly up and your scaling engine will break.
Salespeople are humans, and humans will always do their best to optimize their output given their incentives. This means that sellers will spend their time trying to close the easiest deals. By definition, this means that every incremental sale will get harder than the one before it. The other important piece to grapple with, especially for earlier stage companies, is that founder led sales tend to run into scale issues. Founders are well connected and can employ significant amounts of company resources to close deals. Plus, when they sell early in the lifecycle of a company, they tend to be selling to those who are already bought in; the early adopters. They can have business leader to business leader conversations with people who already understand what they are doing and are already interested. In other words, they tend to close the easiest deals. When founders then try to build scalable sales teams, the sellers don’t have the cache that goes along with being the CEO, they can’t marshal the same resources, and they aren’t talking to early adopters who are halfway bought in. Lastly, as a business grows, it has to hire more people and build operational models to suit more people. Both of these things are harder to do at scale, and therefore cost more. So, all of that is what causes increased difficulty, and therefore, increased cost for each incremental sale.
Once we understand that incremental sales get harder, we can begin to wrap our minds around the concept that as costs increase, the margins decrease and that will mean that the only way to fundamentally improve margins over the long run is to set up process and operational systems that allow for fewer people, and fewer highly paid people to drive more business and work with more accounts.
This is why it is important for revenue leaders to focus on revenue per head even in early stages of growth where it may be advantageous to spend a bit more and sacrifice margin to achieve market share. None of this is to say that decisions like overspending and over-hiring in order to race to market are always the wrong decision. The point is that increases in revenue, no matter how rapid, do not signal the maturity of a revenue organization. Achieving revenue growth is the first step, but the second, and much less flashy step, is achieving balance when it comes to cost per revenue.
Achieving balance in cost per revenue means understanding how much the incremental cost per sale will increase over time, and building a set of processes and support that serve to offset those increases in cost so that when more people are hired, and revenue increases, margins remain relatively unaffected. This is a lot harder said than done.
Of course, we now live in the world of AI, and there are a number of AI tools that can be used to streamline efficiency, but only if they are used in the right way and built into systems of working and operational models that already make sense. The proper operating model for each team or organization looks different, but there are a few principals that are true across the board.
Support your best talent: I have seen organizations who hire salespeople every time they want to drive more sales, but the support organizations never grow. Coordinators, administrators, technical account managers, and other support functions should be hired first because they can free up your highly talented marketers and sellers to spend time doing the tasks that are most likely to drive revenue. It is better to hire coordinators and sales development professionals to support one highly paid and talented individuals in the right way and add to the production expectations, as opposed to adding highly paid and talented individual to a group of under-supported and overstretched people.
Think of AI as part of the team: Develop functions within the organizations, including but not limited to; TAM research, client research, marketing messages, sales messages, Inbound client interaction, relationship building, client success, account management. Not every function needs to be handled by a separate individual, but every function you deem necessary needs to be handled, and you have three options; AI, a coordinator, or a highly paid and high talent individual. Think about who is good at which functions, and where the comparative advantages lie and you will be well on your way to an operational structure that makes sense for your revenue organization.
Test and learn: I am not making the case that margins always have to be positive or improving or reach a certain level. I am however making the case that the maturity of your revenue organization depends on system implementation and sustainable revenue per head. This means that as your organization grows, you will have the opportunity to test different mixes of coordination with highly skilled talent, and different functional uses for AI tools. You will also have the opportunity to test different versions of your sales process to see where your clients respond best. Don’t settle for the first process you implement or the one that develops organically. Systematically test new components of your process as you grow.
Focus on your customers: As you systematically test process, make sure to be responsive to the market and not your internal needs. One example is building an organizational structure that is based on the problems of your client cohorts, rather than something more internally focused and arbitrary to your customers like region, company size, or channel. In other words, lean into internal alignment that drives development of expertise that is focused on the way your customers think and work.
Fundamentally, it is important to wrap your mind around the idea that increased revenue and other metrics around sales and pipeline growth are good. However, without the appropriate strategy and methodology; without the proper systems and processes; without the the right training programs and tools, growth and margins will tend to travel in opposite directions. In order to work towards balancing the two, an organization that is trying to mature itself must set its goals in terms of revenue per head. It must build systems that orient the organization towards operational improvements, and most importantly, it must take actions that make it easier for people do their jobs instead of focusing on actions that simply drive more revenue.
Comments