
How to Figure Out Your Competitors’ Revenues in About 70 Seconds (2013) - pud
http://saastr.quora.com/How-to-Figure-Out-Your-Competitors’-Revenues-in-About-70-Seconds
======
randfish
Moz has 140 employees and is at a revenue run-rate of ~$33mm, putting us
around $235K/employee. I know companies with higher revenue/employee than us
(many of those are smaller) and some with lower revenue/employee (many of
those have lots of funding and are going negative to grow faster). So long as
you're applying additional metrics into the equation (funding, growth rate,
cost/person by location/type, etc) I think this is a reasonable baseline.

That said, there's lots of very important metrics to understand if you're
trying to do a comparison - rate of growth, margins, churn, etc. - all of
these figure prominently into the health of a SaaS business.

~~~
araes
The whole benefit of this method is that its simple. Its first order of
magnitude estimation by taking the fact that headcount is usually close to
linear with revenue and then applying maybe the next biggest twiddle. So you
get maybe 80% accuracy recognizing the linear trend, and then another
correction for the valuation.

As such, even 1 correction is kind of twiddly, since it does pretty good with
average salary. But, its also in that range where you can do it off the top of
your head in conversation, by simply referencing a well known labor number,
and a +/\- factor that most entrepreneur folks you're having drinks with will
know.

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idlewords
Alternative method for high-profile startups: multiply number of employees by
0

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jqm
Those are great numbers........

Too bad they can't be even close to used to predict the revenue of my SAS apps
(so far....). Then we have the train of weekly "Sorry users, we are shutting
down" posts here on HN (unlikely to happen if they are pulling in ~200K per
employee no?).

There is a lot of variation. I view this method with more than a little
skepticism.

~~~
tim333
Maybe when companies are successful they hire employees till the money's
mostly gone. So it'd kinda work for profitable companies but not most
startups.

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lubujackson
Or you could just look it up, most people don't this info is available from a
variety of places for established companies (such as Hoovers and Dun &
Bradstreet).

Search them for free here: [http://nuggety.com/u/nuggety/company-or-business-
search](http://nuggety.com/u/nuggety/company-or-business-search)

~~~
mattzito
Hoovers and D&B numbers are incredibly inaccurate for new and privately held
companies. I've seen them show $20m/year companies as $1m/year and vice-versa.
They don't actually know, they estimate or allow companies to self-register,
along with crawling public filings and the like.

Also, btw, I tried nuggety just now and got prompted to sign up for D&B for
every search on their site.

The OP method is much simpler and at least as accurate.

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gregpilling
Walmart - $480 Billion revenue, 2.2 million employees, $218,000 per employee
per year. So that is a company dealing in physical goods, and it kind of fits.

~~~
brianwawok
Which is kind of funny, because the average pay to an engineer in a tech
startup is nothing close to the average cashier at Walmart.

~~~
mrkurt
The average marginal revenue is vastly different too.

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danohuiginn
Or you could just get their annual accounts from the business registry, and
see what they've reported there.

[won't be up-to-the-minute accurate, of course, and won't work for all
jurisdictions. But it's a data source that far too few people use, IME]

~~~
nemanja
No such requirement in the USA (at least not for private companies, some
public companies may report a few accounts with high business concentration).

~~~
rahimnathwani
All companies in the UK must file annual accounts. They are available to
anyone willing to pay the one pound fee per set of accounts.

Smaller companies don't need to publish P&L and cash flow. They can just
publish a summary balance sheet. However, if you have the summary balance
sheet for two consecutive years, then you can calculate the profit or loss.

About 60% of companies file accounts electronically using XBRL/iXBRL (rather
than paper), and these accounts are available for free via daily/monthly zip
files published on the Companies House web site.

~~~
MarkMc
> However, if you have the summary balance sheet for two consecutive years,
> then you can calculate the profit or loss.

But what if the profit is all paid out as dividends? Then there might be no
significant change to the balance sheet, I suspect

~~~
rahimnathwani
You are correct :(

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swombat
Applies to my company (GrantTree), huh.

However I know that one of our competitors had 7 employees in their first year
and, because they mistakenly published their full accounts, I also know they
made just £80k of revenue that year.

So it doesn't necessarily apply to all companies.

~~~
nemanja
Note that writeup caveats that the rule of thumb generally works for SaaS
companies with $1mm+ in annual recurring revenue (ARR).

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methehack
Insofar as this works, can anyone explain why it might or might not work? Or
perhaps why it must be coincidental.

If I squint, I can imagine it being related to a few things. Average salary at
a SASS startup is roughly the same across startups. Marginal revenue is very
high. And then there's something about keeping revenue and costs pretty close
even though the entity is in 'start-up mode'. Or perhaps that's more a
function of average round size and average targets for making the round last.

Still seems weird that this would come close. Or maybe it's bogus...

~~~
azernik
I think the insight is that if a company has lots of revenue per employee
(headcount correlates pretty well with overall operating costs) they'll take
that as a signal that they're doing well and can afford to expand. And then
they'll do this until they no longer feel like they're in such a secure
financial position.

This, by the way, is why the multiplier is lower for well-funded companies -
if they have more runway in the bank, they'll feel better about a lower level
of revenue per employee, since they don't have to operate at a profit in the
short term.

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lifeformed
I want to see Valve on that chart, they should be way up on top, maybe around
5 million per employee or so?

~~~
corin_
I think probably closer to $10m, but... yeah. A lot.

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pmorici
How could a SAAS company survive long term if they are making less than 200k
per employee per year? The fully loaded cost of an engineer which I assume are
the majority of their employees has to be close to 200k or more after you
include desk space, taxes etc...

~~~
johan_larson
I think the assumption is that the company is in growth mode, spending all
their revenues on staff to build the company, generating zero profit. The
~$200K sum is approximately the loaded cost per employee.

Well-funded companies have extra money to spend so they'll have more people
than their revenues would indicate, which is simulated by dividing their
revenues by a lower cost per employee. (Conversely for poorly funded
companies...)

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dredmorbius
People have made various arguments for why this is arbitrary and may not
apply.

A reason why it may: VC advise start-ups on what their run-rates, burn-rates,
and staffing levels should be. VC operate on standard formulae.

One result is that you'll see a fairly strong pattern.

Or at least that's my hypothesis.

Phenomena and relationships such as this are why there may be relationships
between data patterns, though causality may not be on the basis that's first
apparent. And why there may be strong autocorrelation between variables.

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PythonicAlpha
I am not so good in English and business language: I am wondering, that
companies which are "well funded" have lower revenue per employee as companies
that are modestly funded. Seems to me contradictory at first sight ....
(unless "well funded does mean funds from investors and well funded companies
are still startups ... but still does not seem to fit in, because startups are
more likely burning money and the examples wont fit).

Can somebody explain?

~~~
eemax
You basically have the right idea, well funded in this context means that the
company has drawn a lot of investment capital. Companies without investor
capital have to generate enough revenue per employee to actually pay for the
cost of doing business.

Start ups which are growing quickly can operate at a loss, supported by
venture capital, and thus may have lower revenue per employee.

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kken
That does not work with companies dealing in physical Goods ... At all

~~~
raverbashing
This is for SaaS companies as described in the article, title maybe needs this
detail

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ctdean
Like others have said this is for SaaS startups with more than 1mm ARR. It
won't work for your local Kwik-E-Mart and it won't work for non-startups.

~~~
verticalflight
Hey Chris, its Kris!

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programminggeek
This is skewed heavily by employee wages. In SV they can be 2x what they are
in the midwest so adjust for location.

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AznHisoka
Simply ridiculous. Sure it works out for some companies, so does my "secret"
stock market strategy if you conveniently ignore the 90% of other cases where
it does not work.

Just absurd.. what about 90% of all those startups that fail that have venture
capital and have 10+ employees?

~~~
alain94040
Exactly. Link-bait title.

What the article shows you is how to compute the _burn rate_ of your
competitor. It proves nothing about revenue. Therefore, most VC-funded
companies can afford to have a high burn rate with no revenue [until they
fail].

The math works if you assume your competitor is _established_ and stable. But
if you are entering the market, you'd like to know how you are impacting your
competitor, and that method won't help at all.

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calvinbhai
doesn't necessarily work for Uber no?

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LeicaLatte
lolz

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mahdavi
70 seconds for a multiplication?

~~~
corin_
Looking up a head count number followed by multiplication

~~~
barrkel
I figured out how you got the italic to escape your content.

End a message like this:

    
    
        Like this: *.**
    

Like this: _._ _

~~~
corin_
Actually I just ended the last word with an asterisk (as in to imply I was
correcting my parent comment), completely forgot about its use for formatting.
Have edited it out now.

