As a Profit First partner, with Mike Michalowicz, I am happy to share these highlights from one of his recent blog articles.
Analyzing your competitor’s revenue is a helpful tool in measuring your own progress and potential. So how much are your competitors taking – or raking – in, and how do you find out?
If your competitors are public companies, than you get to read all about their top line and bottom line in the annual audit report available to investors. Of course they’re not always truthful (surprise!)
But some companies are honest about it – they’re not going to tell you how much they make and that’s that. It was nice of you to ask, but it’s none of your business. Okay. Fine. Time for Plan B.
To get to the truth, you’re going to have to do a little spying, but not as much as you think.
- Find out how many full-time employees your competitor has. Most people will not dodge this question or fudge the number. If you have trouble getting the information, just call and ask the receptionist if she’ll participate in a three-question survey. Come up with two other benign questions she wouldn’t be afraid to answer, like “Where do you buy your office supplies?” or “Which crappy chain restaurant do you use for holiday parties?” Then ask the big one, “Approximately how many full time employees do you currently employ?”
- Multiply the total number of employees by $125,000 and then again by $200,000. The company revenue is likely between these two numbers.
- If your competitors are in trouble their top-line revenue is on the low end, and if they are doing well, it will be on the high end. If they are kicking ass and taking names their revenue will be above $250,000 per employee. I know one small private company that is bringing in $1,000,000 plus for each full-time employee – that is AWESOME!
How can you tell if a competing company is in trouble? That, my friend, is a spy lesson for another day.
Why does this calculation work? Because generally, when revenue increases so does the workload. For many business models, revenue is dependent on employees, such as agents for real estate firms or other sales staff.
Soon you’ll be calculating top line revenue in seconds flat.
What about your competitors keeps you up at night?