Revenue per FTE

Revenue per FTE (full-time equivalent) refines the revenue-per-employee metric by accounting for the fact that not everyone at your agency works the same hours. If you have 15 full-time employees, 5 half-time employees, and 10 freelancers who each average 15 hours/week, your headcount is 30 people but your FTE count is 15 + 2.5 + 3.75 = 21.25 FTEs.

This matters because a simple headcount-based calculation can make heavily freelancer-dependent agencies look artificially efficient (fewer "employees" but the same output) or make agencies with many part-timers look inefficient (more "employees" but less total capacity). FTE normalizes everyone to a standard 40-hour-week equivalent so you're comparing productivity on equal terms.

Calculating FTEs: full-time employees count as 1.0 each. Part-time employees count as their weekly hours ÷ 40. Freelancers and contractors can be counted as their average weekly hours ÷ 40, though some agencies exclude them entirely and track freelancer revenue separately. The method doesn't matter as much as being consistent in how you calculate it over time.

For agencies that rely heavily on freelancers and contractors — which is most modern agencies — revenue per FTE gives a much more honest picture of productivity than revenue per employee. If you're reporting $200K revenue per employee but 40% of your delivery is done by freelancers who aren't counted, you're fooling yourself about how efficient your operation really is.

Revenue per FTE is also more useful for capacity planning. When you're forecasting whether you can take on a new client, you need to think in FTEs — total available capacity — not headcount. A 20-person agency with 15 full-timers and 20 freelancers has a very different capacity than a 20-person all-employee shop.