Startup Output per Employee: Use Gross Profit per Employee, AI, and Automation to Stay Small and Strong

A startup team asked what a reasonable level of output per employee would be. That is a huge question, but here is an intuitive answer. First, consider the industry and gross margin. It is actually better to look at “gross profit per employee.” If a startup’s main asset is its people and team, it should compete to attract the best talent in the market to have a measure of international competitiveness. I once estimated TSMC’s gross profit per employee at approximately 15 million. If a startup wants to compete with TSMC for equally excellent software talent, should its “gross profit per employee” not at the very least be 1–1.5 million? Simply divide the company’s annual gross profit by its “total” number of employees. So, the fewer employees a company has, the higher the revenue it generates, and the higher its gross margin—>> the more competitive the company. Startup teams should not blindly pursue a large workforce. Pursue “high contribution per employee” instead. Automate whatever can be automated, give AI whatever it can do, and outsource rather than do everything yourself. Keep only the essential core team to do the most important work.