Analyze your firm's operational efficiency and financial health by calculating Revenue Per FTE and key leverage ratios.
This tool calculates three critical metrics for professional services firms:
1. Revenue Per FTE (RPE) = Total Annual Revenue / Average FTE Employees
2. Total Debt-to-EBITDA = Total Debt / EBITDA
3. Conservative Leverage = Total Debt / (EBITDA - CapEx)
*EBITDA = Earnings Before Interest, Taxes, Depreciation, and Amortization.
Scenario: A consulting firm has the following data:
Results:
In the competitive landscape of consulting, legal, and creative agencies, standard financial metrics often fail to capture the true efficiency of the business. The Professional Services Calculator is designed specifically for human-capital-intensive businesses. Unlike manufacturing, where machines drive output, professional services rely on people. Therefore, this tool focuses on two distinct areas: operational productivity (Revenue Per FTE) and financial stability (Leverage Ratios).
The primary metric calculated by the Professional Services Calculator is Revenue Per Full-Time Equivalent (RPE). This acts as the preeminent scaling metric, reflecting the firm's operational efficiency and pricing power. Increases in RPE over time validate that internal productivity initiatives—such as better utilization rates, higher billing structures, or faster case cycle times—are successfully translating into economic value creation. If your RPE is stagnant while your headcount grows, it is a warning sign of diminishing returns.
Furthermore, financial health is assessed using leverage ratios. The Professional Services Calculator calculates the standard "Total Debt-to-EBITDA" ratio, which indicates how many years it would take to pay off debt using current operating cash flow. However, we go a step further by offering the "Conservative Leverage Ratio." By deducting Capital Expenditures (CapEx) from EBITDA, we provide a more rigorous assessment of financial stability. This ensures that the firm has enough cash flow to service debt after necessary reinvestments are made. Sources like Investopedia and the Wikipedia entry on Professional Services highlight the importance of these metrics in valuing service-based firms. Using our Professional Services Calculator helps owners and CFOs bridge the gap between operational headcount and balance sheet strategy.
Whether you are preparing for a valuation, seeking a loan, or simply trying to optimize your agency's performance, the Professional Services Calculator provides the data-driven insights necessary for strategic decision-making.
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FTE is a unit that indicates the workload of an employed person. It makes it easier to measure the total workforce by converting part-time hours into full-time terms. For example, two employees working 20 hours a week each equals 1.0 FTE.
Subtracting CapEx provides a stricter view of Free Cash Flow. While EBITDA shows operational profitability, CapEx represents cash that must be spent to maintain the business (e.g., buying new computers). The remaining cash is what is truly available to pay down debt.
This varies widely by industry. For general consulting, $150k-$250k is common. For high-end legal or strategy firms, it can exceed $500k. The goal is to see this number rise over time, indicating higher efficiency or pricing power.
EBITDA focuses on a company's operating performance by excluding interest, taxes, and non-cash accounting decisions like depreciation. This makes it a better proxy for raw cash flow generation capacity when analyzing debt serviceability.