Office Hours: Revenue Per Employee, Should I Move Production to Mexico? And Advice to an Early Career 23-year-old

Scott answers a question about using metrics like revenue per employee (RPE) to measure the success of a business. He then shares his thoughts with a luxury furniture designer about moving production to Mexico, and ends with advice on prioritizing career opportunities in your 20s. Music: https://www.davidcuttermusic.com / @dcuttermusic Learn more about your ad choices. Visit podcastchoices.com/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:01Scott Galloway?

  Support for the show comes from Northwest Registered Agent. Your business identity is everything that makes your business legitimate and professional. With Northwest Registered Agent, you don't just form a business, you start a complete foundation built for privacy, credibility, and growth. That includes registered agent service, a business address, operating agreement, domain, website, professional email, phone number, and built-in privacy. In other words, your home address, personal email, and phone number stay private. Don't pay hundreds or thousands of dollars for what you can get from Northwest for free. Visit northwestregisteredagent.com/profgfree and start using free resources to build something amazing. Get more with Northwest Registered Agent at northwestregisteredagent.com/profgfree.

• 0:48Speaker 01

  Your heart can tell you a lot about your health. Apple Watch Series 12 measures your heart rate every five seconds with the most accurate heart rate sensing in wearable. So your vitals app, now with heart rate variability, can tell you when something is off. And your readiness score can let you know when to rest and when to push. Hear the story in every heartbeat with Apple Watch Series 12. The features described are for wellness purposes only and not for medical use. iPhone 11 or later required. Based on Apple conducted study of heart rate accuracy, August 2026. Visit apple.com/aplewatchseries12.

• 1:27Scott Galloway?

  Welcome to the Prof G Pots Office Hours. This is the part of the show where we answer questions about business, big tech, entrepreneurship, and whatever else is on your mind. If you'd like to submit a question, please email a voice recording to [email protected]. Again, that's [email protected]. First question.

• 1:44Speaker 02

  Hi Scott, Ian here from Boston. I really enjoy your podcasts and your insights into running businesses, evaluating businesses, and also being a good human being, especially being a good father. I run my own business and I often hear you talking about metrics like logo renewal, dollar renewal, ARR, PE ratios. I was wondering where revenue per employee fits into the discussion of businesses, particularly small businesses which may not have numbers like PE ratios or ARR numbers to talk about. Would like to hear your thoughts. Thanks.

• 2:15Scott Galloway?

  Thanks for that, Ian from Boston. So all of these metrics are really important. The key is that you have as many as possible to kind of create a snapshot. Of the company and they should inform your decisions but not dictate them. There's a general rule that once a metric becomes the metric that you're studying to, that it loses its importance or it can begin perverting the company. You see this a lot in compensation where if you have really strange behavior that doesn't make any sense among your employees, look to compensation and you're usually going to find out, oh, we pay them based on answering a phone call as opposed to handling customer service via email. So everyone drives everyone to a phone or not to the phone, whatever it might be. So average revenue per employee, I think, really works well for small services companies.

• 2:59Scott Galloway?

  So I remember thinking, when I started Profit Brand Strategy, I started when I was 26 and I was in business school. And the bogey was McKinsey averaged 550 grand per employee in fees. And I thought, all right, we were at 250 or 300. I'm like, our dream is to get to 550, to have the kind of pricing power and have the kind of value and have the kind of brand equity where we could charge the type of consulting fees that resulted in an average revenue per employee. So I think the average revenue at places like Pinterest, Twitter and Snap is 500 to 800 grand per employee. And at Meta and Google, it's one and a half million, which gives you insight into just what cash volcanoes, Meta and Alphabet sit on top of. So it's an interesting metric. Now, having said that, a place like Amazon that has hired a half a million dollars in fulfillment

• 3:43Scott Galloway?

  and those employees are a lot less expensive, has a much lower cost or much lower revenue per employee because it's a different business. Some companies will have very low earnings because they're reinvesting back in growth. A small niche consulting firm will have a very large revenue per employee. Here at Prof G, we're going to try and do about $10 million in revenue this year. Somewhere between, call it eight and 10 million. And we have about 10 or 12 employees. So that's a lot of revenue per employee. But a lot of that is trading off of existing agreements. I'm valuing some of the equity we're getting from some of our distribution partners. You know, it's a little bit misleading and

• 4:25Scott Galloway?

  We aren't hiring like crazy, hoping to grow ahead of the curve. I did that for a long time. I started companies where I was trying, you know, growth was everything. That was the metric. And in our economy, what's changed over the last 30 years is the primary metric that the market is looking at is year-on-year growth. Now, it drills down one more level when it starts talking about really looking at a company. It starts looking at things like logo renewal, dollar renewal, margins. But revenue per employee is another really interesting one. I think it's more about a services company. I think it's more important in a service company and a private company and a smaller company. But as you become a bigger company, it's more about growth. It's more about the margins, the gross margins, right? You might be losing money, but if you're growing fast and you have big gross margins,

• 5:09Scott Galloway?

  eventually those total gross margin dollars will supersede costs and you'll have a good company. But revenue per employee, sure, it's interesting to look at, compare against your peers. Benchmarking is so important because it's not revenue per employee that's insightful. It's revenue per employee at your firm relative to revenue per employee at other firms. No one metric should dictate your position and every business is different. There are different ways to make money. The gross margins on a pharmaceutical is 97% and it's a great way to make a living. The gross margins on Amazon are much lower than that. It's also a great way to make money. So it's all situational, if you will. Thanks for the question and apologies for the kind of the ramble here. Next question.

• 5:52Speaker 03

  Yo, Scott, this is Dave from Santa Barbara. On one of your podcasts a few weeks ago, you mentioned your time advising luxury brands, which made me think you might have some insight into something I'm wrestling with. I'm a woodworker and furniture designer and started a small studio in Oakland about 10 years ago. The pieces are handmade to order here in the US by a small team, including myself. So local and ethically made are two key components of the brand identity. I moved my shop down to Santa Barbara this summer and needed to trim the team down to myself and my best builder. Since then, we are quite overworked and I need to grow the team again. But labor and space are so expensive here in California, plus the taxes and benefit requirements are pretty high. Doesn't quite make sense to scale the team up here. So I've been looking at a number of options, but my current favorite is exploring Mexico

• 6:35Speaker 03

  as a place to grow the production operation. The scheme is that I'd keep my shop here along with my assistant builder to do one-off pieces as well as design and development of new collections. I'd have the majority of pieces built by a partner in Mexico. I speak fluent Spanish and love being in Latin America, so there are non-business benefits to that option as well. I already found a great resource in Mexico who's ready to help me scout out a partner facility that can produce the quality I require and who treats their workers well. That's very important to me. My question to you is about the brand impact of such a move. Assuming I can meet my needs from a quality and price standpoint, do you think a brand that grew up as mine did can make this transition? Or is the concept of quote-unquote "made in Mexico" so associated with crappy quality products made by poorly treated people that it would undermine the brand and lead me

• 7:19Speaker 03

  to lose the clientele I've grown? Realistically, I think moving a production to Mexico is the most ethical move. The best jobs I can sustainably provide here in California barely allow people to eke by, while I could create what would be considered a good job to artisans in Mexico. Thanks again from a fellow Cal Bear, throwing that in there for the chance that that'll help you take my question. Cheers.

• 7:40Scott Galloway?

  Wow, Dave, that was so impressive, just the way that you've kind of broken down the analysis. Quite frankly, you answered your own question better than I could have. I think what you're going through times a million is what the California economy is experiencing, and that is despite what is, in my view, the most beautiful region in the world. The collision of sky, sea, and land in California is just unparalleled. The desert, the ocean, the mountains. But a small business or an artisan, I would bet just the regulation, the taxation, the costs have made California for a lot of people just unworkable. So I do this predictions deck every year, and one of my predictions for the year 2022, I like to pick a city of the year.

• 8:23Scott Galloway?

  And several years ago, I picked Miami, and a few years before that, I picked Austin, which were pretty safe picks, and they both boomed. But my pick for 2022 city of the year was Mexico City, and that is there's a lifestyle arbitrage. You can move down there and you can find a lot of the culture, a lot of the interesting people, a lot of the food, a lot of the economic opportunity you have in the US, but at 50 to 60% off California or especially Santa Barbara prices. So if you have the flexibility to move to Mexico, oh my God, my brother. Adios, you know, go with God. I just think you're gonna kill it. I don't know about whether you should leave something in Santa Barbara. I think if you already have a business there.

• 9:06Scott Galloway?

  The front end, I don't know the extent to which your customers are gonna care. I don't think so. I don't think made in Mexico, especially if it's high-end artisanal furniture with the kind of woodworking it sounds like you're bringing to it, is gonna matter at all. I think Mexico has an unbelievable art scene. And if it's clearly cheap and it says made in Mexico, that says one thing. But keep in mind, made in China or made in Japan used to mean it was cheap. So I don't think that's gonna hurt you at all. And the fact that you can go down there and build a business and have the economic flexibility and have higher gross margins and not deal with some of the, you know, I'll say it, overregulation that is cursing California right now. I think you've just answered your own question. I think you've thought this out.

• 9:50Scott Galloway?

  And I don't think you need to worry about saying, you know, I'm an artist and working out of Mexico right now. Have a site, you know, show your workshop, show the good people you're giving good jobs to. And I don't think you're gonna have any problem at all. And I think you're taking advantage of an incredible lifestyle arbitrage and one of the core competences of Americans. And that is, we leave, we're being persecuted in Europe, we come to the US. We don't have a good job in Cleveland, we move to Las Vegas, whatever it is. And so a young man who has the kind of skills you have and the flexibility, wow. I think you're in a great spot. Mexico is gonna boom from this desire to have a more heterogeneous supply chain.

• 10:34Scott Galloway?

  There's gonna be a lot of nearshoring, and I think Mexico is gonna be the big beneficiary of that. Data from the United States Trade Representative shows that in 2019, trade with Mexico totaled around 256 billion. Mexico-US trade accounted for 14.8% of total US international trade. The Mexican Secretary of the Interior revealed that there were over 450,000 business visitors who entered Mexico from January to November 2022. That has doubled from 2021. This just feels right as rain, quite frankly. And I hope that you will reach out to us and tell us how it's going in a year. But it sounds like you're living a great life and that you've thought about this and you have skills. Well done, my friend. Enjoy Mexico.

• 11:17Scott Galloway?

  We have one quick break before our final question. Stay with us.

• 11:23Scott Galloway?

  Support for the show comes from NetSuite. They say every day your business is late to AI, you might fall two days behind. So how do you keep up with the competition when they're only moving faster? Enter NetSuite Next. You probably know NetSuite, the AI-powered business management suite that securely connects all your data. It's a unified suite that brings your financials, inventory, commerce, HR, and CRM into a single source of truth, trusted by over 44,000 customers. NetSuite Next is the next big leap in how business gets done because AI is built into everything you do. It automatically surfaces customer insights throughout your day. AI agents work alongside you to solve problems and handle routine work. And anytime you have questions about anything, you can ask, just like you're having a conversation with a colleague.

• 12:07Scott Galloway?

  NetSuite is customized for a wide range of industries so it supports the way your business truly works. Whether your company earns millions or even hundreds of millions, it's time for NetSuite Next, where your business meets AI. If your revenues are at least in the seven figures, get our free business guide, Aligning for the Agentic Era: How AI is Changing Everyday Work, at netsuite.com/prog. The guide is free to you at netsuite.com/prog. netsuite.com/prog.

• 12:40Scott Galloway?

  Support for the show comes from Vanta. As AI adoption grows, so does your company's security risks and requirements. New frameworks, audits, and vendors keep piling on, but your team isn't getting any bigger. Most compliance tools promise automation, but you're really stuck doing all the work by hand, chasing screenshots, validating controls, and playing catch-up when audit season comes around again. Vanta works differently. The Agentic Trust Platform is built to scale with you, not slow you down. With over 1,400 automated tests across 400-plus integrations, Vanta collects evidence and monitors your controls year-round, cutting your audit prep by 82%. Plus, you can access the Vanta agent everywhere you work, whether your team is in Vanta every day or living in tools including Claude or Cursor. Want proof?

• 13:25Scott Galloway?

  Over 16,000 fast-growing companies like Ramp, Rider, and Harvey save time and resources while scaling fast with Vanta. Learn more at vanta.com/prog and get $1,000 off. That's spelled V-A-N-T-A dot com slash prop G for $1,000 off.

• 13:48Scott Galloway?

  Welcome back. Question number three.

• 13:50Speaker 04

  Hi, Provji. My name is Jordan. I'm 23 and a recent university graduate abroad. I studied communications in school and managed to get a marketing internship this past summer at a private VC investment firm. Now I'm an analyst doing investor relations while still working on some of our content. My question to you is, how can I continue to build a strong career in VC with a non-finance background? In my heart, I'm a content marketing person, but I'm trying to follow my skills, which is strategy, relationships, and storytelling. I think if I put my head down and work really hard these next few years, I could put myself in a good position to start my career strong. But I'm also trying to find the time to exercise, eat healthy, go out, and create my own content. I've listened to a lot of your ideas about not seeking balance in your twenties and following skills versus following your passion.

• 14:34Speaker 04

  And I'm very much living those ideals out right now. I'm wondering if you can give a little more advice to someone like me who wants to build a great career and life in my early twenties and hopefully a family one day. Thanks so much. I've said it before, and I'll say it again. I'm most appreciative to you, Provji, because your content and writing is something that my father and I bond over and share. Thank you so much for the time.

• 14:55Scott Galloway?

  First off, Jordan, thanks so much for your kind words. And especially the last part, when you say that you and your dad are, "I listen to my stuff." That's just the nicest compliment anyone could give me. So, thank you. So, look, you're killing it. The VC, I get so many, so many kids, when I say kids, students, want to be in venture capital or private equity. And this industry is enormous from a capital standpoint, from an influence standpoint, from a relevant standpoint. But it's actually, these are tiny industries in terms of employment. You know, General Catalyst, Sequoia, think of the top venture capital firms in the world. They have hundreds of employees, not thousands.

• 15:34Scott Galloway?

  So, you've got a great seat. To be a guy your age at a venture capital firm is a fantastic seat. In terms of understanding the financial end, what you want to do is you want to take a great class. You might be able to do online. I don't know if you're in San Francisco or in New York, but take a venture finance class and just know everything about venture capital, know everything about the capital structure of a table. You want to learn about options. You want to learn about essentially venture finance and take an accounting class, take a stats class. But great investors are typically multi-dimensional, and that is they understand psychology, they understand biology, they understand a variety of different things, or storytelling. The most successful venture capitalists don't necessarily come out of finance,

• 16:15Scott Galloway?

  but you need to understand some basics. So bone up on those basics right away if you don't feel confident in them. The only thing you've said that I have a little bit of concern around is what sounds like when you say content creator, and that is a side hustle. And I am not a fan of side hustles. I've always said or thought, if you have a side hustle, that probably means your main hustle is not what it should be, and you need to focus. You know, the difference between the 200th ranked golfer in the world and the number in the top 10 is like 0.4 strokes per round. And so the difference between someone who's good at your position and someone who really stands out is a few extra hours, some more focus, a few more contacts, a few more original ideas,

• 16:59Scott Galloway?

  a few more source deals from you, whatever it might be. And so, um, yeah, take some time to stay in shape. And that's not a lot. At your age, a half an hour a day, I do this kind of intense CrossFit thing that takes 30 minutes. I do it four times a week. A guy your age, when, when he does that, if you eat decently, is still ripped. And you can, you don't even have to eat decently at your age, and you're still going to be in decent shape. Try and find some time to try and find relationships, specifically a mate. But I find young people generally find time for that. The only thing that worries me about what you're doing is the side hustle because you've got a great seat, and I would be very focused on making the most of that opportunity.

• 17:42Scott Galloway?

  In sum, it is great to be Jordan, to be 23 at a VC firm. You must be an impressive young man. Keep some time to have some fun. And if occasionally you have to put your fitness aside, occasionally if you think this is stressful, occasionally think this is really fucking hard, that's exactly where you should be. Thanks for the question, Jordan, and also thanks again for the kind words. That's all for this episode. Again, if you'd like to submit a question, please email a voice recording to [email protected].

• 18:20Scott Galloway?

  Our producers are Caroline Chagrin and Drew Burrows. Jennifer Sanchez is our associate producer. If you like what you heard, please follow, download and subscribe. Thank you for listening to the Prop G Pod from the Vox Media Podcast Network. We will catch you next week.

• 18:35Speaker 05

  Running a business shouldn't feel like surviving a software group project. One app for accounting, another for inventory, another for sales, and somehow, none of them talk to each other. That's where Odoo comes in. An all-in-one business management software that brings every part of your business together. From sales and accounting to inventory and marketing, all in one powerful platform. No messy integrations, no bouncing between tabs, and best of all, no spreadsheet. Stop managing software and start managing your business with one unified system. Try for free today at Odoo.com/vox. That's O-D-O-O dot com slash vox.

• 19:11Speaker 06

  Afternoon glare totally ruined my watch party for the big game. That's when my buddy recommended Blinds.com.

• 19:18Speaker 07

  With custom window treatments made to fit your style, space, and budget, customers who shop at Blinds.com experienced overwhelming satisfaction. Side effects may include a fuller, deeper night's sleep and a sudden urge to host the watch party again. Blinds.com isn't a medication, but it can improve how you feel about your home. Visit Blinds.com to order your free samples today.