People light, revenue dense businesses (or PLRD for short) is my shorthand for the new generation of business that deliver tremendous value for their size. I’m writing this blog post as a reference post to explain the Acronym in my writing.
Apple is my best example of a PLRD business. It is a surprising example, given that Apple has 123,000 employees. That hardly sounds people light. But in 2017, Apple generated $229.2 billion in revenue. When you divide that figure by the number of its employees, Apple generated $1.8 million per employee. The company’s income to employee ratio is astronomical and it sets the gold standard of a PLRD dense business.
Let me put the above example into perspective. An old business coach of mine used to recommend that small businesses turn over at least $100,000 per person.
That figure gave them enough money to pay their employees well, pay their bonuses, cover their overheads and make a healthy profit. So, $100,000 per employee is a healthy metric. This represents the difference between the old and new ways of doing business. On the other hand, HSBC, one of the world’s largest banks, employs 229,000 people globally. That’s 106,000 more people than Apple. The difference between HSBC and Apple is HSBC turns over $225,000 per employee, bringing their annual income to just $51.5 billion by comparison.
Now don’t get me wrong, HSBC is a healthy, viable business. It is one of the world’s most successful banks and a bank that weathered the global financial crisis better than most. But it operates on an old-world economic model in a heavily regulated industry. It is people heavy, relative to its income. The company lacks unique automation, product or technological advantages and would perform financially comparably to its peers. Apple, by contrast, is peerless. It outperforms other tech companies. It has high turnover and high margins and uses a great deal of automation while delivering remarkable products.
Where people are involved, they’re delivering intellectual property, they’re adding value and they’re making their products remarkable.
Today, PLRD businesses are new and in the minority, but between 2021 and 2031 it is forecast that the world will experience an unprecedented period of growth led primarily by these types of businesses.
The 2031 theorem predicts the technological developments of artificial intelligence, blockchain, virtual reality, drones, 3D printing, quantum computing and robotics will all reach commercial maturity in the end decade and businesses will be able to do more with less.
In my former coworking business, I’ve been watching the PLRD trend emerge for years.
Collective Works, the coworking business I sold in 2019, used to turn over five times the revenue per employee of an older style business, benchmarking it at double the revenue-per-person of HSBC, albeit not quite in the same league as Apple. My business achieved this through the development of unique product design, smart automation and remarkable user experience.
The coworking industry at large caters to PLRD business and my clients were no exception. They’re businesses with a lot of intellectual property, a lot of automation, that highly leverage technology for lean gains and efficiency. Most importantly (and critically why they are coworking users) they see their people as architects of their future not as cogs in a machine.