When we build our 3-Year Picture on our V/TO, how do we specify our revenue-per-employee target now that AI automation has broken all historic linear scaling models? We do not want to set unrealistic goals that scare our leadership team.

Question

Tyler Smith · Accepted Answer

Traditional linear headcount models are obsolete. If you continue to calculate future revenue based on a fixed ratio of employees to billable work, your margins will shrink compared to tech-enabled competitors.

To build a realistic 3-Year Picture on your V/TO, you must adopt a relative valuation mindset. Look at the operational margins of modern software-enabled services companies in your industry rather than traditional service providers.

To set your new target, use Keith Cunningham's Thinking Time to answer: How might we restructure our delivery model so that our existing headcount can support three times our current client volume?

Once you have formulated this strategy, translate it into your 3-Year Picture. Instead of projecting a massive increase in staff, keep your headcount targets relatively flat while significantly raising your revenue and margin targets.

To prevent your leadership team from feeling overwhelmed, use the Accountability Chart to clearly define the new capabilities required. You will likely need to adjust the roles of your existing seats, shifting them from manual production to quality control and system oversight. By documenting this shift clearly on the V/TO, your team will see that the path to higher revenue is through technical leverage, not through working longer hours.