I remember sitting across from a potential Director level hire and asking him if he has any questions after the interview concluded. He asked a question I have rarely heard from interviewees:

"So, how big do you want the company to get?"

My responses was:

"There isn't a corporate size goal but I would prefer to make more with less people."

Now, based on what business you are in, that can be plausible but hard or impossible. Consulting businesses make more money by having more people billing more hours. Since there is an upper limit on the number of hours an individual can bill in a day, the logical conclusion is to hire more people to increase revenue. Of course, you end up increasing expenses right along with that growth with employee's salaries and benefits.

A better model is how Product businesses work. Product businesses don't have to increase head count to earn more; they just need to sell more products. However, to see how hard it is to stay small and increase your earnings per person, you can look at two well known examples with Google at around 20,222 full-time employees as of December 31, 2008 and Microsoft at around 89,809.

However, I think a more interesting model comes from id Software with an estimated 95 employees and at least a billion dollars in games that were sold using id technologies up to Quake 3.

The beauty of small companies that can produce large revenues is there is going to be less friction to do the work that company needs. As companies get larger, they require more and more filters which means more and more middle management. It is also very difficult to measure performance, so your small number of stars and your many average joes at a large company are going be averaged together since it seems to take so many people to do any task (you do need to keep them all busy after all). The less managing that needs to happen cuts costs and allows you to do direct management of the people working. Since consulting companies have to grow head count to increase revenue , that kind of company will never be as profitable as let's say a video game company like id Software on a per person basis.

If your business sells something that can be sold many times for a low transaction cost and material cost, then that's a great business. Less costs and less employees really can mean more profit per person. I am always more impressed by someone who speaks in terms of high per person revenues and profits than in terms of high numbers of employees.