Percentage of Revenue
Three times last week, I was asked a similar question. What is the right percentage of revenue? One asked this about marketing expenses, another about acquisition spend, and a third about SG&A costs. In each case, my answer was the same. There is no “right” percentage.
Sure there are some industry norms, but they’re of little value when developing a testable, measurable growth hypothesis. What matters is that you allocate the needed resources that will deliver the planned revenue.
Each channel has its own set of economics, as does each category. To help illustrate how many variables come into play and how vastly different the percentage can be from one brand to another, I’ll offer a few fictional examples.
Let’s examine three different brands. Elliot’s Wellness Shots. A self-stable line of functional shots. Waven’s Treats, a range of organic chocolate macadamia bars, and Juliet & Charity’s Cold Brew.
Elliot’s Wellness is focused primarily on direct-to-consumer. Waven’s Treats generates most of its sales through impulse purchases in grocery, c-store, and drug. Juliet & Charity’s is truly omnichannel available in grocery, e-commerce, and foodservice. All three are still pretty early-stage and have sales of around $2MM annually.
So, would you expect the percentage of revenue of their respective marketing…
