Advertising Spend Benchmarks

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Advertising Spend Benchmarks

Key Takeaways

  • Across all industries, the U.S. Small Business Administration recommends an average ad spend between 7-8% gross revenue for companies under $5 million in sales.
  • It is suggested that companies that are stagnating or in decline should increase their total ad spend by between 3-10%.
  • Small online businesses tended to have increased ad spends that were between 10-20%, and as much as 45% of revenue due to less overhead costs compared to brick-and-mortar businesses.

Introduction

Below we've provided information on advertising spend benchmarks for both companies that are looking to maintain their business as well as those that are trying to expand. As was available, we've also provided supplementary data on how these benchmarks apply to the food and beverage industry, the restaurant industry, and the smoothie and juice bar space.

Advertising Spend Benchmarks

  • Across all industries, the U.S. Small Business Administration recommends an average ad spend between 7-8% gross revenue for companies under $5 million in sales.
  • This applies to companies who are currently at a net profit margin of at least 10-12%, whereas one source notes that ad spend may be over 10% for newer or less profitable companies, or companies in highly competitive spaces.
  • While it is noted that the smoothie market is growing rapidly, it is also becoming a highly competitive space, which might suggest a need for higher ad spend.
  • Some start-ups and small businesses with limited budgets may begin with only 2-3% of their revenue allocated for advertising, far below the recommended spend.
  • Actual ad spend across industries averages at about 11% of total revenue, with consumer package goods including food products averaging 9.1%.
  • It was also noted that ad spend increased alongside the rate of company growth, with companies that grew 1-15% spending 16.5% of their revenue on marketing as a whole compared to companies that grew 16-30% spending 22% of their revenue on marketing, and companies that grew between 31-100% spending on average 50% of their revenue on marketing.
  • It is also suggested that companies that are stagnating or in decline should increase their total ad spend by between 3-10%.

Industry Specific Ad Spend Data

While we found data was limited regarding benchmarks that directly specified recommended ad spend in the food and beverage industry or related to smoothies, we did find the following relevant data points.
  • Within the restaurant space, it's suggested that established but growing restaurants allocated 12-18% of revenue to ads, whereas new restaurants should spend 25-30% on ads.
  • Another source showing ad to sales ratio by industry found that the ad to sales ratio for beverages was 6.0%.
  • Another suggested strategy for suggested for food service companies to adjust ad spend benchmarks was to rate competition on a scale of 1-10, and spend more on marketing and ads based on ranking of competition.
  • It was also noted that for online and e-commerce businesses, more budget can be allocated to advertising due to lack of budget on maintenance of physical storefront and real estate.
  • Small online businesses tended to have increased ad spends that were between 10-20%, and as much as 45% of revenue.

Research Strategy

For this research on advertising spend benchmarks, we leveraged the most reputable sources of information that were available in the public domain, including market reports, ad industry experts, and business media sources.
Sources
Sources