Part
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Part
01
Financial Benchmarks
Key Takeaways
- Benchmark G&A expenses are around 20% of the total company revenue. For top performing companies, the benchmark is around 3% to 5%.
- Sales expense benchmark range between 5% to 20% of the total company revenue. The values correspond to the small and large sized companies, respectively.
- Benchmark marketing expenses had a steady average of 11% of the total company revenue until 2021, where it dropped to 6.4% of the total company revenue.
Introduction
While the benchmarks for the required criteria were not available, the research did find several insights surrounding operating expenses and approximate benchmarks for the same. The approximate benchmarks can be found in the attached spreadsheet [columns M — O rows 24 – 29].
Insights
- According to Nico Laine, from Calculate.io, benchmark G&A expenses are around 20% of the company revenue.
- He also states that the average R&D expense is somewhere around 23% of the company revenue. However, the exact value varies according to the size of the company itself.
- According to a report by McKinsey & Company, for the top performers in the various industries, the G&A expenses are somewhere between 3% to 5% of the company revenue.
- Karl Sakas of Business2Community states that the benchmark sales expenses range from 5% to 20% of the company revenue, where the 5% corresponds to the smaller companies while the 20% corresponds to larger companies in the spectrum.
- Karl also provides benchmark marketing expenses that range between 7% to 20% of the company revenue. Marketing expense ranging between 7% to 10% of the company revenue is considered moderate investment.
- An annual survey of CMOs from June 2020 states that the marketing expenses stand around 11.4% of the company revenue as a benchmark.
- A Deloitte report further reflects that "B2B Product industries allocate, on average, roughly 10% of revenue to marketing."
- The U.S. Small Business Administration has fixed the marketing expense benchmark for small businesses (revenue<$5 million) at 5% to 8% of the company revenue.
- A different dataset from Gartner depicts that the benchmark marketing expenses as a percentage of revenue has taken a dip in 2021, from a steady average of 11% to a sharp decline of 6.4%.
Research Strategy
For this research on financial benchmarks for operating expenses, we leveraged the most reputable sources of information that were available in the public domain, including Hubspot, McKinsey, Business2Community, and GCom.
While approximate benchmarks were found for G&A expenses, R&D expenses, sales expenses, and marketing expenses, no granular data was found. Further, no data was found for separate quartiles of $200 million companies that sell business products. The research attempted a scan of business finance analytics websites such as ScaleStudio, SaiBooks, ValuationResources, and Microbuilt. However, either there was no relevant data on these websites or the data was paywalled.
The research also attempted triangulation, however, due to lack of available compiled data regarding the company expenses and revenues of private companies, the triangulation attempt failed. The goal of triangulation was to find revenues and expense details of companies among the 1st, 2nd, and 3rd quartiles of revenue performance. The research would have then tabulated and found the average expense percentages for various operating expenses. However, the data required for the calculation was scarce, While scattered revenue details for some companies were found, they were insufficient for the triangulation of required benchmarks.
We also did not find any associated data for warehouse expenses and purchase expenses, likely because they are usually included among G&A expenses. As such, we have provided the approximate benchmarks that were found in the attached spreadsheet [columns M — O rows 24 – 29]. The benchmarks that could not be found have been assigned N/A in the relevant cell.