Operating expense benchmarks tell you what share of revenue businesses like yours spend on running the company. For consumer brands the honest answer is a wide range, not one number. Public-company data puts packaged food near 10.5% of revenue and apparel and footwear near 37.4%. Your own ratio only means something once you compare it with the right peers, calculated the same way.
This guide shows how to calculate the ratio, what the published numbers say, where benchmarks mislead founders, and how to use them to make decisions instead of confirming that you are average.
TL;DR
- Operating expense ratio = operating expenses divided by revenue. Define which costs sit above and below the line before you compare anything.
- Published ranges are huge. Normalized SG&A across 244 US public companies runs from 0.4% to 125.9% of revenue, with a median of 15.9%.
- Packaged food and apparel sit at opposite ends (about 10.5% and 37.4% median SG&A), so a blended “consumer” benchmark is nearly useless.
- Misclassified payroll, 3PL fees and ad spend break comparisons more often than real inefficiency does.
- Use benchmarks to find the one or two lines worth attacking, not to hit a median.
Table of Contents
- What an operating expense benchmark actually measures
- What the published numbers say for consumer sectors
- Normalize before you compare
- Why a generic benchmark can mislead you
- The medians are a setpoint, not a target
- How to read your ratio: five questions
- Where to cut, and where not to
- Our perspective
- Getting an outside read on your numbers
- FAQ
- Sources
What an operating expense benchmark actually measures
An operating expense benchmark is a ratio. You take the recurring costs of running the business, divide by revenue, and compare the result with a reference group. The formula is simple. The discipline is in what you count.
The formal definitions come mostly from real estate, where the operating expense ratio is a standard tool. The National Apartment Association’s quick guide defines it as operating expenses divided by effective gross income. Operating expenses there include the fixed and variable costs of running the property, and they exclude capital expenditures and mortgage debt service. Debt service is a financing obligation, not an operating cost.
The logic carries over to a consumer brand. Interest on a loan is not OpEx. Buying a new warehouse racking system is capital, not OpEx. Costs that run through the business month after month are OpEx.
Where brands get confused is the line between cost of goods sold and operating expenses. Gross margin and operating margin are two different questions. One asks whether the product earns money. The other asks whether the company around the product does.
The formula, with a worked example
Say a brand does $12M in net revenue. Cost of goods sold, including landed product cost, is $6.0M, which leaves a 50% gross margin. Below that line, it spends $1.8M on payroll, $2.4M on paid media, $0.6M on software, agencies and professional fees, and $0.5M on rent, insurance and other overhead.
Total operating expenses are $5.3M. The operating expense ratio is 5.3 divided by 12, or 44.2%. Operating margin is the 50% gross margin minus 44.2%, so 5.8%.
Now the useful part. Whether 44.2% is high or low depends entirely on what you call OpEx. If your fulfillment and customer service payroll were booked below the line but a peer books it in COGS, you are not comparing the same thing. We cover that trap in COGS vs. OpEx and the payroll mistake that skews margins.
What the published numbers say for consumer sectors
Most free benchmark pages blend every industry together. That is where the typical advice, “15 to 25 percent for mature businesses,” comes from. It is a fair rule of thumb for a software-heavy company and close to meaningless for a brand that makes and ships physical goods.
The best public data we have found for consumer categories is the SG&A benchmarking dataset built from public-company 10-Ks. It normalizes selling, general and administrative expense so companies are comparable. Across 244 US public companies in 31 sectors, normalized SG&A runs from 0.4% to 125.9% of revenue, with a median of 15.9%.
For consumer categories specifically, the same dataset shows the spread:
| Category | Median SG&A as % of revenue | Source |
|---|---|---|
| Packaged food | About 10.5% | SG&A Benchmarking |
| Apparel and footwear | 37.4% | SG&A Benchmarking |
| Furnishings | Roughly 37% to 40% range, together with apparel | SG&A Benchmarking |
A 27-point gap between two consumer categories is the whole argument for choosing your peer set carefully. A food brand at 30% of revenue is in trouble relative to public peers. An apparel brand at 30% might be disciplined.
Why public-company data is a ceiling and a floor at once
These figures come from large public companies. A $20M brand does not have Clorox-scale purchasing, shared services or retailer use. It also does not carry a corporate headquarters, though it may carry a founder-sized salary structure and agency retainers that no public company would recognize.
So treat public medians as a direction, not a verdict. If your category median is 37% and you are at 52%, the gap is worth investigating. If you are at 38%, the number tells you almost nothing about whether you are healthy.
For category-level metrics built for direct-to-consumer brands, including CAC, margins and profitability, see our 2026 DTC benchmarks by category. We also publish category pages for food and beverage, fashion and apparel and pet care.
Normalize before you compare
Headline SG&A is not a clean number. The same dataset strips out lines that distort comparisons: advertising, R&D, pension costs, stock-based compensation, restructuring and one-time items in its packaged-food briefing. The reason is clear. A brand that spent heavily on a one-time restructuring looks inefficient for a year. A brand that capitalizes or hides a cost looks lean when it is not.
You should do the same exercise on your own P&L before you look at any benchmark. Here is a practical order.
- Pull a trailing twelve months, not a quarter. Seasonality in consumer brands can swing the ratio by ten points between Q4 and Q1.
- Remove one-time items. Legal settlements, a failed product launch write-off, a one-off rebrand. List them separately so you can still see them.
- Separate paid media from everything else. Advertising is the biggest and most discretionary line for most DTC brands. Whether you include it changes the ratio dramatically, so show the ratio both ways.
- Decide where fulfillment lives. Pick and pack, 3PL storage and shipping sometimes sit in COGS and sometimes in OpEx. Choose a rule and apply it to every period. Our 3PL cost benchmarks show what these costs look like in practice.
- Classify payroll by function. Warehouse and production labor belongs near product cost. Marketing, finance and leadership payroll belongs in OpEx.
Only then does your ratio mean something. Founders who skip this step often conclude they have an efficiency problem when they have a bookkeeping problem, or the reverse, which is worse.
Why a generic benchmark can mislead you
Government guidance on operating expense analysis makes a point that applies well beyond housing. In its chapter on operating expense estimates, HUD warns that broad statistical averages can be extremely misleading for an individual property. The better test is a comparison with a peer set that shares your methods of operation, your material costs and the way you deliver the service.
Translate that into consumer brand terms. A brand selling shelf-stable snacks through grocery and one selling premium skincare through its own site both live in “consumer goods.” Their cost structures have almost nothing in common. One pays slotting fees and broker commissions. The other pays for creative testing and retention email.
A sound peer set matches on:
- Channel mix. Wholesale-heavy, DTC-heavy and Amazon-heavy brands carry different cost structures.
- Revenue scale. A $6M brand and a $60M brand do not buy fulfillment, software or talent at the same price.
- Gross margin profile. A 70% gross margin brand can afford more marketing than a 35% gross margin brand, so their OpEx ratios should differ.
- Operating model. Owned manufacturing, contract manufacturing and pure resale create different overhead.
That is the hard part of benchmarking, and it is the reason peer benchmarks segmented by industry, geography and company size are more useful than a single industry average. If you can get data cut to a narrow industry code and a revenue band, use it before you rely on a headline median.
The medians are a setpoint, not a target
Here is the part most benchmark pages leave out. Industry medians describe where the average company ended up. They do not describe where a good one should aim.
The SG&A research makes an observation about mature categories like food and beverage: the operating structure has barely changed over the past decade. That suggests a kind of setpoint. Margins and expense ratios settle where pricing power and business model let them settle, and individual brands rarely move that setpoint by trimming costs alone.
If you benchmark to the average, you confirm you are an average competitor. The more useful question is which constraint your model depends on. For some brands it is inventory turns. For others it is repeat purchase rate, or brand strength that supports a price premium. Your operating expenses should serve that constraint, and a benchmark should tell you where they do not.
How to read your ratio: five questions
Once your numbers are clean and your peer set is sensible, ask these in order.
1. Is the gap in one line or spread evenly? A single outlier, such as software subscriptions at three times the peer level, is a quick fix. An evenly high ratio points to scale or structure.
2. Is the cost fixed or variable? Fixed costs hurt when revenue dips. Variable costs flex. If you are unsure how your costs split, our guide on separating fixed and variable brand costs walks through it.
3. Does the spend buy growth or just maintain the status quo? Paid media that returns a profitable customer is an investment. A recurring retainer for work nobody reads is overhead.
4. What happens to the ratio if revenue grows 20% and the cost base holds? Operating use is the real prize. A brand at 45% that holds its fixed costs flat while growing will look very different in 18 months.
5. Does the trend matter more than the level? A ratio falling two points a year from a high starting point is often healthier than a brand sitting on a median it has not moved in three years.
Where to cut, and where not to
Benchmarks often trigger a reflex to cut. That reflex is the most expensive mistake in this process, because cutting the wrong line can reduce revenue faster than it reduces cost.
Start with costs that do not touch customer acquisition, retention or product quality: unused software seats, duplicate tools, legacy agency scopes, office space that no one uses, and insurance or banking fees that were never shopped. Our overhead reduction checklist for consumer brand founders goes line by line, and cost reduction strategies product brands can actually use covers the larger structural moves.
Sometimes the issue is not cost at all. If gross margin is thin, an OpEx ratio that looks fine against peers still leaves no profit. In that case the lever is price, and how to price products for sustainable profit is the better place to start.
Our perspective
We see the same mistake repeatedly. A founder finds a benchmark, discovers they are above it, and launches a cost-cutting exercise. Six months later revenue has softened and the ratio is no better, because the denominator shrank along with the numerator.
We think of benchmarks as a question generator. A gap against a well-chosen peer set tells you where to look, not what to do. The answer lives in your own constraint: the one thing that, if it improved, would change cash flow the most. It might be inventory, it might be a customer acquisition cost that has drifted, and it might be a team structure built for the revenue you had two years ago.
That view comes from operating, not from theory. Our work is founder-to-founder, from someone who has built, scaled, restructured and exited a consumer brand. When we review a P&L we are looking at what you can change in the next 90 days and what will matter to an investor reading it, not at how close you are to a median.
Getting an outside read on your numbers
If you want a fast first pass, the DTC Operator Diagnostic is a one-off $197 review that helps you identify the operating constraints in your business. If you already know which decision is stuck, a Founder Hour is $500 per hour for a direct conversation about your P&L, your peer set or an investor discussion. For a broader review of the whole picture, see our Financial Health Assessment.
These are built for consumer brand founders and leaders running businesses in the $5M to $75M revenue range.
FAQ
What is a good operating expense ratio?
There is no single good number. Public-company data shows median SG&A of roughly 10.5% in packaged food and 37.4% in apparel and footwear. A good ratio is one that is in line with a true peer set, falling or stable, and consistent with your gross margin and growth plans.
What is included in operating expenses?
Recurring costs of running the business that are not part of product cost: marketing, payroll outside production, software, professional fees, rent and overhead. The standard property-operations definition excludes capital expenditures and debt service, and the same logic applies to a brand. Decide where fulfillment and payroll sit and apply that rule consistently.
How do I calculate the operating expense ratio?
Divide total operating expenses by revenue for the same period, usually the trailing twelve months. Clean out one-time items first, and show the ratio both with and without paid media so you can compare against peers who define it differently.
Should I match my industry benchmark?
Not as a goal. A median shows where the average company landed, and HUD’s guidance warns that broad averages can be extremely misleading for individual businesses. Use it to find questions worth asking, then judge your spending against your own constraint and strategy.
Sources
- SG&A as a percentage of revenue by industry, SG&A Benchmarking
- Clorox SG&A briefing, SG&A Benchmarking
- HUD Handbook 4465.1, Chapter 6: Operating Expense Estimates
- NAA Financial Terms and Formulas Quick Guide (2016)