What is SG&A Expense?
SG&A (Selling, General & Administrative) represents the day-to-day overhead required to run a business outside direct production and delivery. It typically includes Sales & Marketing costs (pipeline generation, sales team, ads, tools), G&A (executive team, finance, HR, legal), and other corporate/admin support expenses.
When you measure SG&A as a percentage of revenue, you’re basically checking how efficient (and scalable) your operating model is. If SG&A % drops while revenue grows, you’re usually seeing operating leverage—the business is scaling without overhead rising at the same pace. If SG&A % climbs, it can point to aggressive go-to-market investment, growing complexity, or cost control issues (especially if the lift isn’t translating into stronger unit economics).
SG&A also has a direct line into profitability. Higher SG&A typically compresses operating profit, which shows up immediately in your Operating Margin (EBIT Margin), and it can materially change your EBITDA Margin depending on what’s being expensed. To interpret SG&A properly, you’ll usually want it alongside Gross Margin (to separate product economics from overhead) and Contribution Margin (to see how much margin you’re actually generating after variable costs). If you’re building a full operating view, it often helps to connect SG&A with your Operating Expenses total and, for SaaS especially, tie it back to efficiency metrics like Burn Multiple and the SaaS Rule of 40.
Formula
Example
SG&A (same period): $350,000
Revenue (same period): $1,200,000
Step 1: Divide SG&A by Revenue
Step 2: Convert to percent
Frequently Asked Questions
Should I use gross revenue, net revenue, or sales for the “Revenue (same period)” field?
Use the revenue figure that matches your income statement presentation for the same period—typically net revenue (after returns/discounts). The key is consistency over time and when comparing to peers.
What exactly should be included in SG&A for this calculation (and what should be excluded)?
Include operating overhead tied to selling and running the business (e.g., sales/marketing, admin payroll, office, professional fees). Exclude COGS, interest, taxes, and one-off non-operating items—otherwise your SG&A% won’t be comparable.
My SG&A% jumped—how do I tell if it’s inefficiency or intentional growth spend?
Check what changed: (1) SG&A grew faster than revenue (headcount, marketing, commissions), or (2) revenue dipped seasonally while fixed overhead stayed. Track SG&A% over multiple periods and separate “selling” vs “admin” drivers internally.
Can I compare SG&A% across companies or industries directly?
Only with caution. SG&A% varies heavily by business model and industry (e.g., services vs manufacturing, SaaS growth stage vs mature firms). It’s most useful for trend analysis over time and peer benchmarking within the same segment.
Sources & Methodology