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
$350,000 ÷ $1,200,000 = 0.2917
Step 2: Convert to percent
0.2917 × 100 = 29.17% ≈ 29.2%
Result: SG&A as % of Revenue = 29.2%