# SG&A Meaning: What Selling, General and Administrative Expenses Are Published: 2026-04-15 Author: Warren Team URL: https://www.heywarren.com/blog/sg-a-meaning --- **SG&A** stands for **Selling, General and Administrative expenses** — the line item on an income statement that captures all operating expenses that are not directly tied to producing goods or delivering services. SG&A is everything it costs to run and sell the business that isn't in COGS (Cost of Goods Sold): salaries for sales teams and corporate functions, rent and utilities for corporate offices, marketing and advertising, executive compensation, legal and accounting fees, software, and insurance. After COGS, SG&A is typically the largest expense category for most businesses. A company with $100M in revenue, $60M in COGS, and $25M in SG&A has a gross profit of $40M and an [operating income](/blog/formula-for-operating-income) (EBIT) of $15M. SG&A efficiency — measured as SG&A as a percentage of revenue — is a key indicator of a company's operating leverage and cost discipline. ## What's Included in SG&A **Selling expenses** (costs of selling and marketing products): - Sales team salaries, commissions, and bonuses - Marketing and advertising spend (digital, print, TV) - Trade show and events costs - Customer support and service (non-manufacturing) - Shipping and delivery to customers (if not in COGS) - CRM software licenses ![SG&A breaks into two buckets: Selling expenses (revenue-facing) and G&A expenses (corporate overhead).](data:image/svg+xml,%3Csvg%20xmlns%3D%22http%3A%2F%2Fwww.w3.org%2F2000%2Fsvg%22%20viewBox%3D%220%200%20600%20211%22%20width%3D%22600%22%20height%3D%22211%22%20role%3D%22img%22%3E%3Ctitle%3EHierarchy%3C%2Ftitle%3E%3Crect%20width%3D%22100%25%22%20height%3D%22100%25%22%20fill%3D%22%23f8fafc%22%2F%3E%3Crect%20x%3D%22220%22%20y%3D%2220%22%20width%3D%22160%22%20height%3D%2258%22%20rx%3D%228%22%20fill%3D%22%232563eb%22%2F%3E%3Ctext%20x%3D%22300%22%20y%3D%2254%22%20text-anchor%3D%22middle%22%20font-family%3D%22system-ui%2C-apple-system%2Csans-serif%22%20font-size%3D%2214%22%20font-weight%3D%22700%22%20fill%3D%22white%22%3ESG%26amp%3BA%3C%2Ftext%3E%3Cpath%20d%3D%22M%20300%2078%20L%20300%20105.5%20L%20210%20105.5%20L%20210%20133%22%20stroke%3D%22%23cbd5e1%22%20stroke-width%3D%222%22%20fill%3D%22none%22%2F%3E%3Crect%20x%3D%22130%22%20y%3D%22133%22%20width%3D%22160%22%20height%3D%2258%22%20rx%3D%228%22%20fill%3D%22white%22%20stroke%3D%22%230891b2%22%20stroke-width%3D%222%22%2F%3E%3Ctext%20x%3D%22210%22%20y%3D%22158%22%20text-anchor%3D%22middle%22%20font-family%3D%22system-ui%2C-apple-system%2Csans-serif%22%20font-size%3D%2213%22%20font-weight%3D%22600%22%20fill%3D%22%230f172a%22%3ESelling%3C%2Ftext%3E%3Ctext%20x%3D%22210%22%20y%3D%22176%22%20text-anchor%3D%22middle%22%20font-family%3D%22system-ui%2C-apple-system%2Csans-serif%22%20font-size%3D%2210%22%20fill%3D%22%2364748b%22%3ESales%2C%20marketing%2C%20support%3C%2Ftext%3E%3Cpath%20d%3D%22M%20300%2078%20L%20300%20105.5%20L%20390%20105.5%20L%20390%20133%22%20stroke%3D%22%23cbd5e1%22%20stroke-width%3D%222%22%20fill%3D%22none%22%2F%3E%3Crect%20x%3D%22310%22%20y%3D%22133%22%20width%3D%22160%22%20height%3D%2258%22%20rx%3D%228%22%20fill%3D%22white%22%20stroke%3D%22%230891b2%22%20stroke-width%3D%222%22%2F%3E%3Ctext%20x%3D%22390%22%20y%3D%22158%22%20text-anchor%3D%22middle%22%20font-family%3D%22system-ui%2C-apple-system%2Csans-serif%22%20font-size%3D%2213%22%20font-weight%3D%22600%22%20fill%3D%22%230f172a%22%3EGeneral%20%26amp%3B%20Admin%3C%2Ftext%3E%3Ctext%20x%3D%22390%22%20y%3D%22176%22%20text-anchor%3D%22middle%22%20font-family%3D%22system-ui%2C-apple-system%2Csans-serif%22%20font-size%3D%2210%22%20fill%3D%22%2364748b%22%3EExec%2C%20finance%2C%20legal%2C%20IT%3C%2Ftext%3E%3C%2Fsvg%3E) *SG&A breaks into two buckets: Selling expenses (revenue-facing) and G&A expenses (corporate overhead).* **General & Administrative (G&A) expenses** (corporate overhead): - Executive salaries and compensation (CEO, CFO, General Counsel) - Finance and accounting department (staff, audit fees, software) - Human resources department - Legal fees (routine; not M&A transaction costs) - Corporate office rent, utilities, and facilities - IT infrastructure (servers, security, general software) - Insurance (D&O, general liability, property) - Depreciation of corporate assets ## SG&A on the Income Statement **Income statement structure**: ![SG&A sits between gross profit and operating income, bridging production costs and bottom-line results.](data:image/svg+xml,%3Csvg%20xmlns%3D%22http%3A%2F%2Fwww.w3.org%2F2000%2Fsvg%22%20viewBox%3D%220%200%20875%20125%22%20width%3D%22875%22%20height%3D%22125%22%20role%3D%22img%22%3E%3Ctitle%3EFlow%20diagram%3C%2Ftitle%3E%3Crect%20width%3D%22100%25%22%20height%3D%22100%25%22%20fill%3D%22%23f8fafc%22%2F%3E%3Crect%20x%3D%2230%22%20y%3D%2225%22%20width%3D%22170%22%20height%3D%2275%22%20rx%3D%2210%22%20fill%3D%22white%22%20stroke%3D%22%232563eb%22%20stroke-width%3D%222%22%2F%3E%3Ctext%20x%3D%22115%22%20y%3D%2258.5%22%20text-anchor%3D%22middle%22%20font-family%3D%22system-ui%2C-apple-system%2Csans-serif%22%20font-size%3D%2214%22%20font-weight%3D%22600%22%20fill%3D%22%230f172a%22%3ERevenue%3C%2Ftext%3E%3Ctext%20x%3D%22115%22%20y%3D%2278.5%22%20text-anchor%3D%22middle%22%20font-family%3D%22system-ui%2C-apple-system%2Csans-serif%22%20font-size%3D%2211%22%20fill%3D%22%2364748b%22%3E%24100M%3C%2Ftext%3E%3Cline%20x1%3D%22205%22%20y1%3D%2262.5%22%20x2%3D%22237%22%20y2%3D%2262.5%22%20stroke%3D%22%2364748b%22%20stroke-width%3D%222%22%2F%3E%3Cpolygon%20points%3D%22244%2C62.5%20235%2C57.5%20235%2C67.5%22%20fill%3D%22%2364748b%22%2F%3E%3Crect%20x%3D%22245%22%20y%3D%2225%22%20width%3D%22170%22%20height%3D%2275%22%20rx%3D%2210%22%20fill%3D%22white%22%20stroke%3D%22%232563eb%22%20stroke-width%3D%222%22%2F%3E%3Ctext%20x%3D%22330%22%20y%3D%2258.5%22%20text-anchor%3D%22middle%22%20font-family%3D%22system-ui%2C-apple-system%2Csans-serif%22%20font-size%3D%2214%22%20font-weight%3D%22600%22%20fill%3D%22%230f172a%22%3EGross%20Profit%3C%2Ftext%3E%3Ctext%20x%3D%22330%22%20y%3D%2278.5%22%20text-anchor%3D%22middle%22%20font-family%3D%22system-ui%2C-apple-system%2Csans-serif%22%20font-size%3D%2211%22%20fill%3D%22%2364748b%22%3Eminus%20COGS%3C%2Ftext%3E%3Cline%20x1%3D%22420%22%20y1%3D%2262.5%22%20x2%3D%22452%22%20y2%3D%2262.5%22%20stroke%3D%22%2364748b%22%20stroke-width%3D%222%22%2F%3E%3Cpolygon%20points%3D%22459%2C62.5%20450%2C57.5%20450%2C67.5%22%20fill%3D%22%2364748b%22%2F%3E%3Crect%20x%3D%22460%22%20y%3D%2225%22%20width%3D%22170%22%20height%3D%2275%22%20rx%3D%2210%22%20fill%3D%22white%22%20stroke%3D%22%232563eb%22%20stroke-width%3D%222%22%2F%3E%3Ctext%20x%3D%22545%22%20y%3D%2258.5%22%20text-anchor%3D%22middle%22%20font-family%3D%22system-ui%2C-apple-system%2Csans-serif%22%20font-size%3D%2214%22%20font-weight%3D%22600%22%20fill%3D%22%230f172a%22%3ESG%26amp%3BA%3C%2Ftext%3E%3Ctext%20x%3D%22545%22%20y%3D%2278.5%22%20text-anchor%3D%22middle%22%20font-family%3D%22system-ui%2C-apple-system%2Csans-serif%22%20font-size%3D%2211%22%20fill%3D%22%2364748b%22%3E%2425M%20deducted%3C%2Ftext%3E%3Cline%20x1%3D%22635%22%20y1%3D%2262.5%22%20x2%3D%22667%22%20y2%3D%2262.5%22%20stroke%3D%22%2364748b%22%20stroke-width%3D%222%22%2F%3E%3Cpolygon%20points%3D%22674%2C62.5%20665%2C57.5%20665%2C67.5%22%20fill%3D%22%2364748b%22%2F%3E%3Crect%20x%3D%22675%22%20y%3D%2225%22%20width%3D%22170%22%20height%3D%2275%22%20rx%3D%2210%22%20fill%3D%22white%22%20stroke%3D%22%232563eb%22%20stroke-width%3D%222%22%2F%3E%3Ctext%20x%3D%22760%22%20y%3D%2258.5%22%20text-anchor%3D%22middle%22%20font-family%3D%22system-ui%2C-apple-system%2Csans-serif%22%20font-size%3D%2214%22%20font-weight%3D%22600%22%20fill%3D%22%230f172a%22%3EOperating%20Income%3C%2Ftext%3E%3Ctext%20x%3D%22760%22%20y%3D%2278.5%22%20text-anchor%3D%22middle%22%20font-family%3D%22system-ui%2C-apple-system%2Csans-serif%22%20font-size%3D%2211%22%20fill%3D%22%2364748b%22%3EEBIT%3C%2Ftext%3E%3C%2Fsvg%3E) *SG&A sits between gross profit and operating income, bridging production costs and bottom-line results.* | Line Item | Amount | |---|---| | Revenue | $100,000,000 | | − [Cost of Goods Sold (COGS)](/blog/cost-of-goods-sold-computation) | ($60,000,000) | | **Gross Profit** | **$40,000,000** | | − SG&A | ($25,000,000) | | − R&D (if separate) | ($5,000,000) | | **Operating Income (EBIT)** | **$10,000,000** | SG&A comes after gross profit and before operating income. Some companies separate Sales & Marketing from G&A; others report a combined SG&A line. ## SG&A as a Percentage of Revenue: Benchmarks SG&A efficiency varies dramatically by business model: | Industry | SG&A as % of Revenue | |---|---| | SaaS / Software | 40–65% (high sales + marketing investment) | | Consumer staples | 15–25% | | Retail | 20–35% | | Industrial manufacturing | 10–20% | | Healthcare devices / pharma | 25–40% | | Financial services | 30–50% | | Distribution / wholesale | 8–15% | **Why SaaS companies have high SG&A**: Customer acquisition for subscription software is expensive — sales cycles are long, sales teams are well-compensated, and marketing budgets are large. The investment is justified by recurring revenue and high lifetime value (LTV). ## Operating Leverage: Fixed vs. Variable SG&A SG&A can be divided into: - **Fixed SG&A**: Corporate salaries, rent, insurance — don't change with revenue - **Variable SG&A**: Sales commissions, advertising spend tied to campaigns — scale with revenue ![20% revenue growth drives 80% operating income growth when fixed SG&A stays flat.](data:image/svg+xml,%3Csvg%20xmlns%3D%22http%3A%2F%2Fwww.w3.org%2F2000%2Fsvg%22%20viewBox%3D%220%200%20800%20210%22%20width%3D%22800%22%20height%3D%22210%22%20role%3D%22img%22%3E%3Ctitle%3EComparison%3C%2Ftitle%3E%3Crect%20width%3D%22100%25%22%20height%3D%22100%25%22%20fill%3D%22%23f8fafc%22%2F%3E%3Ctext%20x%3D%22230%22%20y%3D%2257.5%22%20text-anchor%3D%22end%22%20font-family%3D%22system-ui%2C-apple-system%2Csans-serif%22%20font-size%3D%2214%22%20font-weight%3D%22600%22%20fill%3D%22%230f172a%22%3ERevenue%20growth%3C%2Ftext%3E%3Crect%20x%3D%22240%22%20y%3D%2225%22%20width%3D%22112.5%22%20height%3D%2255%22%20rx%3D%226%22%20fill%3D%22%232563eb%22%2F%3E%3Ctext%20x%3D%22364.5%22%20y%3D%2257.5%22%20font-family%3D%22system-ui%2C-apple-system%2Csans-serif%22%20font-size%3D%2214%22%20font-weight%3D%22700%22%20fill%3D%22%232563eb%22%3EM20%3C%2Ftext%3E%3Ctext%20x%3D%22230%22%20y%3D%22152.5%22%20text-anchor%3D%22end%22%20font-family%3D%22system-ui%2C-apple-system%2Csans-serif%22%20font-size%3D%2214%22%20font-weight%3D%22600%22%20fill%3D%22%230f172a%22%3EOp.%20income%20growth%3C%2Ftext%3E%3Crect%20x%3D%22240%22%20y%3D%22120%22%20width%3D%22450%22%20height%3D%2255%22%20rx%3D%226%22%20fill%3D%22%237c3aed%22%2F%3E%3Ctext%20x%3D%22702%22%20y%3D%22152.5%22%20font-family%3D%22system-ui%2C-apple-system%2Csans-serif%22%20font-size%3D%2214%22%20font-weight%3D%22700%22%20fill%3D%22%237c3aed%22%3EM80%3C%2Ftext%3E%3C%2Fsvg%3E) *20% revenue growth drives 80% operating income growth when fixed SG&A stays flat.* Companies with high fixed SG&A have **high operating leverage**: when revenue grows, additional revenue drops mostly to operating income (since fixed SG&A doesn't grow proportionally). This amplifies both gains (in growth) and losses (in decline). **Example**: - Revenue grows 20% ($100M → $120M) - COGS grows proportionally (+20%) - Fixed SG&A stays flat ($25M) - Operating income grows from $10M to $18M — **80% growth** on 20% revenue growth ## Comparing SG&A Across Companies Analysts use SG&A trends to evaluate: - **Cost discipline**: Is the company scaling efficiently, or does SG&A grow faster than revenue? - **Investment phase**: High SG&A relative to revenue is acceptable for a growth-stage company investing in sales capacity; less acceptable for a mature business - **Restructuring**: A sudden drop in SG&A may signal cost-cutting that could impair future revenue growth **"SG&A leverage"**: When SG&A as a % of revenue declines over time (while margins improve), analysts say the company is "showing SG&A leverage" — a sign of a maturing business model. ## Authoritative Sources For deeper background and primary-source data on this topic, the following authoritative sources are useful starting points: - [IRS](https://www.irs.gov/) - [SEC](https://www.sec.gov/) ## Conclusion SG&A captures all non-COGS operating expenses — selling costs (sales teams, marketing) and G&A costs (corporate overhead, finance, legal). It is the bridge between gross profit and operating income. SG&A as a percentage of revenue benchmarks cost efficiency and operating leverage. For related income statement and financial analysis concepts, see our guides on [EBITDA margin](/blog/ebitda-margin) and [formula for operating income](/blog/formula-for-operating-income). Warren at [heywarren.com](https://heywarren.com) helps analysts, CFOs, and investors understand SG&A composition, benchmark operating expense ratios, and evaluate whether a company's cost structure is scaling efficiently relative to revenue growth. --- ## Related Reading **More from Warren**: - [EBITDA Margin: What It Is, How to Calculate It, and What It Tells You](/blog/ebitda-margin) - [Formula for Operating Income: How to Calculate It and Why It Matters](/blog/formula-for-operating-income) - [Contribution Margin and Contribution Margin Ratio: Formula and Examples](/blog/contribution-margin-and-contribution-margin-ratio) **Authoritative sources**: - [SEC — Financial Statement Reporting](https://www.sec.gov/cgi-bin/browse-edgar) - [FASB ASC 220 — Income Statement](https://asc.fasb.org/220) - [CFA Institute — Income Statement Analysis](https://www.cfainstitute.org/en/membership/professional-development/refresher-readings)