SG&A stands for selling, general and administrative expenses: the operating costs of winning customers and running the company, as opposed to the cost of delivering the product. In a B2B SaaS income statement it appears as two lines below gross profit, sales and marketing (S&M) and general and administrative (G&A), with R&D reported on its own line.
The rest of this page breaks SG&A into its parts for a SaaS company, gives the formula, sets out benchmarks from dated sources and four public 10-K filings, and shows with an illustrative P&L how each point of SG&A moves operating margin and the Rule of 40.
What Does SG&A Stand For?
SG&A is an accounting group name for three kinds of operating cost: selling, general and administrative. Investors and finance teams usually treat it as two buckets, because selling costs grow with the sales motion while general and administrative costs grow with the size and complexity of the company.| Part of SG&A | What it pays for | B2B SaaS examples | Line in a SaaS P&L |
|---|---|---|---|
| Selling | Winning and growing customers | AE and SDR salaries, commission expense, sales engineers, sales management, marketing team, paid media, events, CRM and sales tools | Sales and marketing (S&M) |
| General | Running the company as a whole | Office rent and utilities not charged to a team, company-wide software, business insurance | General and administrative (G&A) |
| Administrative | Leading, governing and supporting the company | CEO and CFO, finance and accounting, legal, HR and recruiting, external audit, board costs | General and administrative (G&A) |
From annual periods beginning after December 15, 2026, US public companies must also disaggregate expense captions in their notes under ASU 2024-03, "present a separate total of its selling expenses," and disclose how they define selling expenses (Deloitte Heads Up on ASU 2024-03; effective date per Deloitte on ASU 2025-01). Private companies are outside its scope.
What Is Included in SG&A for a SaaS Company?
Everything a SaaS company spends on selling to customers and running the business, except the cost of delivering the service and the cost of building the product. The gray areas are where SaaS P&Ls differ, so the table lists the common ones with where each cost usually goes.| Cost | Usually goes in | Why, and what to watch |
|---|---|---|
| AE, SDR and sales manager salaries and benefits | S&M (SG&A) | Selling cost. Most of S&M is headcount |
| Sales commissions | S&M (SG&A), as amortization | Under ASC 340-40, commissions on signed contracts are capitalized and expensed over the benefit period, so S&M shows the amortization, not the cash paid |
| Marketing programs: paid media, events, content | S&M (SG&A) | Selling cost, expensed as incurred |
| CRM, sales engagement and marketing automation software | S&M (SG&A) | Tools used by the selling teams |
| Account managers who sell renewals and expansion | S&M (SG&A) | Selling cost when their job is to renew and expand |
| Customer support and onboarding | Cost of revenue, not SG&A | Delivering the service. See what to include in SaaS COGS |
| Hosting and third-party infrastructure | Cost of revenue, not SG&A | Delivering the service |
| Engineers and product managers building the product | R&D, not SG&A | Reported on its own line in SaaS |
| CEO, CFO, finance and accounting, legal, HR | G&A (SG&A) | Running the company |
| External audit, tax and legal fees | G&A (SG&A) | Expect a jump in the month the audit is billed |
| Insurance, ERP, billing and HR systems | G&A (SG&A) | Company-wide overhead |
| Rent and IT | Allocated by headcount to each line | Many SaaS companies spread these across cost of revenue, S&M, R&D and G&A by headcount |
| Stock-based compensation | Inside each line, by the employee's team | GAAP figures include it. Salesforce reports $1,287 million of stock-based pay in S&M and $478 million in G&A for fiscal 2026 (10-K) |
How Do You Calculate SG&A and the SG&A Ratio?
Add selling expenses to general and administrative expenses for the period, then divide by revenue for the same period to get the SG&A ratio. In a SaaS P&L that means S&M plus G&A over total recognized revenue, subscription and services together, after discounts and credits (see gross revenue vs net revenue).- SG&A = Sales and marketing + General and administrative
- SG&A ratio = SG&A / Total revenue x 100
- G&A ratio = G&A / Total revenue x 100
Three rules keep the ratio comparable:
- Use recognized revenue, not ARR or bookings. The expense is on a GAAP basis, so the denominator should be too. The revenue formula guide shows why a year's revenue is lower than ending ARR in a growing company. If you also track S&M against new ARR, call it a sales efficiency ratio and keep it separate.
- Keep R&D out. Adding R&D turns SG&A into total operating expense, which is a different ratio.
- Say whether stock-based pay is in. 10-K figures include it. Many board packs show the ratio with and without it.
In Excel or Google Sheets, with revenue in B2, S&M in B3 and G&A in B4:
| Measure | Formula |
|---|---|
| SG&A | =B3+B4 |
| SG&A ratio | =(B3+B4)/B2 (format as %) |
| S&M ratio | =B3/B2 |
| G&A ratio | =B4/B2 |
| G&A share of SG&A | =B4/(B3+B4) |
SaaS SG&A Benchmarks by Stage
Private B2B SaaS companies spend a median 37% of revenue on S&M and 24% on G&A, and in public filings G&A falls to 7% to 10% at scale while S&M stays between roughly 28% and 44%. The first table collects survey benchmarks with their dates. The second is computed from four public 10-K filings.Survey and dataset benchmarks
| Benchmark | Figure | Source and date |
|---|---|---|
| Sales and marketing, median, private B2B SaaS | 37% of revenue | Benchmarkit 2025 SaaS benchmarks, 2024 data |
| General and administrative, median | 24% of revenue | Benchmarkit, as above |
| R&D, median (outside SG&A) | 34% of revenue | Benchmarkit, as above |
| S&M by ownership | 47% VC-backed vs 33% PE-backed | Benchmarkit, as above |
| S&M, private companies above $100M ARR | 33% of revenue, similar to public companies | Benchmarkit, as above |
| Marketing alone (people plus programs), by ARR | Median 30% to 55% of revenue at $1M to $25M ARR, 10% to 20% from $25M to $200M+ ARR | ICONIQ Growth, Marketing Budgets and Productivity, November 2024, p.7 |
| SG&A to sales, US system and application software | 24.38% (309 firms) | Damodaran, NYU Stern, margins by industry, January 2026 |
| SG&A to sales, US internet software | 33.35% (29 firms) | Damodaran, as above |
| SG&A to sales, total US market | 15.94% (5,994 firms) | Damodaran, as above |
SG&A in four public SaaS 10-K filings
Computed from each company's results of operations table. Rule of 40 here uses GAAP operating margin as the profit measure, which is stricter than the EBITDA or free cash flow margin many investors use.
| Company and fiscal year | Revenue | Growth | S&M % | G&A % | SG&A % | R&D % | GAAP operating margin | Growth + operating margin |
|---|---|---|---|---|---|---|---|---|
| Weave, 2025 | $239.0M | 17.0% | 43.0% | 23.3% | 66.3% | 18.6% | -12.8% | 4.2 |
| HubSpot, 2025 | $3,131.3M | 19.2% | 44.1% | 10.4% | 54.5% | 28.9% | 0.2% | 19.4 |
| Datadog, 2025 | $3,427.2M | 27.7% | 27.9% | 8.2% | 36.1% | 45.2% | -1.3% | 26.4 |
| Salesforce, FY2026 | $41,525M | 9.6% | 34.5% | 7.2% | 41.8% | 14.4% | 20.1% | 29.6 |
- G&A shrinks with scale. S&M does not. G&A runs from 23.3% of revenue at Weave to 7.2% at Salesforce. S&M stays between 27.9% and 44.1% at every size, because a SaaS company keeps buying new and expansion ARR as long as it grows.
- G&A is a small part of SG&A at scale. G&A is 35% of Weave's SG&A and 17% of Salesforce's. In a mature SaaS P&L, most of SG&A is selling cost.
- SG&A alone does not decide the margin. Datadog has the lowest SG&A ratio of the four (36.1%) and still a negative GAAP operating margin, because R&D takes 45.2% of revenue. Read SG&A next to R&D and gross margin.
These are four companies, not a statistical sample, and each defines its lines in its own way. They are reference points, not targets.
How SG&A Moves Operating Margin and the Rule of 40
Every point of SG&A as a share of revenue is one point of operating margin, and so one point of a Rule of 40 score that uses operating margin. Where the saving comes from matters more than its size: a G&A saving drops to profit, while an S&M cut also removes some of next year's growth. Operating margin is revenue minus cost of revenue, S&M, R&D and G&A, divided by revenue, and revenue vs profit walks a full SaaS P&L from revenue to net income. The Rule of 40 adds revenue growth to a profit margin. Hold growth and the other lines fixed, and a 3-point drop in G&A lifts both by 3 points.Worked example: SG&A in a $20M ARR SaaS company
Illustrative numbers, not benchmarks. A B2B SaaS company with $20 million of ending ARR recognizes $18 million of revenue this year, up 25% from $14.4 million. Margin assumptions use Benchmarkit's 2025 medians for subscription and services gross margin (81% and 30%) and its 37% S&M median.| Line | Amount | % of revenue |
|---|---|---|
| Subscription revenue | $16,500,000 | 91.7% |
| Services revenue | $1,500,000 | 8.3% |
| Total revenue | $18,000,000 | 100.0% |
| Cost of revenue, subscription (19% of subscription revenue) | $3,135,000 | 17.4% |
| Cost of revenue, services (70% of services revenue) | $1,050,000 | 5.8% |
| Gross profit | $13,815,000 | 76.8% |
| Sales and marketing | $6,660,000 | 37.0% |
| General and administrative | $3,240,000 | 18.0% |
| SG&A | $9,900,000 | 55.0% |
| Research and development | $4,320,000 | 24.0% |
| Operating income | -$405,000 | -2.25% |
| Rule of 40 (25% growth + operating margin) | 22.75 |
| S&M item | Amount | G&A item | Amount |
|---|---|---|---|
| Sales team salaries and benefits | $2,900,000 | Executive team | $900,000 |
| Commission expense (ASC 340-40 amortization) | $950,000 | Finance and accounting | $780,000 |
| Marketing team salaries and benefits | $1,100,000 | HR and recruiting | $520,000 |
| Marketing programs | $1,250,000 | Legal and external audit | $430,000 |
| Sales and marketing software | $260,000 | Insurance | $180,000 |
| Allocated rent and IT | $200,000 | Back-office software (ERP, billing, HRIS) | $210,000 |
| Allocated rent and IT | $220,000 | ||
| Total S&M | $6,660,000 | Total G&A | $3,240,000 |
| Scenario | SG&A | SG&A % | Operating income | Operating margin | Rule of 40 this year | What happens next year |
|---|---|---|---|---|---|---|
| Base case | $9,900,000 | 55.0% | -$405,000 | -2.25% | 22.75 | Growth plan intact |
| G&A down to 15% of revenue ($540,000 less) | $9,360,000 | 52.0% | $135,000 | 0.75% | 25.75 | Growth plan intact, if the cut does not slow billing, collections or hiring |
| S&M down $1,000,000 | $8,900,000 | 49.4% | $595,000 | 3.31% | 28.31 | About $500,000 less new ARR (see below) |
| G&A up $360,000 for a first external audit and new HR system | $10,260,000 | 57.0% | -$765,000 | -4.25% | 20.75 | Planned one-time step, reverses partly next year |
Where SG&A Gets Cut, and What It Costs
G&A savings usually come from systems and process; S&M savings almost always come from headcount, and the cost of a headcount cut arrives a year or more later. Most of S&M is people: in the worked example, salaries, benefits and commissions are $4.95 million of the $6.66 million.Pete Furseth, ORM's COO, puts the timing problem plainly: "Most companies discover a capacity problem when they miss the revenue number." The capacity problem was often created several quarters earlier, when the company did not hire early enough for a rep to be productive when the revenue was needed. In ORM's customer work, B2B SaaS reps often take 15 to 18 months to become fully productive. A rep cut from S&M this year is bookings missing next year, and a rep hired late is S&M cost with no revenue behind it yet.
Pete's point for anyone trying to lower the S&M line is to fix the plan before the headcount:
- Plan capacity from the revenue requirement. ORM's capacity models choose positions, territories and hire months to either minimize sales cost for a revenue target or maximize bookings for a fixed sales budget. Pete reports that the optimization improves sales cost or productive capacity by about 10% to 15% in the models ORM builds.
- Plan two years out, not one. Pete's rule of thumb is that moving from a one-year to a two-year capacity plan can reduce cost by roughly 5%, because hiring needs are found early enough to hire and ramp in time.
- Use full assigned quota to judge productivity. Assigned quota and productive quota are not the same thing, and an S&M budget built on headcount alone overstates what the team can sell.
On the G&A side, the common levers are consolidating back-office software, automating the close and billing, and timing one-off costs such as a first audit so the board sees them coming. The one cut to avoid is the finance capacity that produces the forecast and the board pack, because a smaller G&A line with a less trusted plan costs more than it saves.
SG&A vs COGS, OpEx and Overhead
SG&A is the part of operating expense that pays for selling and running the company. COGS pays for delivering the product, OpEx adds R&D to SG&A, and overhead is an informal word for indirect costs. The terms overlap, so the table sets them side by side for a SaaS P&L.| Term | What it covers in SaaS | Where it sits | Includes R&D? | Includes commissions? |
|---|---|---|---|---|
| SG&A | S&M plus G&A | Below gross profit | No | Yes, in S&M |
| G&A | Executive, finance, legal, HR, audit, insurance, back-office systems | Below gross profit, inside SG&A | No | No |
| COGS (cost of revenue) | Hosting, support, onboarding, services delivery | Above gross profit | No | No |
| OpEx | S&M, R&D and G&A, plus items such as restructuring | Between gross profit and operating income | Yes | Yes, in S&M |
| Overhead | Indirect costs not tied to one product or customer, often rent, utilities, admin staff | Mostly G&A, with some allocated to other lines | Sometimes | No |
Sources
- Benchmarkit, 2025 SaaS Performance Metrics Benchmarks, 2024 data: S&M 37%, R&D 34% and G&A 24% median of revenue; S&M 47% VC-backed vs 33% PE-backed; 33% for private companies above $100M ARR; New CAC ratio median $2.00; gross margin medians 81% subscription and 30% services.
- ICONIQ Growth, Marketing Budgets and Productivity, November 2024: marketing spend as a share of revenue by ARR band.
- Aswath Damodaran, NYU Stern, Operating and net margins by industry (US), January 2026: SG&A to sales by industry.
- Form 10-K filings: Weave Communications, 2025; HubSpot, 2025; Datadog, 2025; Salesforce, fiscal 2026. Ratios computed by ORM from each results of operations table.
- Deloitte, Heads Up on ASU 2024-03 and ASU 2025-01 effective date.
- Pete Furseth, ORM COO, ORM insight board, 2026: capacity timing, rep ramp, optimization and planning horizon.
Frequently Asked Questions
What is included in SG&A?
SG&A includes the cost of selling and the cost of running the company. Selling covers sales and marketing pay, commission expense, advertising, events and sales tools. General and administrative covers the executive team, finance, legal, HR, audit fees, insurance and back-office software. It excludes the cost of delivering the product (cost of revenue), and most SaaS companies report R&D on its own line outside it.
What is the difference between SG&A and COGS?
COGS, called cost of revenue in SaaS, is the cost of delivering what the customer bought: hosting, support, onboarding and services delivery. It sits above gross profit. SG&A is the cost of winning customers and running the company, and it sits below gross profit. A support engineer is cost of revenue. An account executive or a controller is SG&A.
What is the difference between SG&A and OpEx?
Operating expenses (OpEx) are every cost between gross profit and operating income. SG&A is the biggest part of OpEx, but OpEx also includes R&D and items such as restructuring charges or, in some formats, depreciation and amortization. In a SaaS P&L, OpEx is usually S&M plus R&D plus G&A, so SG&A is OpEx minus R&D.
What is a typical SG&A percentage of revenue?
Across all US industries SG&A is about 16% of sales in Damodaran's January 2026 data, but software runs much higher: 24% for system and application software and 33% for internet software. Private B2B SaaS companies in Benchmarkit's 2025 report spend a median 37% of revenue on S&M and 24% on G&A. Compare against companies of your own size and growth rate.
Is R&D included in SG&A?
In most SaaS and technology income statements, R&D is a separate line and is not part of SG&A. Some companies outside tech fold small research costs into SG&A, which is one reason SG&A ratios are hard to compare across industries. Before you compare, check how each company presents its expenses, and keep R&D out of a SaaS SG&A figure.
Are sales commissions part of SG&A?
Commissions are a selling expense, so they sit in sales and marketing, inside SG&A. Under US GAAP the expense is not always the cash paid: ASC 340-40 requires most commissions earned on signed contracts to be capitalized and amortized over the benefit period. The S&M line therefore shows commission amortization, while the cash paid appears in the cash flow statement.
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