General and Administrative (G&A) expenses consist of overhead costs of your day-to-day operation. It’s common for businesses to look at G&A expenses as a percent of revenue to understand how efficient the company’s administrative costs are. This metric also allows investors to benchmark their percentage against other SaaS businesses and set targets to keep costs under control.
Want to learn more about SaaS G&A benchmarks? Keep reading for more information.
What are G&A expenses as a percentage of revenue?
It is the proportion of revenue spent on General & Administrative expenditures over a certain period. The metric is a valuable tool for determining the amount of money spent on management-related tasks. It usually includes costs related to office spaces, equipment, utilities, salaries of employees, etc.
Companies in later stages, with ARR greater than $100 million, spend 20% of revenue on G&A expenses. VC-backed startups with revenue less than $10 million revenue expect to spend an average of 70% revenue on these expenses.
What to include in G&A expenses?
G&A is one of the four fundamental expense categories for a SaaS company. The other three are Cost of Goods Sold, Sales and Marketing and Research and Development.
Typical G&A expense categories are:
- Rent for office space
- Office expenses like equipment and supplies
- Utilities and internet
- Software and services
- Founder payroll
- Professional services like legal, accounting or payroll administration
Companies can keep things simple by having expenses such as rent for office space costs in the G&A expenses at their early stages. But, these costs should be proportionally assigned to other cost centres for companies in the later stage.
How to calculate G&A expenses as a percentage of revenue?
It is calculated by dividing General & Administrative expenses by total revenue earned by the company.
Why are G&A expenses as a percentage of revenue important?
It is crucial to analyse this metric because it shows how much of our revenue is being utilised in the General & Administrative expenses. Having a high percentage of this metric will show that the G&A expenses are eating up a large part of the company’s revenue. Hence, the business owners could take measures to reduce these costs.