Read TL;DR
- G&A functions are the backbone of your operations. While finance, HR, legal, and IT don’t directly generate revenue, monitoring these G&A expenses as a percentage of revenue is vital to evaluating your cost efficiency and operational maturity.
- General and administrative (G&A) expenses as a percentage of revenue measures how much of a company’s revenue is spent on overhead costs required to keep the business operational.
- G&A expenses are a cost center for a business as opposed to a profit center. However, they are foundational to a company’s ability to run its business.
- Common G&A expenses include:
- Executive and administrative staff
- Professional services
- Office and facilities
- Information technology
- Insurance and risk management
- Corporate functions
- Compliance and regulatory work
General and administrative (G&A) expenses are the non-glorious category of expenses. There are no “creative” ways to spend here, unlike in sales and marketing, but it’s still mission-critical to track your G&A expenses. They quietly shape your ability to grow efficiently and maintain healthy margins.
General and administrative expenses as a percentage of revenue (G&A%) measures how much of a company’s revenue is spent on overhead costs required to keep the business operational.
Companies track G&A expenses as a percentage of revenue, among other metrics, to ensure cost discipline and operational maturity. In this guide, we explain what this means and how you can use the G&A number to extract insights about your business.
You’ll learn how to calculate G&A%, what costs are included in G&A expenses, and why this metric matters to businesses. We also look at the most efficient ways to collect data required to track G&A% in real time.
We’ll explore the topic through the lens of a SaaS business, however the information here is broadly applicable to businesses in almost any industry.
Table of Contents
What is the role of G&A expenses in a business?
G&A expenses include the overhead required to keep your business operational.
This includes the costs of running finance, HR, legal, IT, and executive leadership functions. While these areas don’t directly contribute to revenue like sales and marketing (S&M), they’re essential for compliance, risk management, and governance.
G&A efficiency is a key lever of operating margins, especially for high-growth SaaS businesses. G&A expenses as a percentage of revenue serves as a benchmark to evaluate administrative cost discipline and compare performance with peer companies.
While S&M and R&D expenses scale with growth, G&A benefits from economies of scale. The best companies ensure G&A expenses grow more slowly than revenue and decline as a percentage of revenue over time.
Learn more about SaaS metrics here
What are the common G&A expenses?
G&A can include a wide range of overhead expenses. Here are the most common ones:
- Executive and administrative staff: Includes salaries, bonuses, and benefits for the CFO, legal, HR, and other administrative staff who support the business but don’t directly drive revenue.
- Professional services: Includes outsourced legal counsel, audit and tax advisors, consultants, and other external experts engaged for specialized, non-recurring work.
- Office and facilities: Includes rent, utilities, office supplies, and maintenance. These costs are often minimal in remote-first SaaS businesses, but can still be material in hybrid or HQ-heavy models.
- Information technology: Includes internal systems like ERP, HRIS, and productivity software, as well as IT support and infrastructure that keep your internal operations running.
- Insurance and risk management: Includes premiums paid for general liability, cybersecurity, directors and officers (D&O), errors and omissions (E&O), and other corporate insurance.
- Corporate functions: Includes the cost of centralized functions like accounting, finance, legal, and HR. These often overlap with executive support but are usually tracked separately for clarity.
- Compliance and regulatory: Includes the cost of SOX compliance, data privacy, tax filings, and other local and international regulations.
Why G&A expenses are important for SaaS companies
Think of G&A functions as the operational backbone of your business. For SaaS businesses, in particular, tracking and keeping the costs associated with these functions in check is critical to your success as you scale. Let’s dig deeper into why G&A expenses are important:
- Helps scale without losing control: Even though they don’t directly generate revenue like S&M, G&A functions ensure you can scale rapidly without losing control.
- Improves governance and compliance: Strong G&A teams ensure adherence to regulatory, tax, and reporting requirements. These are especially critical for global expansion and IPO readiness.
- Improves operational efficiency: Strategic G&A spending streamlines internal processes, eliminates redundancies, and reduces overhead drag on margins. Also, if you can maintain slower G&A growth and faster revenue growth, your operating margins improve over time.
- Signals organizational maturity: The structure and efficiency of your G&A functions reflect how well your company is prepared to handle scale and complexity.
- Helps make data-driven decisions: Advanced finance and IT systems (the cost of which falls under G&A expenses) offer live data that helps you develop more accurate forecasts and track metrics in real time.
How is G&A as a percentage of revenue calculated?
G&A% is calculated by dividing total general and administrative expenses by total revenue, then multiplying it by 100.
For example, if a company with $4.5 million annual recurring revenue (ARR) spends $405,000 on G&A, its G&A as a percentage of revenue is 9%:
While S&M and R&D tend to increase as revenue grows, G&A should ideally go down, exhibiting operational leverage.
You’ve probably heard that leverage is a two-edged sword. It amplifies both profits and losses. Let’s look at this in the context of G&A.
Suppose your revenue last month was $10,000, and gross profit was $5,000. Assume you have no other expenses except paying two employees a monthly salary of $3,000 ($1,500 each). In this case, your G&A as a percentage of revenue is 30% ($10,000 / $3,000).
Next month, your revenue and gross profit are $15,000 and $7,500, respectively. Your G&A as a percentage of revenue now stands at 20% ($3,000 / $15,000). A lower G&A as a percentage of revenue, therefore, behaves like operational leverage—it increases your profit when revenue grows and decreases it when revenue shrinks.
For more context on G&A, you can also track other metrics like:
- G&A per employee: Shows how administrative costs scale with headcount
- G&A growth rate vs. revenue growth rate: Highlights whether overhead is expanding too quickly or staying under control
G&A costs can be of two types:
- Fixed costs: Rent, insurance, and staff salaries, which don’t change much with revenue fluctuations. These are the costs from which most of your operational leverage comes.
- Discretionary (semi-variable) costs: Consulting, IT upgrades, and extra administrative support, which can be dialed up or down based on growth, cash flow, or strategic priorities.
Note: SaaS businesses typically don’t have variable G&A expenses that scale directly with business activity.
Understanding your G&A cost mix is critical. Fixed costs offer continuity, stability, and economies of scale. But the discretionary layer is where you have room to optimize spend, preserve margins, and respond to market conditions.
What are the industry benchmarks for G&A spending
Various reports have aggregated G&A spending data from various companies. For SaaS businesses, for example, data from SaaS Capital’s 2024 Spending Benchmarks for Private B2B Companies report shows that media G&A as a percentage of revenue is 11%, down from 15% the previous year.
Another report from ICONIQ shows the trend in G&A among SaaS companies. As per the report’s findings, G&A expenses for small companies (less than $25 million ARR) are significantly higher than large companies ($25–$100 million ARR):
Here’s what that distribution looks like for larger companies:
G&A as a percentage of revenue continues to fall, though at a slower pace, as SaaS companies continue their growth journey. For companies with $100+ million ARR, the reported G&A expenses as a percentage of revenue are as low as 16%:
A report from SaaS Capital shows a more detailed breakdown of what G&A expenses as a percentage of revenue look like for SaaS companies across the size spectrum:
Benchmarking G&A expenses as a percentage of revenue in your business against similar-sized companies can help you identify where you may be spending inefficiently or in excess.
It can also help you spot areas of your business where your spending isn’t sufficient to provide the operational resilience or foundation you need to support growth.
If you see significant variations between your G&A as a percentage of revenue and relevant, reputable benchmarks, that’s a good sign that you might need to take a closer look at the expenses driving that.
How to track, monitor, and control G&A expenses
There are several effective ways to track, control, and optimize G&A expenses, such as:
- FP&A tools: FP&A software is the most effective way to gain real-time visibility into your G&A spending. It enables proactive cost control, faster decision-making, and early detection of budget overruns and anomalies. Analytical capabilities also help you identify ways to optimize your G&A spend.
- Cost audits: Perform quarterly or semiannual reviews of G&A categories to find overruns or underutilized services. Look for trends across departments and use zero-based budgets where possible to hit reset on every team’s spending expectations.
- Expense approval workflows: Implement approval workflows to control discretionary spending in areas like travel, software, and consulting. These controls improve accountability and ensure all spending aligns with current priorities and budget thresholds.
- Outsourcing: Outsourcing helps reduce operating leverage. If you expect an economically volatile period in the near future or are otherwise struggling to protect margins, consider outsourcing non-core functions like payroll, bookkeeping, IT help desk, or legal admin to specialized vendors. This provides cost flexibility, access to expert talent, and frees up internal resources.
- Prevent uncontrolled ad hoc spending: Standardize remote work stipends and equipment reimbursements to control ad hoc spending. A clear policy helps align employee expectations with your budget.
- Benchmarking: Compare G&A as a percentage of revenue and per employee against comparable companies in your industry and region. Use industry benchmarks to set internal targets and justify both cost-cutting decisions and strategic investments.
- Contract negotiations: Renegotiate vendor and SaaS contracts, especially for professional services, when you have reason to believe you can get a better deal. Consolidating vendors or committing to longer terms can often unlock volume discounts and other more favorable terms.
Tracking is easier with Drivetrain
G&A expenses don’t directly drive revenue, but they’re fundamental to scaling your business with discipline and control. They support growth and help preserve operating margins.
Understanding the importance of G&A is easy. The hard part is what follows—consolidating and tracking G&A expense data in real time. Technology plays a critical role in this process. It gives your team real-time visibility into spend, automates workflows, flags inefficiencies, and supports scenario planning.
A tool like Drivetrain can empower your team to track and manage G&A alongside revenue growth and other critical metrics—automatically, in real time, and in sync with your goals. If you’re looking for a tool that can track G&A as a percentage of revenue and other critical metrics, take some time to explore Drivetrain today!
FAQs
Most are fixed but can also be semi-variable and fully variable (in rare cases). For example, if your software vendor requires you to pay for an additional license each time you add a user, that’s a fully variable cost (or semi-variable if there’s a fixed minimum annual fee).
Executive and admin salaries, rent, utilities, insurance premiums, professional services, and office supplies are common examples of G&A expenses.
SG&A is a standard accounting term that combines selling, general, and administrative costs, where “selling” covers marketing and sales activities. G&A alone excludes direct sales expenses and focuses only on overhead costs.
You should review G&A monthly or quarterly, based on your company’s size and available resources. During your review, try to identify spending creep, opportunities to renegotiate for more favorable terms, and actions you need to take to align structural maturity and growth targets.
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