SG&A
Selling, General and Administrative expenses — the operating costs not directly tied to production, including sales team, executive salaries, and office expenses.
Example
“The company reduced SG&A from 35% to 25% of revenue through layoffs and office consolidation.”
Memory Tip
SG&A = Selling + General + Administrative. The overhead costs of running the business.
Why It Matters
Understanding SG&A helps you evaluate how efficiently a company is run and whether your investment or employer is managing overhead costs well. A company with bloated SG&A expenses relative to its revenue may struggle to remain profitable, which affects job security and investment returns.
Common Misconception
Many people think SG&A is just executive salaries, but it actually encompasses a much broader range of costs including marketing, office rent, utilities, administrative staff, and customer service operations. This wider scope means reducing SG&A requires changes across many departments, not just cutting executive pay.
In Practice
A retail company with 100 million dollars in annual revenue might spend 20 million dollars on SG&A, which includes 5 million in sales commissions, 8 million in executive and administrative salaries, and 7 million in rent and office expenses. If that same company increases revenue to 120 million dollars but keeps SG&A at 20 million dollars, their profit margin improves significantly because they leveraged existing overhead more efficiently.
Etymology
Acronym for Selling, General and Administrative. The three main OVERHEAD categories.
Common Misspellings
Small business accounting made simple
Related Terms
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See Also
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