G&A (General and Administrative) expenses are the overhead costs of running a business — rent, executive salaries, legal and accounting fees, insurance — that aren’t tied to making or selling a specific product. Combined with selling costs, they form SG&A on the income statement.
What Is G&A?
Common G&A Expenses
- Executive salaries
- Rent and utilities
- Legal and accounting fees
- Office supplies
- Insurance
- Administrative staff wages
👆 Fun fact: G&A is a significant component of OPEX (Operating Expenses), which includes all day-to-day costs of running a business. In many companies, G&A can represent 10-20% of total OPEX!
G&A and OPEX: The Big Picture
OPEX typically includes:
- Selling expenses
- General and Administrative expenses (G&A)
- Research and Development (R&D) for some companies
- Depreciation and Amortization
G&A is always part of OPEX. When G&A goes up, OPEX goes up, and vice versa. It’s like G&A is a room in the bigger OPEX house. 🏠
Why G&A Matters
Understanding G&A is crucial because:
- It impacts profitability: G&A directly affects the bottom line as part of OPEX.
- It reflects operational efficiency: Lower G&A can indicate a lean operation.
- It’s a key component of financial analysis: Investors and analysts scrutinize G&A closely within OPEX.
G&A on Financial Statements
You’ll typically find G&A on the income statement, often grouped with Selling expenses as SG&A (Selling, General, and Administrative expenses). It’s part of operating expenses, which are subtracted from gross profit to calculate operating income.
Benchmarking G&A
G&A as a percentage of revenue and total OPEX varies widely across industries:
| Industry | Typical G&A as % of revenue |
|---|---|
| Tech startups | 15–20% |
| Large retailers | 5–10% |
| Manufacturing companies | 2–5% |
Remember, lower isn’t always better. Too low G&A might mean underinvestment in crucial areas like compliance or IT infrastructure.
Managing G&A
Here are some strategies companies use to keep G&A in check:
- Automation: Using software to handle administrative tasks.
- Outsourcing: Hiring external firms for specialized functions.
- Shared services: Centralizing admin functions for multiple business units.
- Zero-based budgeting: Justifying G&A expenses from scratch each year.
These strategies aim to reduce overall OPEX by targeting G&A specifically.
G&A vs. Other OPEX Components
It’s important to distinguish G&A from other types of operating expenses:
- Cost of Goods Sold (COGS): Direct costs of producing goods or services (not part of OPEX).
- Selling Expenses: Costs directly related to sales activities (part of OPEX).
- Research and Development (R&D): Costs for innovation and product development (part of OPEX for some companies).
G&A is the catch-all for operating expenses that don’t fit neatly into these other categories.
G&A Expenses FAQ
What does G&A stand for?
G&A stands for General and Administrative expenses — the overhead costs of running a company that aren’t tied to producing or selling a specific product. Examples include rent, executive salaries, legal and accounting fees, insurance, and office costs.
What is the difference between G&A and SG&A?
SG&A (Selling, General & Administrative) is the broader line item that combines selling expenses with G&A. G&A is the “general and administrative” portion only — the overhead left after you separate out direct selling costs. On most income statements they’re reported together as SG&A.
Is G&A part of OPEX?
Yes. G&A is always a component of operating expenses (OPEX), alongside selling expenses and, for some companies, R&D and depreciation. It is subtracted from gross profit to arrive at operating income.
What is a good G&A as a percentage of revenue?
It depends on the industry: tech startups often run 15–20%, large retailers 5–10%, and manufacturers 2–5%. Lower isn’t always better — too little G&A can signal underinvestment in compliance, IT, or finance.
