Overhead Expenses

What it measures

The total fixed cost of running the company as a whole in a period: fully loaded payroll for finance, legal, HR, and administrative staff; office rent, utilities, and facilities; outside professional services like legal counsel, audit, and accounting; corporate insurance premiums; and company-wide admin software. It excludes the variable cost of delivering revenue (COGS), the cost of acquiring customers (Sales & Marketing), and the cost of building product (R&D) — only the back-office platform cost of being a company belongs here.

Why it matters

Overhead is the part of your cost base that does not scale with customers — it is the fixed platform cost of running a company, and it is one of your three operating-expense buckets alongside R&D and Sales & Marketing. Separating G&A out reveals how much operating leverage you have: a business with $500K ARR and $300K of overhead is in a very different position from one with $100K of overhead, even at the same total expense. As you scale, G&A should grow slowly relative to revenue, so its share falls and margin expands. Boards watch it as a discipline check — G&A rising faster than revenue signals hiring sprawl, tool sprawl, or loss of operational control rather than investment in growth.

How to read it

Read Overhead Expenses as a ratio to revenue and a trend, never as a single dollar figure. The same $500K of quarterly G&A is sustainable at $50M ARR (1% of revenue) and catastrophic at $5M ARR (10%). Early-stage companies often run 15–30% of revenue because the fixed back office stays roughly constant while revenue is still small; mature SaaS typically targets 5–10%. The direction matters more than the level — is G&A growing slower than revenue (healthy leverage), in line with it (neutral), or faster (a warning of waste or executive bloat)? Decompose by line item to diagnose a move: if payroll jumped 40% while headcount rose only 10%, comp climbed without visible output; if rent spiked with no new office, it is a lease renewal, not growth.

What good looks like

Watch-outs

• Burying overhead inside Total Operating Expenses. Lump G&A in with R&D and Sales & Marketing and you lose the signal that overhead is fixed and should not scale with customers — always report it as its own bucket.
• Reading the dollar figure instead of the ratio. $500K of G&A is cheap at $100M of revenue and unsustainable at $5M. Always compute G&A-to-revenue and compare to plan and prior quarters; early-stage, the ratio should fall as revenue grows, and a rising ratio means you are adding overhead faster than you monetize.
• Misallocating R&D or product cost into G&A to shrink the number. If finance reports overhead is only $200K but six finance staff sit embedded in product, the real G&A is hidden — and you will not know where you can actually cut when you need to. Allocate by where people work and document it.
• Leaving one-time charges in the run-rate. A severance package, office move, or lawsuit settlement is real G&A but not recurring. Carry it into the baseline forecast and you overstate ongoing overhead and miss the underlying trend in fixed cost.

Worked example