![]() ![]() “Generally speaking, SG&A should run from 15% to 25% (of revenues), depending on the industry or business you’re in.’’ “If you want to keep your pre-tax profit at 20%, and your cost of sales is too high, the first place you’re going to have to cut is SG&A,” Barros says. That means your SG&A have to be a maximum of 10% to 20% because you need to ideally have 10% as profit before taxes.’’īarros says companies with high COGS must be “lean and mean,’’ in order to keep pre-tax profit margins in the 10% range. “You’ll have 20% to 30%, respectively, left over. For example, if your cost of goods sold represents $700 for every $1,000 in revenues, then your gross profit margin will be $300 or 30% of revenues.ĬOGS of 80%, or even 70%, of revenues is generally too high, says Barros. Management payroll-the professional fees, accountants, lawyers-all fall under administrative expenses,” says Barros.Ī relatively high cost of sales or COGS will require attention if your company wants to remain profitable. “Administrative costs are for managing the business. These include the cost of a company’s accounting, marketing or HR personnel, as well as its administrative and management staff, including outside professionals, such as accountants or lawyers, who are not salaried employees. Examples of general expensesĪdministrative expenses are the costs of paying wages, salaries and providing benefits to non-sales personnel. General expenses are different from administrative costs in that they do not relate to the management of the business. Rent, insurance, utilities, office supplies-all of the costs associated with the day-to-day running of the business,” says Barros, adding that it’s also called overhead. “General expenses are directly related to the operation of the business. General expenses are the costs a business incurs as part of its daily operations, separate from administration expenses.
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