What percent of revenue should a SaaS company spend on major expense categories? In this post we show COGS, R&D, S&M, and G&A as a percent of revenue for the full years ended 2025, 2024, 2023 and 2022. The data is for every SaaS company that has IPO’d since 2017.
Observations are below.
57 companies. The data set includes 57 companies in 2025, 63 companies in 2024, 67 companies in 2023 and 65 companies in 2022. If you see a “ — -“, that means the business was acquired sometime between 2017 and 2024, so no data is available. Note that all the data below will discuss medians only, not averages.
COGS are consistent, but not 20%. In 2025,2024, 2023 and 2022, COGS were 25%, 26%, 27% and 27% of revenue respectively. These are big mature companies with scale, so the data in our view debunks the myth that COGS should be 20% of revenue for a SaaS company. That’s just not realistic. Note that profitable SaaS companies came in at 21% whereas unprofitable SaaS had a median of 26%. We’re not sure why this would be since all the companies are at scale, but it is worth the call-out.
Sales & Marketing have declined. In 2025, 2024, 2023, and 2022, S&M was 37%, 39%, 40% and 46% of revenue respectively. The percentage decline makes sense to us as SaaS companies have really emphasized efficiency over growth. Again the difference between profitable and unprofitable SaaS is stark: profitable SaaS came in at 27% in 2025 whereas unprofitable SaaS came in at 42%. This makes sense as unprofitable SaaS grows far more quickly (22%) than profitable SaaS (13%) in part due to the commitment to S&M spend.
Research & Development has been consistent. In 2025, 2024, 2023 and 2022, R&D was 24%, 25%, 25% and 27% of revenue respectively. R&D is a ‘black box’ whereby ROI is very hard to measure. So in our view R&D spend shouldn’t be over 30% of revenue for any SaaS company that is beyond the Series A. Again the chasm between profitable SaaS companies and unprofitable ones is wide: 18% versus 27% in 2025. This is due to the fact that unprofitable SaaS is investing far more in product led growth, and that is reflected in the growth rate of unprofitable SaaS (22%, versus only 13% for profitable SaaS)
General and Administrative is declining. G&A was 18%, 20%, 21, and 23% of revenue in 2025, 2024, 2023, and 2022. Obviously this number is to be kept as low as possible at all times. Note profitable companies had a median of 15% in 2025 whereas the unprofitable ones were at 20%. We think this is largely coming from cost rationalization and scale. It’s the one expense line where scale alone does most of the work, which is why it’s the easiest place to show improvement over time.
Improved profitability. In 2025, 2024, 2023, and 2022 SaaS operating losses were -6%, -9%, -15%, and -28% of revenue. That’s a remarkable improvement, however it is coming at the expense of growth which can be very dangerous for valuation.
While these SaaS companies are large and mature, the data is a great guide to where Series A+ SaaS companies should be on their spend as a percent of revenue.
Improved profitability is being driven by S&M. The 9-point drop in S&M as a percent of revenue from 2022 to 2025 (46% to 37%) is the biggest driver of margin improvement. SaaS profitability is coming from go-to-market efficiency improvement and increased scale, not cuts in COGS or R&D.
Thank you for your readership. See more blogs and SaaS data at blossomstreetventures.com. Other resources we’ve built for founders include: SoftwareMultiples.com; softwareMRRcalculator.com; FounderInvited.com, and TwoFoundersTalk.com. Founders are always welcome to reach out to sammy@blossomstreetventures.com as well.