How to Manage SG&A Effectively When Sales Are Falling
When revenue is declining, many business leaders ask:
“Where do we cut — and how deep — without killing the future of the business?”
It’s a fair question. In times of uncertainty, your SG&A (Selling, General & Administrative) expenses can either become a lifeline for agility or an anchor that drags your margins down. The key lies in managing SG&A strategically, not reactively.
In this article, I’ll share how I help clients restructure their SG&A cost base — not just to survive a revenue dip, but to emerge leaner, sharper, and better aligned for profitable growth.
What Is SG&A — and Why It’s Often the First Lever to Pull
SG&A includes:
Selling: Sales team salaries, commissions, advertising, marketing spend
General: Rent, office expenses, insurance, utilities
Administrative: HR, finance, IT, and other overhead
These costs don’t directly generate revenue — but they enable it. That’s why they require careful scrutiny when sales drop.
7 Smart Ways to Manage SG&A During a Sales Downturn
1. Run a Zero-Based SG&A Budget
Instead of trimming each cost center by 10%, rebuild from scratch:
What spend is absolutely essential to support current operations?
What can be deferred, reduced, or eliminated?
🎯 Outcome: Clear visibility into “must-have” vs. “nice-to-have” SG&A.
2. Benchmark Your SG&A-to-Revenue Ratio
Analyze SG&A as a percentage of revenue over time and against peers in your industry. A rising ratio during falling sales is a red flag.
🧮 Tip: Build a simple rolling forecast that recalculates your SG&A ratio monthly. This lets you course-correct early.
3. Separate Fixed vs. Variable SG&A
Segment costs like this:
Variable SG&A (commissions, ad spend, travel) should flex down with sales.
Fixed SG&A (salaries, leases) require strategic decisions — freezing hiring, renegotiating contracts, or centralizing functions.
🎯 Focus on reducing variable first, then optimize fixed.
4. Prioritize Cost-to-Serve Efficiency
Not all customers or channels are equal. Some cost more to serve than others.
💡 Implement cost-to-serve analytics to:
Identify unprofitable accounts
Rethink service levels and delivery models
Redirect resources to high-margin revenue
5. Use Fractional and Outsourced Support
Reduce SG&A without sacrificing capability by outsourcing:
Accounting and payroll
HR administration
CFO support (like my firm offers)
🧠 This replaces full-time costs with flexible, value-based support models.
6. Preserve Strategic Capabilities
Avoid across-the-board cuts that cripple future growth.
✅ Keep investing in:
Customer success and retention
High-performing sales reps
Product or R&D (if it drives differentiation)
🚫 Pause or cut:
Brand campaigns with unclear ROI
Unused tech tools and licenses
Low-impact headcount or legacy roles
7. Create an SG&A Dashboard
Track:
SG&A spend by category
Cost per employee
Cost per revenue dollar
Headcount by function
📊 A real-time dashboard helps drive accountability across the leadership team.
Final Thoughts: Don’t Just Cut — Recalibrate
Your SG&A isn’t just a cost center — it’s a capability center. The goal during a downturn is to protect what creates value, shed inefficiencies, and make sure your cost structure matches your revenue reality.
When I work with clients as a fractional CFO, I help design a leaner SG&A model that’s still built for growth — and backed by clear KPIs and ROI-based decision-making.
📞 Need Help Managing SG&A in a Downturn?
Let’s make your SG&A work smarter, not just smaller.
Lets talk and figure out how to be profitable even in downturn
