Sales and Marketing Expenses
Financials
Industry:
Sector Agnostic
Short Definition
Sales & Marketing (S&M) Expense is the all-in cost to acquire and grow customers in a period: people (sales + marketing teams), paid media, agencies/programs, tools, partner commissions, travel/events, and amortized sales commissions (per accounting rules).
Short Definition
Sales & Marketing (S&M) Expense is the all-in cost to acquire and grow customers in a period: people (sales + marketing teams), paid media, agencies/programs, tools, partner commissions, travel/events, and amortized sales commissions (per accounting rules).
Short Definition
Sales & Marketing (S&M) Expense is the all-in cost to acquire and grow customers in a period: people (sales + marketing teams), paid media, agencies/programs, tools, partner commissions, travel/events, and amortized sales commissions (per accounting rules).
Why it matters for Investors
Growth engine cost: Shows how much it takes to drive pipeline, bookings, and ARR.
Efficiency lens: Feeds CAC, CAC Payback, Magic Number, LTV/CAC, and Burn Multiple.
Quality of growth: Channel and segment mix inside S&M explains unit economics and scalability.
Why it matters for Investors
Growth engine cost: Shows how much it takes to drive pipeline, bookings, and ARR.
Efficiency lens: Feeds CAC, CAC Payback, Magic Number, LTV/CAC, and Burn Multiple.
Quality of growth: Channel and segment mix inside S&M explains unit economics and scalability.
Why it matters for Investors
Growth engine cost: Shows how much it takes to drive pipeline, bookings, and ARR.
Efficiency lens: Feeds CAC, CAC Payback, Magic Number, LTV/CAC, and Burn Multiple.
Quality of growth: Channel and segment mix inside S&M explains unit economics and scalability.
Formula
Practical considerations:
Set the rulebook: What sits in S&M vs COGS vs G&A? Publish and stick to it.
Customer success / onboarding: If they deliver contracted SLAs, put them in COGS; if they’re growth/retention oriented, keep in S&M (be explicit).
Commissions: Capitalize incremental costs to obtain a contract; expense amortization here each period.
Channel view: Track by paid vs organic, direct vs partner, and new logo vs expansion.
Attribution: Tie spend to pipeline/ARR cohorts to keep CAC and Magic Number honest.
Formula
Practical considerations:
Set the rulebook: What sits in S&M vs COGS vs G&A? Publish and stick to it.
Customer success / onboarding: If they deliver contracted SLAs, put them in COGS; if they’re growth/retention oriented, keep in S&M (be explicit).
Commissions: Capitalize incremental costs to obtain a contract; expense amortization here each period.
Channel view: Track by paid vs organic, direct vs partner, and new logo vs expansion.
Attribution: Tie spend to pipeline/ARR cohorts to keep CAC and Magic Number honest.
Formula
Practical considerations:
Set the rulebook: What sits in S&M vs COGS vs G&A? Publish and stick to it.
Customer success / onboarding: If they deliver contracted SLAs, put them in COGS; if they’re growth/retention oriented, keep in S&M (be explicit).
Commissions: Capitalize incremental costs to obtain a contract; expense amortization here each period.
Channel view: Track by paid vs organic, direct vs partner, and new logo vs expansion.
Attribution: Tie spend to pipeline/ARR cohorts to keep CAC and Magic Number honest.
Worked Example
Line Item | Amount | Notes |
|---|---|---|
Add : People (Sales + Marketing) | $520,000 | Salaries, Benefits, Variable Comp. |
Add : Paid Media | $180,000 | Included above |
Add : Agencies/ Programs | $70,000 | Creative, PR, Content, Field Programs |
Add : Tools/ Software | $35,000 | CRM, Marketing Automation, Attribution |
Add : Partner Commissions | $40,000 | Reseller/ Referral Payouts |
Add : Travel/ Events | $25,000 | Conferences, Roadshows |
Add : Amortized Sales Commissions | $30,000 | Period Amortization under accounting rules (eg. under ASC 606) |
Total S&M Expense | $900,000 | Sum of above |
Notes:
“People” = wages, benefits, bonuses for sales + marketing.
“Amortized Commissions” = period expense from capitalized contract costs (ASC 606).
Do not include delivery/support costs needed to fulfill contracts → those belong in COGS/Cost of Sales by policy.
Worked Example
Line Item | Amount | Notes |
|---|---|---|
Add : People (Sales + Marketing) | $520,000 | Salaries, Benefits, Variable Comp. |
Add : Paid Media | $180,000 | Included above |
Add : Agencies/ Programs | $70,000 | Creative, PR, Content, Field Programs |
Add : Tools/ Software | $35,000 | CRM, Marketing Automation, Attribution |
Add : Partner Commissions | $40,000 | Reseller/ Referral Payouts |
Add : Travel/ Events | $25,000 | Conferences, Roadshows |
Add : Amortized Sales Commissions | $30,000 | Period Amortization under accounting rules (eg. under ASC 606) |
Total S&M Expense | $900,000 | Sum of above |
Notes:
“People” = wages, benefits, bonuses for sales + marketing.
“Amortized Commissions” = period expense from capitalized contract costs (ASC 606).
Do not include delivery/support costs needed to fulfill contracts → those belong in COGS/Cost of Sales by policy.
Worked Example
Line Item | Amount | Notes |
|---|---|---|
Add : People (Sales + Marketing) | $520,000 | Salaries, Benefits, Variable Comp. |
Add : Paid Media | $180,000 | Included above |
Add : Agencies/ Programs | $70,000 | Creative, PR, Content, Field Programs |
Add : Tools/ Software | $35,000 | CRM, Marketing Automation, Attribution |
Add : Partner Commissions | $40,000 | Reseller/ Referral Payouts |
Add : Travel/ Events | $25,000 | Conferences, Roadshows |
Add : Amortized Sales Commissions | $30,000 | Period Amortization under accounting rules (eg. under ASC 606) |
Total S&M Expense | $900,000 | Sum of above |
Notes:
“People” = wages, benefits, bonuses for sales + marketing.
“Amortized Commissions” = period expense from capitalized contract costs (ASC 606).
Do not include delivery/support costs needed to fulfill contracts → those belong in COGS/Cost of Sales by policy.
Best Practices
Segment the spend: New logo vs expansion, SMB vs enterprise, self-serve vs sales-led.
Tag brand vs demand: Track long-term brand separately from near-term pipeline.
Time alignment: When analyzing efficiency, align spend with the cohort whose revenue it generated (often a 1-quarter lag).
Clean data: Single source of truth for headcount, media, tools, and commissions.
Best Practices
Segment the spend: New logo vs expansion, SMB vs enterprise, self-serve vs sales-led.
Tag brand vs demand: Track long-term brand separately from near-term pipeline.
Time alignment: When analyzing efficiency, align spend with the cohort whose revenue it generated (often a 1-quarter lag).
Clean data: Single source of truth for headcount, media, tools, and commissions.
Best Practices
Segment the spend: New logo vs expansion, SMB vs enterprise, self-serve vs sales-led.
Tag brand vs demand: Track long-term brand separately from near-term pipeline.
Time alignment: When analyzing efficiency, align spend with the cohort whose revenue it generated (often a 1-quarter lag).
Clean data: Single source of truth for headcount, media, tools, and commissions.
FAQs
Does S&M include customer success?
Only if the team’s mission is growth/retention (renewals, expansion). If they deliver contracted service (support/implementation), that’s usually COGS.Do we include sales commissions?
Yes—amortized commissions expense belongs in S&M. The capitalized portion sits on the balance sheet.Are partner revenue shares in S&M or COGS?
If it’s a distribution/marketing fee, keep in S&M. If it’s a delivery/take-rate tied to serving the customer (common in marketplaces/fintech), put it in COGS.Is S&M just ad spend?
No. It’s people + media + programs + tools + partner costs + amortized commissions.How does S&M connect to CAC and Magic Number?
CAC ≈ S&M (fully loaded for acquisition) ÷ new customers.
Magic Number ≈ Net New ARR this quarter ÷ S&M last quarter.
FAQs
Does S&M include customer success?
Only if the team’s mission is growth/retention (renewals, expansion). If they deliver contracted service (support/implementation), that’s usually COGS.Do we include sales commissions?
Yes—amortized commissions expense belongs in S&M. The capitalized portion sits on the balance sheet.Are partner revenue shares in S&M or COGS?
If it’s a distribution/marketing fee, keep in S&M. If it’s a delivery/take-rate tied to serving the customer (common in marketplaces/fintech), put it in COGS.Is S&M just ad spend?
No. It’s people + media + programs + tools + partner costs + amortized commissions.How does S&M connect to CAC and Magic Number?
CAC ≈ S&M (fully loaded for acquisition) ÷ new customers.
Magic Number ≈ Net New ARR this quarter ÷ S&M last quarter.
FAQs
Does S&M include customer success?
Only if the team’s mission is growth/retention (renewals, expansion). If they deliver contracted service (support/implementation), that’s usually COGS.Do we include sales commissions?
Yes—amortized commissions expense belongs in S&M. The capitalized portion sits on the balance sheet.Are partner revenue shares in S&M or COGS?
If it’s a distribution/marketing fee, keep in S&M. If it’s a delivery/take-rate tied to serving the customer (common in marketplaces/fintech), put it in COGS.Is S&M just ad spend?
No. It’s people + media + programs + tools + partner costs + amortized commissions.How does S&M connect to CAC and Magic Number?
CAC ≈ S&M (fully loaded for acquisition) ÷ new customers.
Magic Number ≈ Net New ARR this quarter ÷ S&M last quarter.
Related Metrics
Commonly mistaken for:
COGS/Cost of Sales (Delivery Costs) (Servers/CDN (to run the product), card fees (payment processing), must-have third-party APIs (e.g., SMS, LLM, maps), shipping/packaging/returns, the per-order cut you pay partners/suppliers, and any onboarding/support you must provide to meet promised SLAs)
G&A Expense (Finance, HR, legal, IT helpdesk, office facilities)
R&D Expense (Engineering, product, design building the product)
Related Metrics
Commonly mistaken for:
COGS/Cost of Sales (Delivery Costs) (Servers/CDN (to run the product), card fees (payment processing), must-have third-party APIs (e.g., SMS, LLM, maps), shipping/packaging/returns, the per-order cut you pay partners/suppliers, and any onboarding/support you must provide to meet promised SLAs)
G&A Expense (Finance, HR, legal, IT helpdesk, office facilities)
R&D Expense (Engineering, product, design building the product)
Related Metrics
Commonly mistaken for:
COGS/Cost of Sales (Delivery Costs) (Servers/CDN (to run the product), card fees (payment processing), must-have third-party APIs (e.g., SMS, LLM, maps), shipping/packaging/returns, the per-order cut you pay partners/suppliers, and any onboarding/support you must provide to meet promised SLAs)
G&A Expense (Finance, HR, legal, IT helpdesk, office facilities)
R&D Expense (Engineering, product, design building the product)
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