Modeling S&M, G&A, R&D expenses
I look at SS models and feel they do it wrong - just some random decreasing % of sales
How do pro investers model the operating exps? How do you know how much is variable vs fixed?
Tks
talk to management, look at notes in 10ks for breakdowns, and for forecasts use % growth rates not % of sales (which you only use as a sense check)
Thanks. I don't have access to management without working for a buy-side. When companies say "we expect R&D to be a smaller % of total revenue over time", but how do I know by how much % each year in the forecast?
Scale by headcount for each business and apply standard comp range if you can (h1b data often shows some base salary info). Marketing and r&d more tough but you can try to back out major national level pushes. And then you’ll have to estimate - benchmark against trough covid no growth periods and backtest/roll. Usually you won’t spend more than 70/30 on growth vs maintenance
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