What is Operating expenses (OpEx)? Definition, Formula & Benchmarks

What is operating expenses (opex)?

Operating expenses are the costs of running your business that aren't tied directly to producing what you sell, salaries, rent, marketing, software, and admin. They sit below gross profit on the income statement and cover the overhead of simply operating. Often grouped as SG&A and R&D, OpEx is what gross profit has to cover.

Worked example

A company with $2M in gross profit spends $1.5M on salaries, rent, marketing, and tools, its operating expenses, leaving $500K of operating income.

Why it matters for fast-growing companies

OpEx is where most discretionary spending lives, so it's the lever founders pull to manage burn and reach profitability. Tracking OpEx as a percentage of revenue shows whether you're gaining operating leverage as you grow or just piling on cost. Bloated OpEx is a common reason a company with healthy margins still loses money.

Frequently asked questions

What's the difference between OpEx and COGS?+

COGS is the direct cost of delivering your product; OpEx is the cost of running the company around it. COGS moves with sales volume, while much of OpEx is fixed or semi-fixed, rent and salaries stay roughly the same whether you sell ten units or a thousand. Both live on the income statement, in different sections.

Are salaries operating expenses?+

Usually yes, pay for sales, marketing, non-production engineering, finance, and admin roles is operating expense. The exception is labor tied directly to producing or delivering the product, such as manufacturing or hands-on service delivery, which belongs in COGS. Where the role sits determines which line its salary lands on.

Operating expenses (OpEx)