Operating expenses (OPEX) are the day-to-day costs of running a business—everything it takes to keep the doors open and the lights on. These are different from the Cost of Goods Sold (COGS), which are directly tied to producing or purchasing what you sell.
Common Examples
- Rent or lease payments
- Utilities (electricity, internet, phone)
- Wages and salaries (excluding those tied directly to production)
- Office supplies
- Marketing and advertising
- Insurance
- Software subscriptions
- Professional services (accounting, legal)
Why It Matters
Understanding operating expenses helps you:
- Track where your money goes
- Spot inefficiencies and opportunities to save
- Set realistic prices and profit goals
- Calculate key metrics like Operating Profit or Net Profit
Operating Profit Formula
Operating Profit = Gross Profit − Operating ExpensesThis tells you how much money you have left after covering the core costs of running the business—before taxes and interest.
Tip: Not all spending is wasteful. Some expenses, like staff training or well-targeted advertising, can increase revenue and improve operations over time. Don’t just cut—assess value.