Also known as: OpEx, operating costs

Operating Expenses

FoundationalFinance

Definition

Operating Expenses: Operating expenses (OpEx) are the ongoing costs to run your business that aren't directly tied to delivering the product. They include R&D, sales & marketing, and general & administrative expenses. Revenue minus COGS minus OpEx equals operating income.

Example Usage

“With R&D at 30%, S&M at 40%, and G&A at 10% of revenue, our total OpEx is 80% of revenue.”

Common Misconceptions

OpEx and COGS are the same. COGS is direct costs; OpEx is indirect operating costs.

Lower OpEx is always better. Under-investment in R&D or S&M can hurt growth.

OpEx scales linearly. Many OpEx items have fixed components that create leverage at scale.

Related Terms

Cost of Goods Sold

Cost of Goods Sold is the direct cost of delivering your product or service, including hosting, support, and payment processing for SaaS. COGS subtrac...

FoundationalFinanceMetrics

Burn Rate

Burn rate is the speed at which a company spends its cash reserves before generating positive cash flow. Gross burn is total monthly expenses, while n...

FoundationalFinanceMetrics

Related Tools

QuickBooks

Accounting software for small businesses.

Xero

Beautiful accounting software for small business.

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Operating Expenses

Definition

Example Usage

Common Misconceptions

Related Terms

Cost of Goods Sold

Burn Rate

Related Tools

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