Operating expenses (OpEx) are the ongoing, day-to-day costs a business pays to keep running — rent, salaries, utilities, and marketing. Unlike capital expenditures (CapEx), which buy long-term assets and are depreciated over years, OpEx is expensed immediately and deducted from revenue to help calculate net income.
What is OpEx?
OpEx covers the recurring costs of normal operations — the expenses a company incurs simply by being open for business. They're recorded on the income statement in the period they occur and directly reduce profit and cash flow. Because OpEx reflects current operations, it's a fast read on how efficiently a company runs day to day.
How to Calculate OpEx
There's no single universal formula — OpEx is the sum of all operating costs over a period:
OpEx = Salaries + Rent + Utilities + Marketing + Maintenance + Other operating costsTotal operating expenses for a period
On the income statement, OpEx is subtracted from gross profit to give operating income (a.k.a. operating profit or EBIT).
OpEx vs CapEx
| OpEx | CapEx | |
|---|---|---|
| What it buys | Day-to-day operating needs | Long-term assets |
| Recorded on | Income statement | Balance sheet |
| Timing | Expensed immediately | Depreciated over time |
| Examples | Rent, salaries, SaaS subscriptions | Buildings, servers, equipment |
For the deeper accounting treatment, see CapEx and CapEx vs OpEx in SaaS.
Common Examples of Operating Expenses
| Category | Examples |
|---|---|
| Payroll | Salaries, wages, benefits, bonuses |
| Facilities | Rent, electricity, internet, water |
| Maintenance | Equipment and facility upkeep |
| Office & tools | Supplies, software subscriptions |
| Sales & marketing | Advertising, promotion, campaigns |
| Professional fees | Legal, accounting, consulting |
| Insurance | Business insurance premiums |
| Travel | Business travel costs |
Why OpEx Matters
- Profitability: OpEx sits between gross profit and operating income — controlling it directly lifts margins.
- Efficiency signal: OpEx as a % of revenue shows how lean operations are as the company scales.
- Cash flow: unlike CapEx, OpEx hits cash in the same period, so it shapes short-term runway.
Operating Expenses (OpEx) FAQ
What counts as an operating expense?
Any recurring cost of running the business that isn't a direct production cost or a long-term asset purchase: rent, salaries, utilities, marketing, insurance, and professional fees. Direct production costs go in COGS; long-term assets are CapEx.
Is OpEx the same as COGS?
No. COGS is the direct cost of producing what you sell; OpEx is the indirect cost of running the company. On the income statement, COGS is subtracted first (to get gross profit), then OpEx (to get operating income).
Are salaries OpEx?
Yes — salaries for staff who run the business (admin, sales, marketing, management) are operating expenses. The exception is wages for workers directly producing goods, which belong in COGS.
Where does OpEx appear on the income statement?
Below gross profit. Gross profit − operating expenses = operating income, which then leads to net income after interest and taxes.
