---
title: "What Is Operating Expense?"
term: "Operating Expense"
description: "Operating expense (OpEx) is the ongoing cost of running a business — payroll, rent, software, marketing, and admin — excluding capital expenditures and non-operating items like interest and taxes."
date: 2026-07-25T00:00:00.000Z
updated: 2026-07-25T00:00:00.000Z
topics: ["venture-capital"]
source: https://venturecapitaltracker.com/glossary/operating-expense
---

# What Is Operating Expense?

> Operating expense (OpEx) is the ongoing cost of running a business — payroll, rent, software, marketing, and admin — excluding capital expenditures and non-operating items like interest and taxes.

**Operating expense (OpEx)** is the recurring cost of normal business operations — the line items that determine monthly burn before financing and capital spending.

### How it works

Typical categories: **people** (salaries, benefits, contractors), **sales and marketing**, **R&D** (engineers, tools), **general and administrative** (finance, legal, office). SaaS companies often capitalize little; hardware firms may separate **CapEx** for equipment from OpEx for assembly labor.

Income statement: Revenue − COGS = gross profit; gross profit − OpEx = operating income (loss). Investors compare OpEx growth to ARR growth — efficient companies decouple somewhat after product-market fit; inefficient ones show OpEx scaling faster than revenue.

Board **operating plans** set OpEx budgets by department with hiring ramps tied to milestones.

### Why it matters

- **Founders:** Fixed OpEx (core team, rent) is sticky; variable OpEx (ads, contractors) is easier to cut in downturns. Model both in runway scenarios.
- **Investors:** Rule-of-40 and burn multiple analyses use OpEx implicitly through net burn and revenue trajectory. Sudden OpEx spikes without pipeline support trigger bridge conversations.

### Common mistake

Classifying growth marketing as COGS when it is discretionary OpEx — inflates gross margin and misleads unit economics reviews.

### Related ideas

See also [operating margin](/glossary/operating-margin), [burn rate](/glossary/burn-rate), [capex](/glossary/capex), and [operating plan](/glossary/operating-plan).

## FAQ

### What is Operating Expense in simple terms?

OpEx is what you spend to keep the lights on and grow day to day — salaries, cloud bills, ads, legal fees — not big one-time equipment purchases (CapEx) or financing costs.

### Why does Operating Expense matter?

For founders, OpEx drives net burn and headcount plans. For investors, OpEx relative to revenue and growth shows whether the company is investing efficiently or accumulating fixed cost ahead of traction.


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Source: https://venturecapitaltracker.com/glossary/operating-expense