Opex—short for operating expenses—is the recurring cost of running the company day to day, before you get to one-off capital investments or financing items.

How it works

Typical opex lines include compensation, benefits, cloud and software subscriptions, sales and marketing spend, professional services, and general administrative costs. On a startup P&L, opex usually sits above operating income. Add revenue minus cost of goods sold (COGS), subtract opex, and you see whether core operations are profitable or still investing for growth.

Investors often split opex into buckets—R&D, sales and marketing, G&A—to compare companies at the same stage. A seed company might run heavy product and G&A opex with little revenue; a growth company might shift spend toward sales and marketing as it scales. Monthly burn is essentially opex (plus sometimes capex and financing cash flows) minus cash collected.

Why it matters

• Founders: Opex is the budget you control between rounds. Hiring plans, vendor choices, and marketing tests all flow through it. Runway equals cash divided by net burn, and burn is largely opex-driven.
• Investors: Opex trends signal discipline and scalability. Rising revenue with opex growing slower than sales suggests operating leverage; flat revenue with rising opex is a warning sign in diligence.

Common mistake

Confusing opex with capex or treating all spending as interchangeable. Capitalizing software development or buying hardware affects cash and balance sheet differently than paying salaries. Misclassification can hide true burn.

Related ideas

Compare capex, burn rate, runway, COGS, and operating leverage when modeling how a company scales.