Operating Expense
Also called: OPEX, operating expenses
What is Operating Expense?
Operating expenses are the day-to-day costs of running a business that are not part of the direct cost of sales — salaries, rent, marketing, utilities, repairs and administration. They are what gross profit has to cover.
Why Operating Expense matters
Operating expenses are where most cost control actually happens, because direct costs are largely set by suppliers and recipes. They also creep, since each addition looks small on its own.
Operating Expense formula
Operating profit = Gross profit − Operating expenses
Adding depreciation back gives an approximation of EBITDA.
How Operating Expense works in practice
Track them by category month on month rather than as one lump, so a rising line is visible early. Comparing each category as a percentage of sales makes growth-driven increases distinguishable from genuine drift.
Frequently asked questions
No. Equipment is capital expenditure, recovered through depreciation over its useful life.