What is Operating Expenses (OpEx)?

Operating expenses are the ongoing costs a business incurs to run its day-to-day operations — including salaries, rent, utilities, marketing and software — expensed in the period they occur.

OpEx covers everything needed to keep the business running that is not directly tied to producing a sold unit (that is COGS) or to acquiring a long-lived asset (that is CapEx). Typical line items include SG&A, R&D and marketing.

Discipline on OpEx drives operating leverage: if revenue grows faster than OpEx, operating margin expands. The shift from on-premise software CapEx to SaaS OpEx subscriptions has reshaped how businesses pay for technology.

Example

A consultancy with CHF 1m revenue pays CHF 600k in salaries, CHF 100k in rent, CHF 50k in software subscriptions and CHF 50k in marketing — total OpEx CHF 800k.

Related terms

Capital Expenditure (CapEx)

Capital expenditure is money a business spends to acquire, upgrade or maintain long-lived physical assets such as buildings, machinery, vehicles or technology infrastructure, capitalised on the balance sheet and depreciated over their useful life.

Operating Profit

Operating profit (or operating income, EBIT) is what a business earns from its core operations after deducting both the direct cost of sales and all operating expenses, but before interest and tax.

Burn Rate

Burn rate is the speed at which a company — typically an unprofitable startup — spends its cash reserves each month, measuring the pace of cash consumption.

Income Statement

The income statement (or profit and loss statement, P&L) reports a company's revenues, expenses and profits over a specific period, showing whether the business made money and how.

Frequently asked questions

Is OpEx tax-deductible?+

Yes, fully deductible in the period incurred, unlike CapEx which is deducted over years through depreciation.

How can a business reduce OpEx?+

Renegotiate contracts, automate processes, consolidate vendors, and shift fixed costs to variable where possible.

Are SaaS subscriptions OpEx or CapEx?+

OpEx — subscriptions are expensed each period, unlike on-premise software licences which used to be CapEx.