The second layer of costs on a profit and loss statement. OPEX captures the day-to-day cost of running the business - everything that keeps the lights on, regardless of how much product you ship.
Definition
OPEX (Operating Expenses) - the day-to-day costs of running the business that aren't directly tied to producing a specific product or service. Includes rent, salaries, marketing, software, insurance, and general overhead.
Common uses
- Operating profit calculation - Gross Profit − OPEX = Operating Profit
- OPEX ratio - OPEX as % of revenue is a standard efficiency metric
- Budgeting - most budget categories are OPEX line items
Watch out
OPEX has a way of growing quietly - subscription creep, headcount expansion, vendor cost increases. An annual review of every OPEX category usually finds 5-15% of recoverable spend.