What Are Operating Expenses?

What operating expenses are

Operating expenses are the everyday costs of keeping the business running, separate from the direct cost of each sale. Whether you sell 10 items or 1,000 this month, you still pay the rent.

Common examples

• Rent, electricity, water, internet
• Salaries for admin, sales, and support staff
• Marketing and advertising
• Software subscriptions
• Insurance
• Accounting and legal fees
• Office supplies and small equipment

Why they matter for small business

Operating expenses sit between gross profit and net profit. They are usually the easiest area to control — many can be reviewed, renegotiated, or cancelled. A small business with healthy gross margins but bloated OpEx will still struggle.

Simple formula

Practical example

A two-person consultancy has $30,000 in gross profit for the quarter. Their operating expenses are:

• Office rent: $4,500
• Software (CRM, accounting, design tools): $1,200
• Marketing: $2,000
• Accountant: $800

Common mistakes

• Unused subscriptions. Review monthly — many small businesses pay for tools they no longer use.
• Hidden personal expenses. Keep business and personal spending separate to see the real picture.

For a structured review approach, see the Cost Control Checklist.