Operating Expenses
Nate Jewell avatar
Written by Nate Jewell
Updated over a week ago

What are Operating Expenses?

  • Definition: An operating expense is an expense a business incurs through its normal business operations. Often abbreviated as OPEX, operating expenses include rent, equipment, inventory costs, marketing, payroll, insurance, step costs, and funds allocated for research and development.

  • In Plain English: Operating expenses are costs a business incurs to keep it running, no matter what they are selling or if they are selling anything.

  • Example: A business that sells shoes pays rent for the storefront, wages for people to staff the store, utilities to keep the lights on, etc.

Why Should You Care?

  • Understanding operating expenses helps you understand the cost it takes to run your business and gives you insight into where you might be able to reduce costs in order to improve the profitability of your business.

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