Operating Expenses

The costs required to run a business’s core operations.

QUICK ANSWER

Operating Expenses are the day to day costs a business incurs to run its core operations, such as salaries, rent, marketing, and software. They exclude costs like interest and taxes.

In depth

Operating Expenses include all recurring costs required to operate a business, such as employee salaries, office rent, software subscriptions, marketing spend, and utilities. These expenses are recorded on the income statement and are essential for generating revenue. Managing operating expenses is critical for startups because high fixed costs can quickly increase burn rate. Founders often track operating expenses as a percentage of revenue to evaluate efficiency. Over time, improving this ratio indicates better cost control and progress toward profitability.