Operating Expenses: The Line Items That Make or Break Your Marketing Budget

A few years ago, I sat in a board meeting where the founder proudly announced that revenue had doubled. The room was buzzing. Then the VP of Finance put up the next slide: operating expenses had tripled. Revenue doubled, but the company was burning cash faster than ever. The problem wasn't the product or the market share strategy. It was that nobody had been watching the operating expense line while they scaled.

Operating expenses (OpEx) are the costs of running a business day to day, excluding the direct cost of making or delivering your product. They include everything from office rent to your marketing budget, from engineering salaries to the software subscriptions piling up on your company credit card. And for marketers, they matter enormously, because your entire department lives inside this line item on the income statement.

What Are Operating Expenses?

Operating expenses are the ongoing costs a company incurs through its normal business operations. They are distinct from COGS (cost of goods sold), which captures the direct costs of producing goods or delivering services.

The formula that connects them is:

Operating Income = Gross Profit − Operating Expenses

Or equivalently:

Operating Income = Revenue − COGS − Operating Expenses

Operating expenses typically fall into the category accountants call SG&A (Selling, General & Administrative), plus Research & Development. According to Square's business glossary, operating expenses cover "expenses that a business owner incurs in order to operate that business," excluding direct production costs.

Common Categories of Operating Expenses

Understanding what falls under OpEx helps marketers locate their own spending within the broader financial picture.

Sources: NetSuite — Marketing Expenses Defined, DealHub — What Are Operating Expenses?

One detail that trips people up: marketing expenses are sometimes split between COGS and OpEx. For example, at a SaaS company, the customer success team might be classified as COGS (because they directly support service delivery), while the demand generation team is OpEx. How your company classifies marketing costs affects gross margin and operating margin calculations.

Operating Expenses as a Percentage of Revenue: Benchmarks

The question every marketing leader should be able to answer: what percentage of revenue does our company spend on operations, and how does our marketing allocation compare to peers?

Sources: SaaS Capital — 2025 Spending Benchmarks, Data-Mania — B2B Marketing Budget Benchmarks 2026, Rampiq — B2B SaaS Marketing Budget Guide 2025

I find the SaaS numbers particularly revealing. Early-stage SaaS companies routinely spend more than they earn (OpEx exceeding 100% of revenue) because they're investing in growth. According to SaaS Capital's 2025 benchmarks, equity-backed SaaS companies spend 107% of ARR on operations, compared to 95% for bootstrapped companies. The gap is almost entirely in sales and marketing: equity-backed companies spend 89% more on sales and 100% more on marketing.

For B2B companies broadly, marketing budgets in 2025 averaged 9.4% of revenue, up from 7.7% in 2024 according to Gartner's CMO Spend Survey. Looking ahead, 69% of marketers expect budget increases in 2026.

Why Marketers Should Care About Operating Expenses

Marketing doesn't exist in a financial vacuum. Your budget is one slice of the OpEx pie, and you're competing for that slice against every other department.

When operating income is under pressure, the conversation in the C-suite becomes: "Which operating expenses are generating the most return?" Every dollar spent on R&D, G&A, and marketing is scrutinized. If the marketing team can demonstrate that their OpEx drives measurable revenue growth and improves net margin, they protect their budget. If they can't, they're first in line for cuts.

This is why ROMI (Return on Marketing Investment) is so important. It's the metric that translates marketing's OpEx into a language the finance team understands. A marketing department that can say "we spent $2M in OpEx and generated $12M in pipeline" is in a fundamentally different position than one that says "we increased brand awareness."

I've seen this play out dozens of times at agencies and in-house teams. The marketers who speak the language of the income statement keep their budgets. The ones who don't get cut.

Fixed vs. Variable Operating Expenses

Not all operating expenses behave the same way. Understanding the distinction between fixed costs and variable costs within OpEx is critical for planning.

Fixed operating expenses stay the same regardless of revenue or output: office lease, base salaries, insurance premiums, annual software contracts. These costs create your operating cost floor.

Variable operating expenses scale with activity: ad spend (you can turn it up or down), freelancer costs, event budgets, sales commissions. These give you flexibility but require disciplined management.

The balance between fixed and variable OpEx determines your company's operating leverage. Companies with high fixed OpEx and low variable OpEx see dramatic margin improvement as revenue grows (because the fixed costs are spread across more revenue). But they also face significant risk during downturns because those fixed costs don't shrink.

For marketing teams specifically, I recommend targeting a 40/60 or 50/50 split between fixed and variable expenses. Your core team, essential tools, and baseline content production should be fixed. Ad spend, event participation, contractor work, and experimental initiatives should be variable. This gives you a stable foundation with room to flex.

How to Reduce Operating Expenses Without Cutting Effectiveness

The worst way to reduce OpEx is across-the-board percentage cuts. The best way is surgical: identify spending that doesn't generate proportional value and reallocate it.

According to Spendesk's 2025 guide, companies that implemented automated expense tracking and approval workflows reduced marketing overhead by 12–15%. The savings came not from doing less marketing but from eliminating waste in procurement, duplicate tools, and untracked spending.

Practical OpEx reduction strategies for marketing teams:

• Audit your MarTech stack. Most companies use 15–25 marketing tools. According to HubSpot's 2025 State of Marketing, the average enterprise marketing team uses 23 tools, with significant overlap in functionality. Consolidating reduces license costs and improves data flow.
• Shift from agency to in-house for core competencies. Agency fees carry a 30–50% overhead premium. For repeatable, high-volume work (social media, basic content, email), building internal capability often reduces per-unit costs.
• Negotiate annual vs. monthly contracts. Most SaaS vendors offer 15–25% discounts for annual commitments. If you're spending $200K/year on marketing tools, the savings are material.
• Use AI for production tasks. AI content tools, image generators, and copywriting assistants reduce the variable cost of content production. The savings flow directly to the bottom line.

The 5-C framework is useful here. When analyzing your Company's financial position, understanding your operating expense structure tells you what's flexible and what's load-bearing.

Operating Expenses on the Income Statement

Here's where operating expenses appear in the standard income statement structure:

This structure makes something clear: operating expenses are the bridge between gross profit and operating income. If your gross margin is healthy but your operating margin is thin, the problem is in operating expenses. And since marketing is often the largest discretionary item within OpEx, that spotlight often lands on your team.

Frequently Asked Questions

Are marketing expenses considered operating expenses?

Yes. Marketing and advertising costs are classified as operating expenses on the income statement, specifically within the Selling, General & Administrative (SG&A) category. According to NetSuite's accounting guide, marketing expenses include advertising, promotional events, content production, marketing salaries, and technology tools.

What's the difference between operating expenses and COGS?

COGS covers the direct costs of producing or delivering a product (materials, manufacturing labor, hosting for SaaS). Operating expenses cover everything else needed to run the business (marketing, rent, admin, R&D). The distinction matters because COGS is deducted first to calculate gross profit, while OpEx is deducted after.

How much should a company spend on operating expenses?

It varies by industry and growth stage. Mature companies typically spend 60–80% of revenue on total operating expenses. High-growth SaaS companies may spend 95–120% while investing in expansion. The break-even analysis helps determine the minimum revenue needed to cover both COGS and OpEx.

Can operating expenses be capitalized?

Some can. For example, software development costs that create a long-term asset may be capitalized and amortized rather than expensed immediately. Marketing costs are generally expensed in the period incurred, though brand acquisition costs (like purchasing a domain name or trademark) can be capitalized as goodwill or intangible assets.

Why do SaaS companies have such high operating expenses?

Because SaaS business models front-load investment in sales and marketing to acquire customers who generate recurring revenue over years. A SaaS company spending 40% of revenue on sales and marketing is essentially investing today for revenue it will collect over the next 3–5 years. The product life cycle framework explains why early-stage companies spend more aggressively.

How do operating expenses affect stock price?

Investors monitor the operating expense ratio (OpEx / Revenue) closely. Rising OpEx without proportional revenue growth signals inefficiency and typically pressures stock price. Declining OpEx as revenue grows signals operating leverage, which investors reward. This is why cost discipline and the path to operating margin expansion are recurring themes in earnings calls.

What's the difference between OpEx and CapEx?

OpEx (operating expenses) are day-to-day costs expensed in the current period. CapEx (capital expenditures) are long-term investments in assets like buildings, equipment, or intellectual property, capitalized on the balance sheet and depreciated over time. A marketing team's monthly HubSpot subscription is OpEx. Building a custom marketing platform is CapEx.

Sources & References

1. Square — What Are Operating Expenses? Definition and Examples
2. NetSuite — Marketing Expenses Defined: How Are They Treated in Accounting?
3. DealHub — What Are Operating Expenses?
4. SaaS Capital — 2025 Spending Benchmarks for Private B2B SaaS Companies
5. Data-Mania — B2B Marketing Budget Benchmarks 2026
6. Rampiq — B2B SaaS Marketing Budget Planning & Allocation Guide 2025
7. Spendesk — The Complete Guide to Marketing Expenses in 2025
8. Gartner — Annual CMO Spend Survey 2025
9. HubSpot — 2025 State of Marketing Report

Written by Conan Pesci | April 3, 2026 | Markeview.com

Markeview is a subsidiary of Green Flag Digital LLC.