Operating expenses (OpEx) are the costs of running the business that aren't directly tied to producing what you sell. Marketing sits here. Sales salaries sit here. R&D, office rent, legal, accounting, HR, software tools. Everything that keeps the business functioning beyond the factory floor or server rack.
For marketers, operating expenses are where your budget lives and dies. Every marketing dollar competes with R&D, sales, and G&A for a share of gross profit. Understanding this competition, and demonstrating that your dollars generate more value than the alternatives, is how you defend and grow your budget.
What's Included
Operating expenses typically break into these categories:
Category | Examples | Typical % of Revenue |
Sales & Marketing | Advertising, marketing team salaries, events, content, tools, commissions | 10-50% (varies by industry) |
Research & Development | Engineering salaries, prototyping, testing, product development | 5-25% |
General & Administrative | Executive salaries, legal, HR, accounting, office costs | 5-15% |
Depreciation & Amortization | Asset value decline over time | 2-8% |
In SaaS, the split is highly visible: companies report S&M, R&D, and G&A as separate line items. A typical growth-stage SaaS company spends 40-50% of revenue on Sales & Marketing, 25-35% on R&D, and 10-15% on G&A.
Operating Expenses vs. COGS
Operating Expenses | ||
Nature | Direct costs of product/service delivery | Indirect costs of running the business |
Examples | Raw materials, hosting, direct labor | Marketing, R&D, rent, management |
Relationship to volume | Scales with production | Mostly fixed or semi-fixed |
P&L position | Subtracted from revenue to get gross profit | Subtracted from gross profit to get operating income |
This distinction determines which margin you're affecting. Reducing COGS improves gross margin. Reducing operating expenses improves operating margin.
The Marketing Share of Operating Expenses
Marketing's share of total operating expenses varies dramatically:
- High-growth SaaS: 40-60% of OpEx goes to Sales & Marketing
- Mature tech: 20-30%
- Consumer packaged goods: 15-25% (heavy advertising)
- B2B industrial: 5-10%
- Financial services: 10-20%
When the CFO asks marketing to cut 10%, it's because total operating expenses are growing faster than gross profit. The defense: show that your 10% generates disproportionate revenue contribution.
Operating Leverage
The most powerful concept in operating expenses is leverage: as revenue grows, operating expenses should grow slower, creating expanding operating margins.
A company that grows revenue 30% while operating expenses grow only 15% is gaining operating leverage. Each incremental revenue dollar contributes more to operating income because the fixed component of operating expenses is already covered.
This is the pattern investors look for in scaling businesses, and it's why efficient marketing (high revenue per marketing dollar) is valued over simply spending more.
Frequently Asked Questions
Are operating expenses the same as overhead?
Roughly. "Overhead" is a less precise term that typically refers to operating expenses plus allocated manufacturing costs. In service businesses, overhead and operating expenses are nearly synonymous.
Should marketing aim to reduce operating expenses?
Not necessarily. Marketing should aim to improve the ratio of marketing spend to marketing-attributed revenue. If spending more on marketing drives proportionally more revenue (and gross profit), increasing operating expenses is the right move. If efficiency is declining, optimization or cuts may be needed.
What happens when operating expenses exceed gross profit?
The company has a negative operating income (operating loss). This means the business model isn't generating enough margin to cover the cost of running the business. Many startups operate this way deliberately while building toward scale, but it's unsustainable without external funding.
Sources & References
- Corporate Finance Institute. "Operating Expenses." corporatefinanceinstitute.com
- Investopedia. "Operating Expense." investopedia.com
- Chernev, A. (2025). Strategic Marketing Management, 11th Edition.
Written by Conan Pesci | Last Updated: April 2026