Operating Expenses

The ongoing costs required to run a business that are not directly tied to producing goods or services, including salaries, rent, utilities, software subscriptions, marketing, and professional fees.

Understanding and managing operating expenses is essential for maintaining profitability. They represent the baseline cost of keeping the business alive and must be covered by gross profit before any net profit is generated.

A founder calculates that her monthly operating expenses are £4,500 covering software tools, a virtual assistant, her website hosting, and accountancy fees. She knows her gross profit must exceed this every month for the business to break even.