operating costs

Operating Costs

Operating Costs Jonathan Poland

Operating costs are the expenses that a company incurs in order to generate revenues from its business operations. These costs include direct expenses such as the cost of materials and labor, indirect expenses such as rent and utilities, and may include cost of goods sold or COGS.

Operating costs are a crucial element of a company’s financial statements, as they represent the expenses associated with generating the company’s revenues. These costs are typically subtracted from a company’s revenues in order to arrive at the company’s gross profit or gross margin, which is a key measure of a company’s profitability.

Operating costs can be either fixed or variable. Fixed operating costs are expenses that do not change in relation to the level of a company’s production or sales, such as rent or salaries. Variable operating costs, on the other hand, are expenses that change in relation to the level of a company’s production or sales, such as the cost of materials or shipping.

Managing operating costs is an important part of running a successful business, as it can help a company to improve its profitability and generate higher returns for its shareholders. By carefully controlling and minimizing its operating costs, a company can increase its gross profit and net income, and improve its overall financial performance.

The following are common operating costs:

  • Advertising
  • Bad Debt Expense
  • Bank Charges
  • Cost of Goods Sold
  • Depreciation
  • Employee Benefits
  • Equipment Rental
  • Executive Compensation
  • General & Administrative Expense
  • Insurance
  • Interest
  • Legal Fees
  • Licensing Fees
  • Management Fees
  • Management Salaries
  • Meals & Entertainment
  • Office Expenses
  • Office Supplies
  • Professional Fees
  • Promotion
  • Rent
  • Repairs & Maintenance
  • Salaries & Wages
  • Sales Commissions
  • Selling Expenses
  • Software Licenses
  • Taxes
  • Tools & Equipment
  • Travel
  • Utilities
  • Vehicle Expenses
Learn More
Market Development Jonathan Poland

Market Development

Market development is the process of entering new markets to expand revenue and reduce concentration risk. It involves identifying and…

Dismissing Employees Jonathan Poland

Dismissing Employees

Letting go (aka firing) employees is a difficult and sensitive task, and it’s important to handle it with care and…

Demand Risk Jonathan Poland

Demand Risk

Demand risk refers to the possibility of experiencing financial loss or other negative consequences due to a discrepancy between the…

Sales Promotion Jonathan Poland

Sales Promotion

Sales promotion refers to the use of various incentives and discounts to encourage customers to make a purchase. These promotions…

Economic Opportunity Jonathan Poland

Economic Opportunity

Economic opportunity refers to the support that a society provides to individuals that enables them to thrive in the economy.…

SLED Contracts 150 150 Jonathan Poland

SLED Contracts

A SLED contract refers to a contract awarded by State, Local, and Education (SLED) government entities. These contracts involve the…

Time to Volume Jonathan Poland

Time to Volume

Time to volume is a marketing metric that measures the time it takes for a new product to go from concept to launch and reach a significant level of sales or usage.

Business Values Jonathan Poland

Business Values

Business values are statements that reflect the ethical principles of a company. These values are intended to guide the company’s…

Risk Evaluation Jonathan Poland

Risk Evaluation

Risk evaluation is the process of identifying and assessing the risks that an organization or individual may face. It is…

Content Database

Search over 1,000 posts on topics across
business, finance, and capital markets.

Product Cannibalization Jonathan Poland

Product Cannibalization

Product cannibalization refers to the situation in which the sales of one product within a company’s portfolio negatively impact the…

Sales Objections Jonathan Poland

Sales Objections

A sales objection is a concern or hesitation that a customer has about making a purchase. Identifying and addressing these…

Physical Capital Jonathan Poland

Physical Capital

Physical capital refers to the tangible assets that are used to produce goods and services. This term is commonly used…

Do-It-Yourself Lobbying 150 150 Jonathan Poland

Do-It-Yourself Lobbying

Yes, it is possible to lobby the government without hiring a professional lobbyist. Lobbying, in its essence, involves advocating for…

Market Intelligence Jonathan Poland

Market Intelligence

Market intelligence refers to the process of gathering, analyzing, and disseminating information about a market, competitors, and industry trends in…

Organic Growth Jonathan Poland

Organic Growth

Organic growth refers to an increase in revenue that is generated through a company’s own efforts, such as marketing, innovation,…

Operational Efficiency Jonathan Poland

Operational Efficiency

Operational efficiency can be defined as the ratio between the inputs to run a business and the output gained from the business. It is primarily a metric that measures the efficiency of profit earned as a function of operating costs.

What is a One Stop Shop? Jonathan Poland

What is a One Stop Shop?

A one stop shop is a business that offers a wide range of products and services from a single location,…

Advanced Economy Jonathan Poland

Advanced Economy

An advanced economy is a highly developed economic system that provides a high level of economic well-being and quality of…