Operating Expense Ratio Calculator

OpEx Ratio = Operating Expenses / Revenue. Lower = more efficient. Industry varies: SaaS 60-80% (high R&D and S&M), software 40-60%, manufacturing 15-25%, banking 50-70%. Track over time - declining ratio = scale efficiencies; rising = inefficiency.

Categories with biggest impact: marketing (30-50% of SaaS OpEx), salaries (60-70% of services), rent (largest fixed cost). Cut by ROI: lowest-ROI categories first. Avoid cutting R&D and customer success - they drive future revenue.

Because this ratio measures operating efficiency, not total profitability, and as modeled here it excludes COGS, interest, taxes, and depreciation. A 40% OER is excellent at a 70% gross margin and fatal at a 35% one. The real test is whether gross margin minus OER leaves a healthy operating profit.

The OER measures what percentage of revenue is consumed by operating expenses (not counting COGS or taxes). The operating profit margin is 1 minus OER minus COGS as a percentage of revenue; it measures how much is left after all operating and product costs.

It depends on how you define operating expenses. In the presentation used here, the OER excludes COGS to measure only overhead and management costs. Some definitions include COGS to measure the total cost of generating revenue. What matters is being consistent over time.