The Financial Skeleton of Business: How to Manage Rent, Salaries, and Equipment Without Stress

When you add personnel, rent, marketing, equipment, and administration costs to the cost of goods sold ( COGS ), you move from "direct costs" to Operating Expenses (OPEX) and calculating the Total Cost of Goods Sold.

In the financial world, this process and the final indicators have several specific names, depending on what exactly you want to calculate:

1. OPEX (Operating Expenses)

These are all the costs you incur to keep your business running (“keeping the doors open”), whether you sell 1 or 100 units.

• Includes: Rent, administrative staff salaries, utilities, software subscriptions, insurance.

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2. EBIT (Earnings Before Interest and Taxes)

This is the figure you get after you subtract both COGS and all operating expenses (salaries, rent, etc.) from your total revenue. It is also called Operating Profit .

3. Total Cost of Ownership / Total Cost

In management accounting, when you allocate these "overhead" costs (rent, wages) to each unit produced, it is called Overhead Allocation .

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It is important to distinguish between the two main types of expenses so that you do not make the wrong decisions:

A) Variable Costs

They grow with each unit sold (materials, packaging). If you have no sales, these costs are close to zero.

B) Fixed Costs

This is the "burden" you are asking about - the rent and salaries. You pay them even if you don't have a single sale.