If you run an operating store, you already know your top line and you probably know your product cost. The gap most sellers can't explain is what happens between gross profit and the money that actually lands in the bank. That gap is operating expenses, and the legal industry mapped it long before ecommerce existed.
What operating expenses actually are
Operating expenses (OpEx) are the ongoing costs of running the business itself, not the cost of producing what you sell. For a law firm, that means rent, technology, marketing, insurance, and the salaries of non-billable staff — the costs of keeping the doors open, as LeanLaw's breakdown of the Rule of Thirds puts it.
Law firms also split their costs into hard costs and soft costs. MyCase defines hard costs as money paid upfront to a third-party vendor on a client's behalf — court filing fees, expert witnesses, depositions. Soft costs are the overhead-style expenses like rent, software, and salaries that keep the firm running regardless of any single case.
The store-owner translation is direct. Your "hard costs" are the money you hand a supplier to fulfill a specific order. Your "soft costs" are the platform fees, apps, ad spend, and tools you pay every month whether or not the next order ever comes in.
Operating expenses vs. cost of goods sold
The single most useful line to draw is between operating expenses and cost of goods sold (COGS). COGS is what it costs to produce and deliver the specific unit a customer bought — for print-on-demand, that's the supplier's product charge plus the shipping you pay them.
Operating expenses are everything else it takes to run the store: the Shopify subscription, your apps, payment processing, email tools, and the ad spend that acquires customers. If you blur the two together, your per-order math lies to you. We unpack that boundary in depth in the ecommerce ops economics hub, and the mechanics of booking product cost correctly in the guide to recording cost of goods sold.
How law firms benchmark operating expenses
Here's the number that should stop you: according to industry data cited by LeanLaw, the typical law firm spends 45 to 50 percent of revenue on overhead expenses alone. Half of every dollar that comes in the door is gone before anyone gets paid a profit.
Law firms manage that with the Rule of Thirds, a framework LeanLaw lays out as splitting revenue into three roughly equal buckets: one-third to compensation, one-third to overhead, and one-third to profit. If overhead creeps past its third, profit is what gets squeezed — not compensation, which is largely fixed.
The categories inside that overhead third are worth naming, because they map cleanly onto a store. Cresa's benchmark, cited by askCody, puts real estate at roughly 4 to 8 percent of annual gross revenue — the second-largest fixed expense after personnel. And overhead isn't static: the Thomson Reuters Institute reported, via askCody, that law firm overhead expenses rose 8.3 percent year over year in early 2026, the largest jump since 2024.
The lesson for you isn't the specific percentages — a store has no rent and no billable hours. It's the discipline: name every recurring cost, benchmark it against revenue, and watch the categories that quietly grow.
Translating the law-firm frame to your store
A store doesn't have associates or a lease, but it has its own version of the overhead third. For most POD operators, the biggest line by far is ad spend — the equivalent of a firm's marketing plus business development, except it usually dwarfs everything else combined.
Your operating-expense categories look like this: advertising, platform subscription, apps and integrations, payment processing, email and retention tools, and design or contractor costs. None of these are COGS. All of them are the price of keeping the store open.
A worked operating-expense breakdown
Say you run a store doing 340 orders a month at a $31 average order value, with $2,800 a month in Meta spend. Your monthly revenue is 340 × $31 = $10,540.
Assume each order costs you $13 in product and supplier shipping (your COGS). That's 340 × $13 = $4,420, leaving gross profit of $10,540 − $4,420 = $6,120. So far, so good — until the operating expenses land.
| Operating expense (monthly) | Amount |
|---|---|
| Meta ad spend | $2,800 |
| Shopify subscription | $39 |
| Apps and integrations | $120 |
| Payment processing (~2.9% + 30¢/order) | $407 |
| Email / retention tool | $60 |
| Design and contractor costs | $80 |
| Total operating expenses | $3,506 |
These are illustrative numbers from the worked example above, not market figures — swap in your own. The arithmetic is what matters: operating profit is $6,120 gross profit − $3,506 operating expenses = $2,614, an operating margin of 2,614 ÷ 10,540 ≈ 24.8%.
Notice what the law-firm frame exposes. Your ad spend alone is 2,800 ÷ 10,540 ≈ 26.6% of revenue — bigger than a law firm's entire real-estate line, and the fastest-moving number you own. If your cost per acquisition drifts up by even a few dollars, that 24.8% margin can halve without a single other line changing.
The operating expenses store owners underestimate
The categories that break budgets are rarely the obvious ones. App creep is the classic: a $20 subscription here, a $15 one there, and six months later you're paying for tools you tested once and forgot. Law firms watch technology spend closely for exactly this reason — askCody notes technology and knowledge-management costs were among the fastest-rising overhead lines in 2026.
Payment processing is another silent line. At roughly 2.9% plus 30 cents per order, it scales with volume, so it grows precisely when you feel successful. On the worked example above, that's over $400 a month you never explicitly decided to spend.
Refunds, chargebacks, and the POD-specific leak
The operating expense POD sellers most often ignore is the cost of things going wrong. A chargeback on Shopify Payments carries a $15 fee on top of the clawed-back order amount, per chargeback.io — and for print-on-demand, the product cost is gone too, because a printed item can't be restocked.
That makes disputes a real operating-expense category, not a rounding error. We walk the full math of a lost dispute, refund-versus-reprint decisions, and fraud triage in the ecommerce ops economics hub.
If you're also selling on a marketplace, the platform take is its own overhead line. Etsy's combined fees can approach 10 to 13 percent of every sale, according to Sherocommerce — a cost that looks small per order and enormous per year.
How to cut operating expenses without cutting muscle
The law-firm playbook is not "spend less." It's "know which third each dollar belongs to, and protect profit as a first-class line." You cut overhead that doesn't produce revenue, and you defend the spend that does.
Start by separating operating expenses from COGS on paper so your per-order profit is real. Then audit the recurring lines: cancel dead apps, renegotiate or downgrade tools you've outgrown, and treat ad spend as the variable it is — measured against the profit it returns, not the revenue it generates.
The deeper move is understanding how gross profit and operating expenses interact, because that's where your true operating margin lives. Two companion guides go straight at this: gross profit and operating expenses and gross profit minus operating expenses, which walks the exact subtraction that turns a healthy-looking top line into a thin — or negative — bottom one. If you want to see how a large, disclosed operating-expense statement is structured, the breakdown of J.B. Hunt's 2023 Form 10-K operating expenses shows the same categories at industrial scale.
Where Victor fits
The reason operating expenses stay fuzzy for most sellers is that the numbers live in different places — orders in Shopify, spend in Meta Ads and Google Ads, product costs in Printify, Printful, or Gelato. Nobody stitches them into one honest per-order figure.
That's the job PodVector AI built Victor, an AI employee, to do. Victor connects to your Shopify store, Meta Ads, Google Ads, your POD suppliers, and Klaviyo, computes your true per-order profit after both COGS and operating expenses, and delivers the reports to your Google Drive. Every write action Victor takes — including the customer-support emails he drafts — waits for your approval before anything executes.
See your real per-order profit with Victor
FAQs
Are operating expenses the same as cost of goods sold?
No. Cost of goods sold is what it costs to produce and deliver the specific item a customer bought — for POD, the supplier's product charge plus shipping. Operating expenses are the recurring costs of running the business itself, like platform fees, apps, ad spend, and tools. Keeping them separate is the only way your per-order profit reflects reality.
Is ad spend an operating expense?
Yes, for practical purposes. Marketing and advertising sit in the operating-expense (overhead) bucket, the same way a law firm's business-development spend does. For most POD stores, ad spend is the single largest operating expense — often larger than every other line combined — which is why it deserves the closest watch.
What percentage of revenue should go to operating expenses?
There's no universal number, and store economics differ from professional-services economics. For context, LeanLaw reports the typical law firm spends 45 to 50 percent of revenue on overhead. The useful discipline is the Rule of Thirds mindset: benchmark each category against revenue and treat profit as a line you plan for, not what's left over.
Why do operating expenses matter more for print-on-demand?
Because POD margins are thin and your costs are almost entirely variable and recurring. You hold no inventory, so there's little fixed asset to leverage — every order carries fresh COGS, and your overhead (ads, apps, processing) scales with volume. When product cost is unrecoverable on a refund, disputes and returns become a real operating-expense line, not an afterthought.
How do I track operating expenses across Shopify, ad platforms, and suppliers?
Manually, you'd export from each platform and reconcile them in a spreadsheet every month. The alternative is connecting your live data so the numbers combine automatically — which is what Victor does across Shopify, Meta Ads, Google Ads, your POD suppliers, and Klaviyo, computing true per-order profit after both COGS and operating expenses.