THE NUMBERS DON'T LIE: PROFIT & LOSS STATEMENT
Make informed decisions for your new (or already successful) business with the unlocked facts and figures of a P&L Statement.
You may be asking yourself why you need a Profit & Loss Statement. The top-level answer is simple: to make informed decisions for your business.
For any new business, a P&L Statement allows you to understand all of the different cost elements that will affect your business. It's essential to know what you're dealing with, and how much you have to spend on the growth of your business. P&L Statements enable you to make completely informed decisions on your budgets, your spending, and your profitability.
Something I have seen over the years, especially with new entrepreneurs and startups, is that some business owners don’t always know their profitability. In a brand new business, it can sometimes take 2 to 3 years for the startup to become profitable. This is understood, but we need to know what those numbers are, and more importantly, what needs to happen to start earning a profit. Entrepreneurs are working hard to do the right things to make their businesses successful, but at the end of the day, if they aren't making any money, that is a concern that needs to be identified and rectified.
Most entrepreneurs are good at knowing their product/service price point, and cost of goods, but unfortunately other expenses are often overlooked. In addition to the variable costs (costs associated with the actual sale), you need to consider your operational and fixed costs such as rent, administrative costs, salaries, utilities, subscriptions, bank fees, travel (in the good old days), marketing of course, any and all costs to the business must be taken into consideration when calculating your end profitability.
Together, we need to get to a place where your business is viable. This is where we come in…at the onset to help calculate the numbers, define a plan of action, and implement the right strategies to best ensure success and profit.
P&L Statement is an Integral Part of a Marketing Plan
What many of our potential clients do not realize is that, as part of ThinkHatch's discovery phase, we initiate discussions, and ask high-level questions about your sales, pricing methodology, costs, etc.
We then take away and quantify our findings to create a P&L Statement, on your behalf, to help the business owner discover and realize all of the elements involved. We help look at costs and identify any gaps in the business that may exist, such as the need for a lawyer, an accountant, an additional sales representative, etc.
A P&L Statement provides valuable elements to start budgeting for as part of your business operation. As a business owner, you need to know your numbers and financials to make informed business decisions on how to move forward and to make plans on marketing for future sales.
For most entrepreneurs, things like financial statements may be a daunting task, or just something they are not comfortable with. Working with a partner that understands the value and can do it for you, is quite honestly, priceless. Your accountant may be providing a financial outlook, but we at ThinkHatch look at the numbers through a much different lens. We do it to help inform larger business decisions. We discover and recommend strategies and tactics on how to market your business, how to look into investment opportunities, and how to earn your success and profit in the end.
I think of a P&L Statement and financial documents as one piece of the overall puzzle. For a successful business launch, we aim to help to create a cohesive plan with all of the pieces considered, so when we make our strategic recommendations, we are doing so from a place of knowing versus not.
Is a P&L Statement Necessary?
A P&L Statement is something anyone and everyone should create prior to a launch. It is a living, breathing document that changes and should be looked at regularly. Ask yourself, how often do you look at your personal banking statement? Why wouldn't you do the same for your business? When you first build your P&L Statement, the numbers in place may be estimates. It is important to continually update your financials with real, actual numbers, and always look at the most accurate information as possible.
In my opinion, it is best to update your P&L Statement quarterly at the minimum, however some prefer monthly updates, which is great! The best part is that with readily available accounting and bookkeeping tools such as QuickBooks, FreshBooks, Wave, or Sage running timely reports is easy. We can then help pull out the valuable information and the meaning of the data collected.
ThinkHatch will also leverage the expertise of our in-house Chartered Accountant, Irene Lee, to build P&L Statements when required. Our strategic team gathers and hunts all of the valuable information and Irene then builds and interprets.
The Bottom Line
People go into business to make money. Even a not-for-profit initiative has to manage its commerce to build its programs. Knowing your basic financial statements is essential to running any type of business. The risk of running an unprofitable business and making bad financial decisions is a risk that is easily avoidable when you equip yourself with the right information!
We have the proven expertise and experience to help.
Let's get started with the discovery phase and see what's in store for you and your business. Who said math can't be fun…we tend to disagree. The numbers unlock so much potential, and being in the know is essential.
Sarah Benteau, Director of Growth
Sarah Benteau has over 15 years of sales leadership experience managing sales departments and budgets. Sarah takes an action-oriented approach to provide counsel to clients, creating growth strategies, and scaling businesses. She is passionate about helping startups and small-medium businesses win and believes that having a plan is key to that success. Whether it is building a customer journey, path to sale, enablement plan, or systems flow, Sarah understands the mission of a business and envisions a way forward to achieving it. She sees local economy as the cornerstone of our society and believes the more people she can help to get started successfully, the better for everyone. Sarah is currently pursuing her MBA Degree with the University of Fredericton.