Founders – Consider this easy way to understand your profit and loss
In the dynamic realm of entrepreneurship, grasping your company’s financial landscape is crucial. Amidst the whirlwind of establishing your realm, deciphering intricate financial statements can resemble navigating a labyrinth with a blindfold on.
But fret not, for your finance team holds the key to clarity: the Profit and Loss (P&L) waterfall chart.
Consider this straightforward profit and loss example:
Graph 1: Sales to Gross Margin Walk (2023)
Purpose: Gain insight into your cost of sales. What eats into my margins?Â
This table represents the contribution that each item of Gross Margin takes from Revenue.
Graph 2: Revenue to Net Profit Waterfall (2023)
Purpose: Track the path of revenue allocation.
This table represents the allocation of each component of the profit and loss as a % of revenue.
Graph 3: YoY change revenue – gross margin impact.
- Purpose: Understand how my gross margin has been impacted YoY by it’s components.
- How to read this graph:
- Column 1 = Increase in sales for the year compared to prior year.
- Columns 2-4 will tell you how much change is attributed to each line item of gross margin, from that sales increase.
- E.g for purchases – for every $1 of additional revenue, 1% savings in purchases were seen.
Table shows the % change of revenue and costs of sales when comparing 2023 to 2022
 Food for thought:Â
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7. Close it with a bang!
Always aim to inspire a sense of opportunity and partnership, encouraging potential investors to engage actively with your startup.
These charts offer a straightforward method to comprehend contribution.
Elevate their utility by comparing:
- month-to-month
- against budget
- per department
- per tracking category
- or any other pertinent angle.
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About Us
Co-Founders Ashley Law-Smith and Mike Mobilia are the principal advisors. Their extensive assistance has enabled numerous clients to leverage maximum advantages.
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Navigating the dynamic landscape of entrepreneurship can be challenging, but with our dedicated advisory services, we’re here to guide you every step of the way. Whether you’re in the early stages of ideation or seeking strategies for sustainable growth, our team of seasoned advisors brings a wealth of knowledge to address your unique challenges.
From crafting solid business plans to optimizing financial strategies, we specialize in providing tailored solutions to catapult your startup towards success.
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