Financial Intelligence: Making Friends with Your Profit + Loss Statement
The Empowering Truth About Your Profit & Loss Statement
Let's talk about something that makes most entrepreneurs want to run and hide – financial reports. But here's the thing: we've discovered that understanding your Profit & Loss statement (P&L) is actually the most empowering tool you can have in your business arsenal. And we promise it's not as complicated as it seems!
We both remember the days of looking at financial reports with that deer-in-headlights expression. Sandy even had a controller in her brick-and-mortar business who would hand her detailed reports each month, and she spent years pretending to understand them completely (spoiler alert: she didn't!). But now? We get excited about checking our P&L because it tells us exactly how our business is performing.
Here's what we've learned: Your P&L is simply a snapshot of your business's money story. It shows your revenue (all the money coming in), your cost of goods (what you spend to create your offerings), and your other expenses (everything else you need to run your business).
Let's break it down with a real example. In Jenny's product-based business, Woodland Alchemy, understanding the P&L has been crucial, especially when supply costs increased due to tariffs with China. By knowing her numbers, she could make smart decisions about adjusting wholesale prices to maintain healthy profit margins.
We love that we're not intimidated by these numbers anymore. It feels incredibly powerful to look at our financials and know exactly what they mean. And here's something we want you to know – it's totally okay if you're just learning this stuff now.
Here's what we've discovered works best:
We review our numbers each month (though we usually wait a couple weeks after month-end for all the data to come in)
We use Quickbooks for our bookkeeping to keep everything organized
We regularly check our expenses to cut what we don't use (those sneaky software subscriptions add up!)
We focus more energy on increasing revenue than obsessing over every tiny expense
The most liberating thing we've learned? Breaking even in your first year is actually a win. Sometimes you need to spend money to make money, and that's perfectly okay. The goal isn't to become an accountant – it's to understand your business's story through numbers.
Understanding your P&L isn't just about the numbers – it's about feeling confident and in control of your business decisions. It's about making choices from a place of knowledge rather than fear. And honestly? That feels pretty amazing.
RESOURCES:
Teach on Marvelous
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