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- Katie Caldwell
- November 8, 2020
- 11:25 am
What is a profit and loss statement?
The first thing you need to know about profit and loss statements (P+L statements) is they go by half a dozen different names, just to make things more difficult for you. They may also be called:
- Income statements
- Revenue statements
- Earning statements
- Operating statements
Understanding P+L statements
Profit and loss statements all follow a simple, standard formula:
Sales – Costs = Profit / Loss
You might notice a similarity with a balance sheet. Like balance sheets, a profit and loss sheet is a way to represent complicated info in a simple manner.
The issue comes when items start being labelled on the P+L sheet. Sales might be referred to as fee income, or revenue. Costs might also be referred to by another name, commonly expenses.
Each of these headings can be broken down further. For example, operating costs could also be subdivided into:
- Internet fees
- Cell phone fees
- Hosting costs
How to organise a P+L statement
Generally, sales is at the top of your P+L sheet. It might also be called Income, Revenue or Fees.
Below Sales is generally Costs, with total Profit or Loss at the bottom.
There are various methods your bookkeeper might use to set out your P+L statement, there might be several subtotals as you read down the statement, but at the end of the day, the basic formula still stands.
Sales – Costs = Profit
On your statement, sales and revenue might be divided into multiple streams. As an example, a gas fitter might have revenue streams for hours worked, emergency call outs and designing heating systems for commercial buildings.
As a business, the decision might be made to split the revenue into these streams to make it simpler to assess the effectiveness of each income source. Either way, below them all they might also be added together in one final line, totalling the revenue figure.
Sales can be broken down in the same manner. Using our tradesman example, there might be categories for materials, transport and marketing costs.
There is no fixed way to break down your sales and revenue streams. It tends to come down to the needs of the business and the methods used by your accountant.
How to break down costs
One of the most common and effective methods to break down your costs is to divide it into two categories:
- Costs necessary to deliver your service
- Costs that are not necessary to deliver your service
Costs to deliver your service are generally referred to as COGS, or Costs of Goods Sold.
Using our example, necessary tools and materials that are used to repair and install heating systems would be a COGS for our heating engineer.
If there are no direct goods purchased, for example in a service business, then it is referred to as COS, or Cost of Service. This is the operating price of the people who deliver the service and their transport costs.
Gross Profits
Gross profits, which might also be referred to as Gross Margin, can be represented by the following formula:
Sales – COGS = Gross Profit
Gross profit is how much the business makes after the costs of running the business are taken away from the costs necessary to deliver the product.
Other Costs
If you’ve ever run a business, you soon realise that there are a huge amount of incidental costs, that aren’t associated with directly delivering your product or service.
Example costs are the cost of meeting with clients, costs of outside marketing teams or the actual costs of your accountant.
The term for these costs is Selling, General and Administrative Costs (SG&A)
Adding this to our P+L statement, we come to the following formula
Sales – COGS = Gross Profit;
Gross Profit -SG&A = Profit / Loss
Understanding the meaning of your P+L Statements
Like all statistics, there’s deeper meaning behind the numbers. Once you have an understanding of the parts of your P+L statement, you can watch the changes happen over time, see the ups and downs of your business due to outside effects or the effects of marketing campaigns, and begin to use them to predict future performance.
Using this information, it becomes easier to decide how and where to invest further money and time. Despite the fact that reviewing figures like this generally isn’t the most fun use of your time, understanding your P+L sheets and using that information effectively is one of the best ways to improve your business, for both you and your customers.
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John Preston
Mathnasium, Managing Director (UK) & Master Franchisee
John is a former investment banker that quit the city to scratch that entrepreneurial itch and become a franchisee, whilst making a difference in children’s lives. John has successfully scaled his own network of centres as well as scaling Mathnasium and supporting it’s network of franchisees in the UK. John is passionate about franchising and improving the lives of others, whether that is helping students who struggle with mathematics or assisting franchisees to become leaders of successful businesses.
Katie Cannon
Gold Medal Business
5 x British Champion turned 7 figure entrepreneur Katie Cannon has been in the children’s activity industry for the last 20 years.Over the last 20 years, Katie has been in the trenches building classes in gyms, studios, leisure centres etc. She has owned gyms, closed gyms down, hired amazing teams and let teams go. You name it, she has done it in this industry.
Katie now teaches entrepreneurs in this industry to uplevel their business systems and teams to scale their business. One of the key attributes which makes gold medal truly unique is she not only brings her 20 years of experience, she is still in the industry today, bringing 20 years of knowledge plus whats working today.
Andy Georgiou
Andy is the Founder of ICAP and a leading UKFranchise Business Consultant. He is fiercelycommitted to helping children’s activityproviders build successful and profitablebusinesses. With qualifications in BusinessManagement, Digital Media and Marketing, hehas helped build, advise and grow leading 6and 7 fiqure children’s education, sports andactivity brands in the past 17 years.
Theo Millward
Theo Millward is a graduate of Lancaster University with a BBA in Management. In 2016 Theo purchased UK swim school, Swimtime from the founders which teaches 20,000 children a week. Following a multi-award- winning digital transformation, during the global pandemic, Theo and his team founded Franscape, a saas that digitally transforms Franchise brands. FranScape won New Business of the Year at the UK Business Awards.
Pip Wilkins
Pip Wilkins is the Chief Executive of the British Franchise Association (bfa). With 25 years’ experience in the franchise sector, Pip has worked her way up within the Association, gaining insight from all areas of the business and the franchise industry. She is well-known and highly regarded in franchising for her dedication and depth of knowledge. Pip regularly speaks at conferences and seminars both domestically and internationally, as well as writing on franchising matters for national, local and franchising trade press. Pip is also a regular judge for the annual bfa HSBC Franchise Awards, the Franchise Marketing Awards and Global Franchise Awards.Pip represents the UK at both the European Franchise Federation (EFF) and World Franchise Council (WFC). The bfa has grown to be one of the largest franchise associations in Europe, and one of the most successful associations in the world.
Craig Jones
Chief Children's Experience Officer
Craig has over 30 years’ experience working with children and young people in the education, sport, health & fitness and childcare industries. Craig is a high energy professional, with a passion for providing high quality, engaging experiences that are sustainable solutions to childcare and children’s activities, with a focus on increasing physical activity levels within children and young people. Craig’s approach is nurturing, developing and supporting the best people to manage, lead and inspire children’s professionals within organisations. A results orientated individual with experience across the UK and in Europe, including mergers & acquisitions along with implementing Children/Family strategies across 5 countries, including; product development, financial/operating models, training, H&S, Compliance and full stakeholder engagement from Board level to Government.
Ackora Ansah
Marketing Manager - We Make Footballers
Having previously navigated the dynamic world of marketing with beauty industry leaders such as L’Oreal, Clarins and Unilever, I’ve gained a breadth of experience in how to acquire customers and grow brands.
Now, as Marketing Manager at We Make Footballers I support over 50 franchisees across the UK, US and UAE to scale and grow in an ever-changing landscape through strategic local marketing. Alongside this, I run 3 of my own We Make Footballers franchises and so look forward to sharing my learnings from both perspectives.
Tamara Holland
Marketing Consultant for Children's Activities Providers
Tamara is the award-winning expert behind Dot & Stripe, a marketing consultancy for children’s activities providers and family focused businesses.
Tamara works with franchisors, franchisees and independent businesses to nail down the best marketing strategies to get them results and has over 20 years’ experience across the marketing mix.
She’s also been on both sides of the children’s activities industry – as a franchisee and leading the marketing for a franchise.
She has literally got her hands dirty- so she really gets it. You want to share your amazing activities business with your perfect customers- but finding the right direction, time and resources can be tricky.
Tamara has truly got the expertise, the support, and the accountability to make sure your marketing is not just done but done in a way that’s absolutely perfect for you.
Alexis Boyett
Bippity Boppity Bankrolls / Business Coach + Speaker
BECOME FRIENDS WITH THE VILLAIN WITHIN: HOW TO TURN YOUR INNER-CRITIC INTO YOUR BIGGEST SUPPORT SYSTEM
No amount of positive thinking will overpower an engrained negative belief. Regardless of how hard we try, how many therapists we talk to, or how many meditations we do, nothing seems to silence the inner-critic within. So instead of trying to silence it, what would happen if we started to communicate with it? As someone who struggled with a poverty mindset, eating disorders, bullying, toxic relationships, and no support system, Alexis understands how loud and how powerful your inner-critic can be. Instead of giving into the voice, Alexis learned how to harness the power of it and use it to master her self-love, propelling her into her dream life. In the past 15 years she has been a professional model/actress in Hollywood, run a nationwide company, traveled the world full-time and become the most influential business and personal development coach in character entertainment. It all started when she learned how to communicate with her inner critic and use its voice as the compass to her dreams. In this keynote, you will walk away with: A new understanding of your story and how it affects your business How to communicate with your inner critic to support your vision How to self-soothe when the villain within is on a rampage
Bea Waterfield
Owner & Franchisor Baby College
I’ve been working in the sector for 20 years. In that time I have been a franchisee, an independent business owner and a franchisor. I have come through a few challenging times (especially the last few years) along the way but have built Baby College to an international network of 30 businesses in the last 10 years in a sustainable way with a consistent profitable self-sustaining business year on year. I don’t think there is a very clever secret to that. Looking back I think I rely on hard-work, determination, courage, indefatigable positivity and to be friendly to everyone…
Gayle Berry
Founder of global parent & baby wellness business, mentor & philanthropist
Gayle Berry-Founder of Blossom & Berry, BA, Dip. Law, PGCE, IAIM, Birthlight, Dip Hypno, Clinical Hypnotherapist, Life Coach ITEC Massage, Author, Pregnancy and Post Natal Yoga Teacher, Children’s Yoga Teacher, Doula & Sleep Consultant.)
Gayle is a love activist, community architect, the founder of Blossom & Berry, an expert on baby massage, baby yoga and nurturing care for babies and the world’s leading mentor for parent and baby businesses.
Gayle is the mother of three amazing humans who have inspired her journey to teach love to millions of babies through her connected community to create a more peaceful and joyful life for all.
Gayle has over 20 years of experience empowering others to share the power of nurture and nature for families across the globe.
Gayle is an advocate for nurturing touch for babies, a multiple publisher author, and speaker on “Nurturing The Future-1001 days to save the world’
She is also very proud to be an ambassador for a number of mother and baby wellness brands and she is Channel Mums’ Baby Massage Expert.
In more recent years Gayle has mentored the world’s leading birth and baby schools to expand and scale their impact to create even more connection. Everything she does comes from a place of love, connection and community
Contribution is also a huge part of her why. She is the co founder of the charity Love Support Unite where she has enabled a safe motherhood project for mothers and babies in poverty in Malawi impacting hundreds of vulnerable babies.
“All babies deserve to be seen, heard and express their needs. When we respond to babies with love, we teach that the world is a safe and loving place and help children reach their full potential.”
Sarah Booth
Xero - Partner Consultant
My passion has always been to help business owners understand the numbers and how a great Accountant, along with cloud software, can provide the financial data they need to make the best business decisions. Prior to joining Xero I worked as a qualified Accountant and specialised in supporting my clients to understand their business financials in real-time. Working with Xero has given me the opportunity to support Accountants across the country in adapting to the cloud, improving their processes and ability to provide insights for their clients business.
Lou Willis-Keeler
CEO of Psych-Logical (Safeguarding and Behavioural Consultancy)
An international safeguarding consultant with over twenty years experience in safeguarding and behavioural science . Working with a wide range of organisations, across sectors to ensure compliance as a minimum and outstanding practice as a reality. Lou has depth of professional expertise working with a variety of organisations and before forming Psych-logical was an area manager with the NSPCC / ChildLine. She has been commission by the Department of Education to develop best practice resources and is work on professional standards for the out of school settings.An energetic, innovative and engaging speaker who simplifies safeguarding and makes it accessible to all.
David Batch
Premier Education Group
Last academic year, Premier delivered 723,815 hours of activity in over 10% of the nations schools. In addition, as the largest supplier of School Holiday Activity days in the UK, over 20,000 parents have given a 5-star Trust Pilot rating. Premier represents the sector on several Dept. of Education steering groups and was winner of ‘Best Business Culture’, at the 2023 Business Excellence Awards.David founded Premier 25 years ago and since then, the group has grown to encompass businesses which include a mother and child fitness franchise, a school improvement business and is an Ofsted rated ‘Outstanding’ Independent Training Provider.
Natalia Shvarts
Franchise Lawyer
Natalia is an experienced franchise solicitor who is passionate about her clients and their success. Having worked with franchisors, franchisees and spent time in-house, Natalia really has seen it from both sides of the fence. Natalia is a member of the BFA and is a regular contributor to franchise publications and franchise events.
Ellie Baker
BilinguaSing
After 10 years in the UK education system, Ellie quit the classroom to set up her award-winning children’s language & music class company, BilinguaSing, which she franchised in 2014.
Today Ellie uses all of her teaching and business experience to coach educators to become business owners, writes about education and helps her network of BilinguaSing franchisees to thrive in their businesses. In 2023 she authored her first solo book, The 2 Hour Tutor; which reached the #1 spot in 3 educational categories.
She’s an ‘extroverted introvert’ who dreams of living a nomadic life, educating her 3 kids while travelling the world; but for now lives happily in sunny Maidenhead.
Stacey Cann
Franchise Marketing Strategist
Stacey Cann is an award winning franchise marketing strategist who specialises in helping franchisors create successful franchisees and make more money in their business. Stacey has 20 years marketing experience, working with global companies, including Chelsea FC, Jellyfish, BT, Sports Direct and The Telegraph. Marketing training and empowerment is at the heart of everything Stacey does. Her work has been featured in numerous press articles, including; The Sun, The Metro and iNews. Stacey is a franchisee and Franchise Development Coach for multi-award winning Daisy First Aid. She consistently helps new franchisees with no previous business or marketing experience to start making money immediately and hit their initial goals within 6 months. Her proud moments include Daisy First Aid being awarded the British Franchise Association 2023 Continuous Improvement award and helping numerous women successfully leave their previous jobs to become profitable franchisees to fulfil their dreams of independence and work-life balance. Stacey lives in Surrey, UK, with her partner and 3 children and is also a passionate advocate of parents’ mental health following her own experiences as a self-employed mum.
Karl Fox
Franchise Support Director
I’ve worked in the franchise industry for nearly 25 years, building a successful multi-territory franchise business which deploys over 100 Activity professionals and Playworkers.Utilising my experience within my role as Director of Franchise Support for Premier Education, I support our franchisees to build successful, sustainable busineses as we continue to grow our wider network.
David Pearce
Owner / Director - Rhythm Time
Following a successful corporate career as Divisional MD of a FTSE 250 PLC, I started helping people to get into Franchising in 2008. I have been involved in many different Franchise Businesses as a Franchisee, Franchisor and as a Consultant and Coach to Franchisors. My advice has been sought by a variety of leading UK and International Franchise Brands. Finance & Numbers form a fundamental part of any successful business and I am passionate to help others to get to grips with their numbers!
Al Wadey
Book That In, CTO
Al Wadey is the CTO of Book That In, the market-leading booking system for activity providers in the UK, and is also the Vice President of Strategic Consulting at Aprimo, the international software company. Al’s extensive background in business change, digital transformation, and strategic consulting, especially his role in leveraging technology for superior customer experiences, positions him as a leading authority on innovative strategies. His blend of technical prowess and commercial insight, paired with his experience in guiding businesses through digital evolution, means he will be bringing a unique viewpoint to ICAP’s strategy panel this year.
Phillip Archer
Business Planning & Funding Manager
Phil joined d&t in 2019. Background in sales & marketing in asset finance and funding spanning more than 30 years.Responsible for growing the commercial side of d&t to include fully independent business planning, funding, asset finance and of course the full range of accountancy solutions.Recently with Franchise Finance which he joined following a career with roles in the UK and across Europe starting with Lombard/Natwest group and latterly with Renault Banque and SNCF, the French state-owned rail goliath.Phil has a wide and diverse background, grounded in pragmatism and is passionate about supporting both new and existing franchisees on their journey.For a new Franchisee the proposition can be quite daunting and Phil’s goal is to help the franchise industry demystify and simply the business start-up process into one seamless and fully integrated solution.This avoids confusion, self-interest and contradiction and ensures a rounded, more holistic approach as your advisor becomes your trusted partner for the long term.Much of this is achieved by helping franchisees align their personal and business goals and in ensuring sound business planning practices become habits and management tools.Phil contributes to a number of industry publications and forums and is a judge for both Workbuzz and Elite100.
Frank Sahlein
Frank has been active in the Children’s Activity Center industry as an athlete, coach, business owner, consultant and business broker. He is a native of San Mateo, California and graduated from San Jose State University in California (USA).
Frank was a pioneer of the Children’s Learning Opportunity Center concept from 1976 – 2016 at the Wings Center in Boise, Idaho (USA) – a blend of Sports Instruction, Arts, Education, Entertainment and Outreach programs.
As a business management innovator, Frank has delivered over 1,000 presentations for a variety of Children’s Activity Center industries such as gymnastics, swimming, cheerleading, dance, martial arts/ninja and child care/education.
3rd Level Consulting is a Business Development and Service Provider Partner for private industry companies, associations, and organizations in the USA, Australia, Canada, New Zealand, Singapore, the United Kingdom, Mexico, and Panama.
Two-time recipient of the National Business Leader Award from USA Gymnastics, Frank is the author of “Building Your Business Potential” and “Designing Your Empowered Life”. He is the creator of the SmartEDGE™ Business Applications and Management Certification Courses. He is the co-founder of LEAP Learning and the MetaSpheres Corp, and is the founder and Executive Director of the International Association of Child Development Programs.
His passions include his beautiful wife Lourdes Gonzalez, family, friends, fitness training, transformational reading and travel.
