Make Data Your B*tch: How to Tackle Your P&L Report
I’m currently working with a client who doesn’t have a profit and loss statement. Gasp.
Oh, I know.
The process of getting this client set up with solid reporting got me thinking about the importance of tracking the right items. As appalled as you may be by the absence of a P&L report, it’s just as much of a marketing sin to track useless information. This is true for any of your reports.
Now, you may not think your current report is useless. But let me ask you: how often do you take insights gained from that P&L report to direct your business or marketing strategy? If the answer is not very, it may be time to rethink your set-up.
Creating a Profit-driving Profit & Loss Statement
Your P&L statement should provide you with significant, money-driving answers every month. Not there yet? Let’s start with some questions.
You should start with questions when tackling any reporting. For profit and loss statements, some of the most important things I urge my clients to ask are:
What are my most profitable products or services? Why and are there trends?
What are my most profitable times of year? Can I pinpoint why?
What are my most popular products or services? Is this also the most profitable? Why or why not?
What is the most common introductory product or service among new customers? In other words, is there a trend among the types of products or services purchased by first-time customers?
How you segment your P&L report can make a HUGE difference in how easily you get access to some of these answers.
But here’s the real kicker: most business owners don’t know which of these questions is most significant for their business. And how could you if you haven’t been tracking the right insights to see the trends?
Changing Your Conversation with Data
Below, I’ve listed a three step process for you to get some serious answers by changing the conversation between you and your data:
#1. Tweak your reporting for a month or two and be as detailed as possible.
Segment out by product type, different services, first time buyers, etc. to try to answer as many of your starter questions as possible. This step seems simple, but it takes a lot more creativity than you may think.
I previously worked with a non-profit dance studio. Within their P&L report, they segmented tuition income by youth and adult. While, yes, this was useful information in informing our strategy, if they were doing this exercise, they might want to segment by class type AND youth and adult (e.g. hip hop, ballet, jazz). This would tell them the most popular classes by age group, so they not only know the best content to highlight within their marketing, but also how to schedule more effectively.
Taking this example a step further, segmenting class type by first time attendees would allow them to understand how to drive new traffic and create incoming student packages.
#2. The deep dive.
This is your analysis. Now that you have the data segmented, it’s time to dig for answers. Each of your questions correspond with a piece of data.
An important part of the process is to make sure you don’t isolate the information for any one month, but instead, look for trends among the data between time periods. Spotlighting these trends will help you understand the most important components of your reports.
#3. Lastly, it’s time to clean up.
Now that you’ve examined the significant trends in your data, you want to make the “moving-forward” report is as sleek and sustainable as possible. Hopefully, you’ve ended this exercise with a handful of “AHA!” moments. However, there are also going to be a handful of questions you answer, that don’t lead to actionable insights. Flashing back to 8th grade math: not all trends will be statistically significant.
Let’s revisit the dance studio for a moment. Let’s say there’s not a correlation between class type for first time students, but there is correlation between the most popular classes for current youth and adult audiences. It’s probably not necessary to continue tracking first time student information (remember that data input takes time). If a piece of data is not providing you with a usable insight, don’t waste the space in your final report.
Clean up your report to include most significant information for your business, that will help you create more informed strategies.
You never want to report for sake of doing so. This exercise is meant to identify blind spots, not create more work. Longterm, it should create less work, because it’ll allow you to avoid the guess and check method.
Like I mentioned, data input takes time. Always start with a goal in mind (i.e. questions) to make sure your reporting time is leading to strategy.
Having trouble dissecting a specific report? Shoot me a message and I’ll provide customized advice.