Profit and Loss

There are a few things that affect the profit and loss. Mostly it's made up of sales, cost of goods sold (COGS), operating expenses, taxes and interest, labor and labor expense, and finally the net income. The net income of the business is the "bottom line." What does anyone stand to make from this venture?

The business plan Profit & Loss Table is probably the most important. This shows sales coming in, expenses going out, taxes paid, and what's left over as net income or sometimes EBITDA (Earnings Before Interest Taxes Depreciation Amortization).

Profit and loss tables in a business plan can be very detailed or very limited. In working with some business plan writers in Atlanta, we concluded the right way is probably somewhere in between. Give enough information to show you have considered all the line items properly and accurately, but don't list every possible little expense. Our general rule is if it doesn't have at least a .1% impact on the bottom line, lump it all together in a miscellaneous line. Also, some people place depreciation on the profit and loss and methods on the cash flow. It's really just up to preference.

The profit and loss can also sometimes be called the income statement. Since the major lines in the report are gross income, net income, and earnings. The one time and "profit and loss" statement is inaccurate to use is when the business is a non-profit. Non-profits don't have profits; they have surplus and shortfalls in funding. Otherwise the financials operate nearly the same as in any other business plan.

Last, it's very likely that when approaching investors, the only report they will really want to see is the income statement from the business plan. Cash flow is good too but, bottom line, everyone just wants to see the bottom line.