Unveiling Profit Secrets: The Math Behind Your P&L

December 19, 2023

Alright, let’s cut to the chase about your monthly Profit & Loss statement (P&L). No magic tricks, just straight talk. When set up right, your P&L isn’t just a document; it’s a guide, showing you where your Custom Integration (CI) company is shining and where it needs a bit of polish.

The key? Profit Math. It’s not complicated, just simple arithmetic:

GM% – COMP% – MOC% = NOP%

Breaking it down, GM is your Gross Profit, COMP is Compensation expense, and MOC is Major Operating Costs. The result – NOP (Net Operating Profit) – is the bottom line of your financial health. If GM is 60%, COMP is 30%, and MOC is 10%, then NOP is a solid 20%.

An NOP of 20% is the sweet spot, and that’s what the blue on our scale means. It’s a classic profit model we call 60-30-10.

Can a CI company hit a 60% GM or higher? Absolutely! In our system, where everything except actual goods and related discounts is an expense (COMP or MOC), a GM of 60% or higher is pretty standard. Keeping a handle on Compensation and Operating Costs leads to a killer NOP. 

And here’s the thing: Understanding your numbers is one thing; turning that knowledge into action is another. That’s where the rubber meets the road. It’s not just about knowing; it’s about doing. 

Ready to turn insights into strategies? Schedule a free call with us! 

Stay focused and stay VITAL,

Matt & the team

Tailored Metrics for Your Business

Ever tried comparing your success metrics with a friend’s, only to end up confused? The VITAL Method sets standard industry practices in accounting, productivity, project management, leadership, bid management, and warranty support.

In our view, business excellence involves systematic approaches, accountability, and keeping a close eye on the numbers. Wondering how to weave these practices into your business? We’ve got you covered.

Embark on Your Data-Driven Journey

Ready to make informed decisions for your custom integration business? Schedule a free 15-minute call with a VITAL Guide – your first step towards a future where your business decisions are rooted in practical data and strategic insights. Dive into the VITAL Method and transform your business today.

Stay VITAL,

Matt & the team

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