P&L: What You Should Be Looking At

The question, “What is a profit and loss statement and why do I need to look at it?” comes up often enough that a brief explanation is in order. One thing that I’m always amazed by is the willingness of hearing healthcare professionals to open a practice with very little formal business training. Your passion for helping others probably got you into this business, but your ability to run your businesses successfully is what keeps you in business.

Many owners may be in business for years before they see a profit-and-loss statement. Even if someone else is taking care of your bookkeeping or accounting, it is vital to understand this tool. It’s your gauge for knowing how successful the business is, and it provides great information for setting goals. It can show trends that warn when the business is failing. It can also give you clues about how your business can grow.

The most basic function of a profit-loss statement is to determine your gross profit and net profit. Gross profit is the difference between cost of goods sold and total sales. Net profit is the difference between your gross profit and total expenses. Net profit is the bottom-line dollar amount that the business earns at the end of the day.

A profit-and-loss statement can usually be generated electronically through accounting systems such as QuickBooks or Peachtree. Your accountant can also generate one based on the information you provide. Usually a profit-and-loss statement begins with your income. Details are helpful here. For example, you can break down each sales category separately to serve your needs. I suggest creating categories for hearing aids, hearing tests (sub categorized if your office provides specialty testing), ALDs, Ancillary Care Products, Repairs.

The next category is the cost of goods sold. This is how much you pay for your products for resale. The breakdown of your cost-of-goods-sold categories should mirror your sales categories. That way you can calculate individual gross margins for each category.

Again, subtracting the cost of goods sold from your total income will leave you with your gross profit. This is how much money you have made before expenses.

It is extremely important to list all of your expenses. Some of your basic fixed expenses will be utilities, rent and insurance. These are expenses that should remain consistent and that you have limited control over.  It is also important to have your variable expenses listed. These are expenses that in many cases you can control. Some of these would be advertising costs, travel and entertainment, and charitable contributions. By tracking your variable expenses, you have the ability to help your company be more profitable. If the practice’s gross margin declines for some reason, these expenses can be reduced.

Some of the other standard expenses that will show up on a profit-and-loss statement are labor costs, professional fees and office supplies. These again are expenses that can be reduced when the practice’s profits are not in line with the owner’s goals.

Last but not least, don’t forget to create categories for any additional expenses that come through the business such as licenses, dues and subscriptions, and postage and shipping. Interest on loans that you pay, or bad debts you can’t collect, should also be added to your profit and loss statement.

Finally, get into the habit of viewing your P&L at the beginning of the month, mid-month and at the end of the month.  Doing so will help you to use your P&L to accomplish three very important things.

  • Plan
  • Problem Solve
  • Analyze

Reading this was probably a painful process.  There’s only so much humor you can inject into any article related to Accounting.  I hope you made it all the way to the end and I hope when you’re done reading the article, the very next thing you do is go look at your P&L.

Are You Setting Your Business Apart?: Tips to Effectively Sell

What do you offer to your clients that make you stand out from your competitors? Now, are potential customers aware of this? If they’re not then you’re not effectively selling your product or services. If you don’t even know what makes you better than your competitors, then, let’s be honest, you need to figure it out.

What Sets You Apart?

Entrepreneur magazine sums it up best. “ A USP stands for “unique selling proposition.” It’s the thing that makes you unique in the marketplace—it’s what customers can get from you that they can’t find anyplace else. Having a clear USP gives you a clear response for these questions:

  • How are you unique?
  • In what way are you different from your competitors?
  • Why should I buy from you, rather than from someone else?
  • Why should I care at all about you or anything you sell?”

Maybe you don’t know what can make you unique from your competitors? Here are some things that can give you a niche that you may have overlooked:

  • The buyer you serve
    • Do you sell to a specific age group? Gender? Religion? Do they have a specific problem that you can fix?
  • What you sell
    • Is your product unique in some way? Are YOU the thing for sale and your personality is what sets you apart?
  • You have an unusual angle
    • Are you available when no one else is, such as on holidays or around the clock? Do you promise a specific outcome or unusual level of service? Maybe a unique payment plan?
  • What your product or servicedoes not do
    • A perfect example of this is when food products advertise that they contain no GMOs. Is there something your product does not contain or do? Is there something you will never do while providing a service, like never being late?
  • The time frame around your offer
    • Do you promise results within a set amount of time or for a set amount of time?
  • How you guarantee your product
    • Do they get results or their money back? Do you offer an extended warranty?

And How Do You Sell It?

Chris Brogan, consultant, CEO, and master seller gives great advice. “You’d be surprised what goes into really good selling. It’s not all that complex, though there are mountains of things you have to learn to make this work better and better. I’ll tell you what I’ve learned are the elements of good selling:

  • Know who you serve and what they want. If you don’t know your buyers, you don’t really have a product or service, do you?
  • Know what you sell and who will most benefit from it. And by this, I mean with clarity. Know what exactly the rewards of owning what you sell will be. Know how to explain this to people.
  • Master the buying cycle. Selling a house is way different from selling software. Selling deals is trickier than selling insurance. Some take more time. Some take less. Learn it yourself, and/or ask others who sell what you sell for their tips on a buying cycle.
  • Master their language. People won’t buy if they think what you sell isn’t for them. It took us months (maybe years) to nail down how to talk about what we offer. “Simple plans for business success” is what we say, but those five words have a LOT of meat tucked into them. But what matters most about them is that the people we serve (you) helped us define what that means.”