Revenue, Costs and ProfitsMentor Session Denver

8/20/13

Key Categories for your P&L

Category Inputs Things to Consider/Monitor

Revenue Sources Recurring, One-Time, Installment, Subscription, Royalty, etc

Do you have a healthy Revenue/Profit Center mix i.e. LinkedIn or are you a 1 trick pony?

COGS Merchant Fees, Sales Commissions, Materials/Ingredients, Royalties

Less is better if you can design it that way

Gross Profit This is your usable cash (Revenue doesn’t matter)

Divide your SG&A total/GP% to understand your breakeven (i.e. $50,000 per month in SGA/.75= Breakeven of $66,667 per month Revenue)

SG&A Salaries, fixed overhead, insurance, etc. Keep it lean

EBITDA This is your excess cash flow and operating margin

You bootstrap from this number and create your reserves or organic growth line from here

Costs in the Startup World

Managing costs is really managing opportunity,

constraints, and accretive activities.

Bottom’s UP

• DO Address the unit economic

value of your offer and how

much it costs, converts, and

yields and what it takes to get

one.• DON’T project market size and

the percentage you think you

can capture.

Solve Really Big Problems Better

• Can we solve “_____” problem in a new way?• Can we get enough people to pay us to solve it for

them?• Can we get to economies of scale quickly enough?• What does it cost when not at scale and is it investable?• Will we pave a new road that we can “own” or merely

cut down the heavy brush for a future competitor to

speed past us?

Examples to consider

Revenue

“Revenue solves most problems over time because it buys you time; and although revenue is a great validator it can be worthless when costs are un-managed”~CJS

Costs

“Competition is the keen cutting edge of business,

always shaving away at costs.” ~Henry Ford

“In life, the first thing you must do is decide what you

really want. Weigh the costs and the results. Are the

results worthy of the costs? Then make up your mind

completely and go after your goal with all your might.”

~Alfred Montapert

Profits

“A business absolutely devoted to service will have only

one worry about profits. They will be embarrassingly

large.” Henry Ford

Remember: Numbers are SensitiveCHALLENGE YOUR ASSUMPTIONS MULTIPLE WAYS…TEST, REPEAT, TWEAK, and MASTER THIS!!!!!

FIND ME @chrisjsnook

And www.chrisjsnook.comSlides available at

www.slideshare.net/chrisjsnook