Adding profit and loss (P&L) and details of financial performance to your listings is vital for buyer engagement.
- A profit and loss statement (P&L) summarises the revenues and expenses for a business
- Details of financial performance are verifiable screenshots or videos of revenue or traffic
A profit and loss statement (P&L) is a financial statement that summarises the revenues and expenses that a business incurs during a specific time period. The basic equation on which the profit and loss statement is based is revenues - expenses = profit.
Profit and loss statements are are always organised the same way regardless of the industry of the business. The purpose of completing the P&L statements is to demonstrate to prospective buyers the financial health of your company.
Buyers are really looking to see a monthly P&L broken down by line item for at last the most recent 3 months so they can see whats involved at present to operate and manage the business. It would really help your listing to have this present and you can use the template(s) in this article if you do not have one available.
Financial Attachments to Listings
As well as a P&L, it's important to add proof or evidence of revenue. Potential buyers are looking to see that the revenue that is claimed on the listing and in the P&L is accurate.
When adding this information its important that it comes from a reputable and reliable source - so the reporting section of the ecommerce platform were your business operates (Amazon, Shopify etc), the reporting section of your monetisation portal (Adsense, other advertising network) or any accounting software. Video walk-throughs are best, showing you logging-in and navigating through the reporting, but screenshots will suffice. Please note that buyers will almost certainly ask for a video call to go through this reporting.
Discretionary expenses are an important factor to keep in mind when reviewing your finances as they can greatly change the business profitability.
A discretionary expense is a cost or capital expenditure that is not 100% required for the operation and management of the business and could be reduced or even completely eliminated in the short term without having an immediate impact on the short-term profitability of the business. Examples of discretionary expenses are Advertising, Building maintenance, Contributions, Employee training, Equipment maintenance, Quality control, Research and development etc.
These types of expenses should still be present in a P&L in the expense section, however they should also be present as an 'add back'. The templates attached have this add back section.