Why sales professionals should care about P&L
Hi UWS achievers! In this post, Crystal Stephens, Director of Sales at Womply, has created an excellent overview to define P&L and why, as sales professionals, we should care about those of our employers (those of us self-employed are either well-aware or will be very soon regardless). I’m grateful she agreed to this subject because to those of us non-quants (probably a majority, with me very much included) it can appear dry, so it’s not necessarily easy to inject life into, but a significant amount of her background is in finance & P&L management so she can summarize and help us understand why they matter from experience. Her focus is a helpful take for those of us already P&L-aware because I’ve observed we’re typically only mindful of those of prospects and customers. With that, take it away, Crystal!
Gone are the days where P&L rested solely on the shoulders of senior executives. It should not be left to accountants and CFOs to worry about alone. If you are fortunate enough to have a company who goes over this in your monthly or quarterly meetings, resist the urge for your eyes to gloss over because the message is important.
This can be a meaty subject, and if all you take away from this article is to schedule time with your finance team to understand how the business operates, then I have been successful. We will discuss what P&L means, why discounting your product as a sales professional can be harmful, and a quick call to action.
Let’s get started!
The math here is simple, (revenue - the cost of doing business) = Profit and Loss (P&L). This is important if your company is looking to scale, maintain or grow current margins, make investments into new revenue streams, or attract investors (which are most companies). Some also look at only EBIT and others take it to EBITDA, which simply adds in a couple more calculations. I suggest getting with your finance department to understand how they view the business.
Let’s say you were the Head of Sales, for a 50 person org. and you’ve been in business about 5 years. You want to pitch opening another location, but you are unsure if you should explore this option or not. First thing you should do is look at your most recent P&L. Let’s say it looks like this:
(Table in 000’s)
Cost of Goods
Salary, Benefit & Wages
EBIT (Earnings Before Interest and Taxes)
Now, what happens if all of a sudden, sales professionals start discounting the product? With every discount we give a customer, the quicker we chip away at our net income. You may think 30% is nothing, but in this case, 30% off your top line would put your dream of opening another location in jeopardy.
Why do I care about P&L as a sales professional?
70% of companies will not make it past 10 years.
Several studies have been published over the last several years looking at how long businesses survive, and the number is alarming. Now, sometimes you go into a year understanding that you will operate at a loss, but it’s everyone business to make that loss as small as possible. Alternately, if you have consistently grown revenue month over month and you see on your P&L statement you are starting to lose steam, there is no sense in sweeping it under the carpet. The company’s financial wellbeing should be something that we are all accountable too.
Frequently sales professionals erode top line numbers with unchecked discounting
A great way to erode your top line is by allowing unchecked discounting. Things like bulk pricing and non-profit discounting, indeed have a time and place. However, if you are offering a discount on 50%+ of your deals, there is probably some digging you need to do. A frequent unintended consequence of discounting is that you have to actually work harder to hit your target. Just because you have the ability to discount, does not mean your target changes.
If this applies to you, ask yourself why you feel the need to discount as a sales professional? Is it the only way to create urgency? Is it because you are unsure where to take the conversation? If this indeed applies to you, get with your sales coach. Perhaps it’s your product and you’re struggling to find market fit. Usually it’s a sales skill issue and one you can overcome with assistance. No company is the same, so partner with your coach to devise a plan on how to adjust this behavior. I have consulted for several companies in the past both large and small and it’s not just an issue for the little guy trying to make a name for themselves, it infects larger organizations as well. If discounting is a normal step in the sales process you are unintendedly hurting everyone at the company. We can solve this issue while still putting the customer first and protecting your top line.
Overall, keeping an eye on your company’s finances is more than just something that should be left to just an executive. Sales professionals frequently sell themselves short and they have so much information that is valuable to the company. Besides driving top line numbers, sales professionals also can be the voice of the customer, help the company understand what the market wants and help us keep our P&L in check.