I was excited to present at the Inc 5000 conference this week for my eighth year in a row. My presentation: Finding Your Growth Lane and Sleeping Well at Night, focuses on one of the new ideas I have developed over the past year, looking at and tracking our profit and loss statements differently.
Typically, the top of our profit and loss statements includes our variable expenses. These expenses include items such as the cost of goods sold, commission, etc. Therefore, they will go up and down based on our sales.
The bottom of our profit and loss statements includes all of our "other expenses." Things like our rent, marketing expenses, payroll, insurance, travel, etc. If you think about the costs at the bottom of our P and L’s, they could be broken down into two different categories: the money we have to spend and the money we choose to spend to try new things, grow, and expand our businesses.
The money we have to spend is rent, insurance, etc.; these are basic expenses to keep our lights on and keep the business running on time. The money we don’t need to spend, which I believe should now be tagged as investment expenses, are new items that we are testing or trying to use to grow and expand our businesses. These are investments we are making to get bigger, better, or different in the future. So whatever your investments might be, we need to track, monitor, and understand them.
If you took $100,000 and invested it in the stock market, you could log onto your account and see how your investments are doing. When it comes to investments we make in our companies, the information might not be as precise, but we still should have a similar understanding. How are we doing? Where should we double down, and what programs should we kill? You need to be asking yourself those questions.