Understanding the P&L

The P&L is the language the rest of the business speaks. As a revenue leader you must understand which line items you own, which you influence and which you do not control.

The P&L (profit and loss statement) is the language the rest of the business speaks. Revenue (the top line) minus cost of goods sold equals gross profit; gross profit minus operating expenses (sales, marketing, R&D, G&A) equals operating profit (EBITDA).

As a revenue leader you must understand which line items you own, which you influence and which you do not control. You own the revenue line. You own most of the sales and marketing operating expense lines. You influence cost of goods sold (through the deals you sign) and customer support cost (through the customers you bring in).

Critically, you must be able to explain your forecasts and your asks in P&L terms. The board does not want to hear about activity, calls or opportunities. They want to hear about impact on revenue, gross margin, contribution margin and operating profit. Translate your function into their language and your influence compounds.