How to Actually Read Your P&L (And What to Look For)

Most founders don’t avoid their numbers because they don’t care. They avoid them because no one has ever explained them in a way that actually feels usable.

A P&L (profit and loss statement) is often treated like a document you glance at once a month, maybe forward to your accountant, and move on. But when you better understand how (and when) to read it, it becomes one of the most powerful tools you have for making smarter, more confident decisions as a founder.

"The P&L measures the financial health of your business and it is important for all business owners to have this organized and updated regularly. It becomes the clearest decision-making tool you have," says Courtney Spritzer, co-founder of Entreprenista.

In other words, this is not just a report. It’s your reality check, your strategy guide, and your early warning system, all in one easy-to-consult place.

A Simple Version of a P&L

Let’s start with the basics. Here’s a simplified version of what you’re looking at:

Revenue minus Cost of Goods Sold (COGS) = Gross Profit

Gross Profit minus Operating Expenses = Net Profit

At first glance, this can feel overly simple. But each of these lines tells you something very specific about how your business is actually functioning and provides clear marching orders on what to do next. "The biggest mistake I see founders make is treating the P&L as a backward-looking report. It’s much more than that. It’s a forward-looking decision-making tool if you use it right,” Spritzer says.

Related: Your Ads Aren’t Profitable. Your Dashboard Just Says They Are.

1. Revenue

What it is
Revenue is the total amount of money your business brings in before any expenses.

What this actually means for your business
Revenue tells you what’s coming in, but not whether it’s working.

For example, you earn $50K a month and feel like everything is clicking for your business. However, if that revenue came from underpriced offers or high-touch clients that required constant revisions, it may not be sustainable.

In other words, revenue answers the question: Are people buying?
It does not answer: Is this a good business model?

Founder insight
“Revenue growth can be a vanity metric if your margins aren’t healthy. The P&L will show you this, but only if you’re looking at margins by project or by client, not just the top line.” - Courtney Spritzer, co-founder of Entreprenista

Related: How to Build a Revenue-First Personal Brand (Without Burning Out or Posting Daily)

2. Cost of Goods Sold (COGS)

What it is
COGS are the direct costs required to deliver your product or service. Think contractor fees, materials, or any labor tied directly to fulfilling your work.

What this actually means for your business
COGS tells you what it actually costs to make your revenue happen. For example, if you charge $5,000 for a project but spend $3,500 on contractors and team support to deliver it, the profit margin is tighter than it appears at first glance. This is where underpricing quietly shows up.

Founder insight
"Once I started tracking my true cost per engagement, I stopped underpricing and started making decisions about which clients and service lines to pursue based on real margin." -Joy Errico, Founder of Maven Row

3. Gross Profit (and Gross Margin)

What it is
Gross profit is revenue minus COGS. This is what you keep after delivering your product or service.

What this actually means for your business
Gross profit tells you whether your offers make sense before you even think about running your business. If your margins are thin here, no amount of marketing, hiring, or scaling will fix the problem. You will be doing more work for less return.

Your gross profit helps to inform you if your business is built on something solid or something shaky.

Founder insight
"I look at margins by product. If something isn’t generating the results we expected, I want to see that early, not at the end of the quarter when it’s too late to course-correct." - Courtney Spritzer, co-founder of Entreprenista

Related: How Women Entrepreneurs Can Access Capital Before They’re Profitable

4. Operating Expenses

What it is
Operating expenses are costs required to run your business outside of delivering your product or service. This includes software, marketing, salaries, subscriptions, and overhead.

What this actually means for your business
Operating expenses show you how much it costs to keep your business running day to day. This number matters because you might invest in new tools, hire support, and increase marketing spend during a growth phase. It’s easy to allow those costs to rise faster than your revenue.

This is where growth can either be strategic or become unsustainable. “When I see costs creeping up without a corresponding lift in revenue, that’s when I look into whether or not I need to make cuts strategically,” Spritzer says.

5. Net Profit

What it is
Net Profit is what’s left after all expenses are deducted.

What this actually means for your business
Net profit is the bottom line that tells you whether your business is actually making money. You might be growing quickly, hiring a team, and expanding your offers, but if expenses are rising just as fast, your profit may be flat or even shrinking.

Your net profit is where the truth lives.

Founder insight
"It's so easy for passionate founders to make heart-led decisions, and when revenue is going up, it feels like everything is working. Then you realize the increased expenses associated with that revenue are jeopardizing profit margin. Without sustainable profitability, even the best businesses can't last." - Emily Paulsen, Founder of Electric Collab

What to Look For: 3 Real Founder Scenarios

Scenario 1: Revenue Is Growing, But Profit Isn’t

“At my first company, we had periods where top-line revenue was growing, which felt great on the surface. But when I dug into the P&L by project, I could see that certain client engagements were actually losing us money. The labor costs on those projects exceeded what we were charging.” - Courtney Spritzer, Founder of Entreprenista

What this means
You are making more money, but keeping less of it. For example, you might be taking on more clients, but each one requires more time, more revisions, and more support than expected, ultimately tanking your profit.

What to do
Look at margins by project, service, or client. Adjust pricing, tighten scope, or walk away from work that is not profitable.

The takeaway
Look at revenue in context. Margins can help you determine if your revenue growth represents true, scalable growth…or not.

Scenario 2: Your Revenue Model Isn’t Sustainable

"At Entreprenista, we hit a point where we realized that relying primarily on one-time new member revenue was not going to sustain the business long-term, especially if we were going to be able to add on new features and opportunities for our members. The P&L made this clear: Acquisition costs were higher than the expenses it takes to service our community, and the revenue from one-time new member transactions wasn’t creating the kind of predictable cash flow we needed." - Courtney Spritzer, Founder of Entreprenista

What this means
While a business might be bringing in revenue, it is inconsistent and doesn’t allow for confident future planning. You might have strong months followed by slow ones, making it difficult to plan hiring, investments, or growth.

What to do
Shift toward more predictable revenue streams like subscriptions, retainers, or longer-term contracts.

The takeaway
Your P&L will tell you when a revenue model isn’t working, but you have to be willing to act on it to see real, sustainable growth.

Scenario 3: You’re Busy, But Not Building the Right Business

"Using my P&L, I looked more closely at which services were truly the most profitable, and paired that with an 80/20 mindset to see what was actually worth my energy." - Carlyn Bushman, Founder of Carlyn Bushman Consulting

What this means
You are working a lot, but not necessarily on the right things. For example, your calendar is full, but your highest-effort work is not your highest-paying or most strategic work.

What to do
Double down on your highest-margin, highest-impact offers. Reduce or eliminate work that is draining your time without meaningful return.

The takeaway
Your P&L is not just about money. It is a tool for deciding how you spend your time. "[My P&L] helped me clearly see which offers were draining time, energy, and resources versus the ones actually moving revenue forward,” Ingrid Zapata Read, Founder of Grow With Community and MyOrbit.

Your Monthly P&L Review Checklist

Use this each month to make your P&L actually useful:

1. Start with revenue
Where is your money coming from? In other words, what is actually selling consistently?

2. Review COGS
What does it cost you to deliver that revenue? Are you spending more time or money than you realized?

3. Check gross margin
Are your offers worth it, or are you struggling to keep enough of what you earn?

4. Scan operating expenses
Are your costs growing faster than your business? For example, are new tools, hires, or subscriptions adding up faster than expected?

5. Look at net profit
Are you actually making money, not just revenue, but real, sustainable profit.

6. Compare to your plan
At the start of every year, build a detailed budget. Then every month, measure the actual performance against that budget to make sure everything is really working.

7. Make one decision
This is the most important step. Do not just review your P&L. Use it. When necessary, raise a price, cut a cost, shift your focus, or double down on what is working.

No one expects you to become a finance expert overnight. But by using your P&L correctly, you’ll understand your business well enough for your numbers to stop feeling intimidating and start feeling useful.

Once you can read your P&L, you are no longer guessing. You are deciding.