In the world of financial management, the Profit and Loss (P&L) statement stands as a testament to a company's financial health. But at Lift, we see this pivotal document a tad differently. Let's delve into our unique take on P&L and how it can revolutionize business decision-making.

Traditional Profit and Loss Statement:

Most businesses present their P&L in the following structure:

1. Revenue: The topmost section showing total income.

2. Cost of Goods Sold (COGS): Subtracting this from revenue gives the gross profit.

3. Operating Expenses: This is often a detailed list of various accounts, showcasing all the operational costs.

4. Other Income (Expenses): Income or expenses, if any, unrelated to operations.

5. Net Income: The bottom line after all expenses are deducted.

This format, though widely accepted, leaves room for improvement.

Our Redefined P&L Statement:

At Lift, we make two transformative changes to the traditional P&L, which, in our view, offer a more intuitive insight into a company's performance.

1. Isolate Labor: Recognizing that labor is a crucial expense, we isolate it for a detailed view. We further distinguish between direct labor and management labor. These distinctions provide more granular insights into where the bulk of labor costs lie.

2. Simplified Operating Expenses: Instead of a long, intricate list, we categorize operating expenses into five primary buckets. This simplification makes it easier to review and manage expenses.

The Engine, Chassis, and Focus Model:

To provide a clearer perspective on business operations, we break down the P&L into three distinct sections:

1. Engine (Revenue to Contribution Margin): This section propels the business towards its goals. It's where businesses should allocate most of their attention, as it encompasses the major factors affecting profitability.

2. Chassis (Operating Expenses): Think of this as the frame holding the engine. There should be a harmonious fit between the engine and the chassis. If there's a mismatch (like fitting a race car engine into a sedan), inefficiencies arise.

3. Net Income Percentage: This is a pivotal metric in our philosophy. It helps determine if there's a fit between the engine and the chassis. If the number doesn't add up, it's a signal to review and adjust either the engine or the chassis.

The Philosophy Behind the Approach:

We believe businesses should dedicate more than 90% of their time scrutinizing line items from revenue to contribution margin. This segment holds the most significant influence over profitability. By focusing here, companies can identify and leverage opportunities for growth and efficiency.

In conclusion, while traditional P&L statements have their merits, the Lift approach offers a streamlined, focused, and actionable insight into business operations. Businesses can make more informed and impactful decisions by prioritizing labor, simplifying operating expenses, and emphasizing the engine's importance.