Discover why reviewing your profit and loss statement monthly is critical and how to turn financial data into strategic action.
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Episode 16 | Watch on YouTube
Your profit and loss statement is the fuel gauge of your practice. Without it, you would not know whether you are running on a full tank, coasting on fumes, or already on the side of the road. According to SCORE, companies that review their P&L monthly are 50% more likely to improve profitability year-over-year. Brandon Seigel breaks down how to read, categorize, and use this critical tool strategically.
The first step is collecting every single expense — from software subscriptions to mileage reimbursements. Then categorize each expense in two ways: first, as fixed, variable, or discretionary; and second, by bucket: total people expense (TPE), total facility expense, marketing, and miscellaneous. Tools like QuickBooks or a firm like Accounted For can pull and organize this data into a readable format.
The key is measuring every expense as a ratio to revenue. What does your total people expense represent as a percentage of revenue? What does it cost per appointment? Per service? Per hour of delivery? These ratios reveal what a raw dollar figure never can.
Brandon's five-KPI framework: net profit must be no less than 15%, with a target of 20% and a reach goal of 25%. Total people expense must not exceed 60%. Total facility expense must not exceed 10%. Together, people and facility must never exceed 70%, with a goal of 64%. And within your TPE, practitioners should represent 45-50% of revenue while admin represents 10-15%.
Net profit is what is left after all business expenses. Owner's benefit — also called owner's discretionary earnings — includes net profit plus owner salary, perks, benefits, and approved discretionary expenses. This distinction matters enormously in business valuations. The HFMA recommends practice owners maintain clean separation of these categories both for reporting clarity and to prepare for future transactions.
Brandon recommends looking at your P&L at four levels: month over month, quarter over quarter, year over year, and trailing. Comparing Q4 this year to Q4 last year reveals seasonal patterns. Comparing the trailing six months identifies momentum. Do not use Christmas as an excuse when the real story is a 30% drop versus the prior December. The data will always show you the truth if you know how to ask the right questions.
