Profit and loss statements can look difficult, but they are not. Venetian monks in the Middle Ages were using them for bookkeeping! So, HVAC contractors can easily learn the ins and outs of P&L statements too. All you need is practice.
Here are the P&L essentials all HVAC contractors should know:
1. HVAC contractors need to create a monthly reading habit
Take an hour each month to review your P&L statements. And it will help you to:
- Build different strategies for how to grow your business
- Stay on top of your losses and make a plan to fix the issues
- Stay on top of your gains and create a strategy for how to double down on your efforts
- Make better short-term and long-term decisions about your business in general
So make reading your P&L statements a monthly habit. And over time, it will become second nature.
2. HVAC Contractors should know the Key Elements of P&L Satements
You can boil down P&L statements to the following key elements:
- Cost of Goods Sold (COGS) – the expenses that make up your HVAC services, such as labor, or equipment-maintenance fees
- Expenses – the operational costs, such as employee salaries or equipment insurance
- Revenue – any income you earn from your HVAC services, used equipment sales, and also interest
- Gross Profit – total amount of revenue you earned minus GOGS
- Net Profit – total amount of revenue you earned minus expenses
Once you are familiar with these elements, your P&L statements will become an effective decision-making tool rather than an obligation.
3. HVAC Contractors Should Build a Strategic Plan using their P&L Statements
Two scenarios:
First, imagine reviewing your HVAC company’s P&L statements to learn which months you are generally most profitable. Second, consider what you might do if your P&L statements show your out-of-area job calls have come with very costly travel expenses.
Two solutions:
In the first scenario, you can scale back your salaried contractors while adding independent contractors during your busiest months. And, in the second scenario, you can stop offering your HVAC services to out-of-area calls.
As you can see, your P&L statements offer insights you can use to make real-world decisions that will have a big impact on your business. That’s why, these insights are key in growing your HVAC company’s efficiency, sales, and overall profitability.
In conclusion
Understanding your HVAC company’s P&L statements is key to your HVAC business’ success. By taking the time to review P&L statements every month, HVAC contractors can bridge the gap between insight and earnings. And steer the ship–aka your HVAC business–in the right direction.
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