Examining the P&L in 60 Seconds
Understand the Income Statement with Business Acumen
What is the P&L?
The Profit and Loss statement is vital when learning about companies. Especially if you're in the sales space and want to better understand your customers, you need to be comfortable navigating the income statement.
The second thing we noticed was their top-line. To find it, go to its investor relations page, and download its 10-Q. From there you'll find its consolidated statement of earnings which includes the income statement, balance sheet, and statement of cash flows. While looking at Home Deport's P&L, the first thing we noticed is that their quarter ended May 1st, so that tells me that their financial year ends February 1st. This gives us a good understanding of their budget cycle. We now know that they probably finished the beginning of their year planning which you can ask about on your next sales call.
Defining Business Terms:
See a word that confuses you? Head to our Financial Glossary page!
Sales Growth
The second thing we noticed was their top-line sales growth. Home Deport grew to $38.9 billion from $37.5 billion last year. That's a growth rate of 3.7%. We also know that during their last earnings call, they had a goal of hitting $200 billion by the end of this year so we'd be curious to know if they think this is a strong Q1, if they're on pace for that goal, and if I can help them reach their goal. Their gross profit is $13.1 billion. If you divide that by their net sales or revenue of $38.9 billion, you'll find that their gross margin is 33.7%. That is much higher than the average retailer's gross margin, so we'd be curious what they think about that. Finally, their net income is $4.2 billion. Again, out of $38.9 billion in revenue, that gives a net profit margin of 10.8%. That's slightly lower than the S&P 500 average of 13%. If you wanted to help improve their bottom line, there are two levers to pull: growing sales and lowering costs. Now that we have a good understanding of where Home Depot's at, we can then ask on my sales call what lever they are focused on.
What is the Business Strategy?
As a salesperson, you should be curious about your client's business strategy. Know what's most important to them. That's our simple breakdown of a P&L in sixty seconds. Imagine what you could learn with a little more time and more business acumen.
How to Win Sales with Business Acumen
Business acumen is not a dispensable attribute. It's necessary to do your job well. And, if you want your clients to be EXCITED to talk to you, learn their metrics. Learn their business. Get business acumen. Continue your education and finish reading the article:
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