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What Is a Profit and Loss Statement and How Does It Aid in Business Planning?

Any creation of a business, studio, or startup begins with writing a business plan, where one of the most important and resulting sections is the P&L statement. It shows a general view of the business: what will be the income and what it depends on; what will be the expenditure on payroll, office space, equipment, etc. Most importnatly, it shows the amount of money the company will have in the bank account. It also occurs when a company is profitable for a while, but the following month is a financial disaster, affecting many business processes and making them difficult to rebuild later. For instance, this happens quite often when a company is too focused on user acquisition without correctly calculating the payback period.

One of the most important tasks of P&L, especially in mobile development, is the coordination of the product team and marketing team. The product team should lay out the possible product changes that will affect conversions, and marketing should lay out the likely spend and its effectiveness. Thus, the teams will coordinate their goals in numbers and be able to analyze in detail what went according to plan, what didn't, and how to proceed.

P&L also helps to solve the problem of resource allocation in the company in order to maximize efficiency. If the process of preparing P&L statement for each project runs like clockwork and takes into account revenue forecasts for each type of monetization, then they can be compared to understand where investments can give the highest ROI.

To summarize, there are several major challenges to ongoing P&L preparation:

  • –°ontrolling profits and losses so that you don't fall into a cash gap;
  • –°oordinating the development and marketing teams so that all decisions and actions are documented in numbers and that decisions are made solely on the basis of numbers;
  • Allocating company resources to the most effective projects.

All of this is possible with a few mouse clicks in Mad Curve. As soon as you plug in your data sources, we start collecting sessions, payments, and other events. Our automated forecast model starts working, and you can collect your first P&L statement.

It consists of three main functionalities:

  • General P&L statement
  • Revenue data
  • Approval.

General P&L data

Here is the most updated data for each month. You can add additional commissions, taxes, and any other expenses you have on the project.

Next, our tool will calculate the key financial metrics of EBITDA and cash flow. You can make adjustments if necessary, even if you need to calculate the possibility of obtaining a loan and its repayment. The table in P&L works like Excel, and you can enter any formulas you want.

Revenue data

Here is the data on income in calendar-cohort form for all the main types of monetization: in-app, advertising, and subscriptions. Also, if you have any additional income, you can add it to a separate tab.

Each monetization tab calculates revenue in the correct calendar format and also, if there is enough data, forecasts revenue for each type of monetization separately. As a result, a line of LTV dynamics is formed where the percentage of revenue from the previous month is indicated for the next month.

You can also introduce your own variants of the future events and correct the LTV and conversion rates. It is best to do this together with the leads from development and marketing.

Approval

Section Approval at the moment is a simple functionality with the coordination plan for a particular project, so it will go to the overall business report, where you can see a picture of how the whole business of the company is doing, taking into account the different projects from above. In the future, the functional will be updated, and it will be possible to add specific employees who are responsible for the project for approval.

If necessary, each table in the data section and the resulting table can be downloaded in csv and worked out separately in Excel.

We will be glad to have you as a beta-testing participant so you can try out the approaches of large companies and develop your business in the most transparent and efficient way possible.

Always remember when working with revenue forecast, it is important to keep in mind that the revenue prediction is based on actual data. None of the predictive models can take into account factors such as your future app content, monetization events, live ops, or support quality. Your team should know how to manage and operate a product in the long run to achieve your payback period.

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