Crack the Code of Profitability with Segmented P&Ls
Welcome back to another session of Visibility CFO. My name is Andrew Stubbs….and REMEMBER This is where we unpack real challenges our clients may be facing and share creative, actionable solutions we have used that turn confusion into clarity.
Segmented P&Ls
Today, I want to talk to you about why analyzing your business using a segmented P&L is essential in today’s business environment if you want to remain/become competitive in growing your profitability.
Maybe you’ve asked:
"My Revenue is up, we’re growing topline… but I don’t see my profits and more importantly, my cashflow reflecting this growth?"
If you are only looking at the bottom line of your overall company, you are only getting a small part of the story. The answer often lies in breaking your P&L down by segments—whether by product, service line, event, or even geographical region - depending on your business model.
Let me show you why this matters…….
Let’s Take a therapy practice for example. You may offer in-clinic, in-home, in-school, or even virtual sessions. You may offer different types of therapy or even additional add-on services such as speaking engagements, podcasting, YOU NAME IT. Without segmentation, you can’t see which of these service types are profitable—or which ones are just burning cash.
This isn’t just helpful—it’s critical for decision-making. AND IRONICALLY, WHERE IT STARTS is understanding how to allocate costs to these different segmented revenue-generating activities
Understanding Costs - The Building Blocks
We specifically need to understand the, what I call the three pairs of cost categories:
Direct vs. Indirect
Fixed vs. Variable
One-time vs. Recurring
Most people know these terms—but combining them in the right way gives you real insight, especially as you’re trying to understand the profitability of these different segments.
3 Layers of the P&L
Here’s how segmentation works in a nutshell. We break it down into a three layer P&L or PROFIT/LOSS:
Revenue
The income from the service, product, event, or region - even key people in your organization or specific customers.
Minus Direct-Variable Costs
These costs scale with delivery (e.g., therapist hours, materials). This gives you your Contribution Margin—essentially, your break-even insight. Below a certain volume, you’re losing money. But on the flipside, once you cross a certain threshold, the upside can be very rewarding. KNOWING THIS IS KEY.
Minus Fixed-Direct Costs
Costs that don’t change with scale, but only exist if the event or service takes place (e.g., venue, licenses). This gives you Segment Profitability.
Indirect Costs
Optionally, you can subtract Indirect Costs. Overhead like rent or admin. Not tied to a specific event, but still impact your bottom line. It’s what keeps the doors open.
When you do this, you’ll discover which segments to double down on, improve, or cut entirely. It is often mind-blowing to see how different a service-line or event’s profitability is from a client’s expectations and incredible to see how much decision making power this knowledge gives you. This exercise can be done across whatever industry or be done across clients or employees—or whatever drives your income depending on your specific business.
If you are serious about growing your margins, you have to stop JUST looking at your business as one big block. Segmenting your P&L is crucial.
If you’re not currently able to view your business through these different lenses, it’s time to change that.
Let us help you create segmented P&Ls—so you can see exactly where to focus, where to cut, and where to grow.
Click the link below to book a consultation with our team. We’ll help you stop guessing—and start seeing clearly.
AND REMEMBER, we’re not just strategic CFO’s, we’re strategic tax planning CFOs, so we’re keeping an eye on minimizing your tax liability along the way!
