Thread by @ddeolalikar

All B2B PMs should learn to read an income statement (aka P&L)

You can then influence the top or bottom line.

Here is a 50K ft primer on key terms in the income statement and how you can influence -

- Revenue
- Gross Margin
- Expenses
- Net Margin

#productmanagement

The top line in an income statement is revenue for a time period e.g. quarter

B2B Revenue sources:

- New customers
- Upsell existing
- Cross sell existing
- Lower churn
- Professional services
- Support, training, certification

#productmanagement

Gross margin =
Revenue minus direct cost incurred to support a sale

e.g hosting, data storage, onboarding.

In software, the cost of the next sale is almost zero.
In hardware, each widget has material and labor cost.

SW→ High Margin

#productmanagement

Expenses in an income statement show what the company incurred to run the business. There are 4 main categories

- R&D
- Sales and Marketing
- Customer support or success or operations
- G&A (or general and administration )

#productmanagement

Finally, there is Net Margin in the income statement
NM = Gross Margin minus All Expenses

This is the bottom line.
(for the purposes of our discussion)

#productmanagement

If you want to learn about the various components of the income statement, here is a link to the full article

productsos.substack.com/p/all-product-…

#productmanagement

That's a wrap!

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