Regularly reviewing your profit and loss statement is essential for your appraisal business. As an appraiser, you might not have received training on how to be a CEO or CFO (who has?), but understanding your business's numbers is crucial. If you're not already doing it, make it a habit to assess your profit and loss statement regularly.
Today, let's focus on the profit side of the statement. It's important to understand what's truly coming into your business. For most appraisal businesses, this is relatively straightforward, as you typically only have one primary service or product. To calculate your profit, multiply the number of appraisals by the fee you receive. Essentially, you want to know what you're depositing into the bank. Understanding this number is vital for grasping how your business is performing.
Remember, if you don't know your numbers, you don't know your business. Don't just guess; make informed decisions based on accurate data. As an appraiser, you wouldn't estimate a property value without proper support, so why would you run your business without understanding the financials? Interest rates are up and volume is down, making it even more critical to know your numbers and make vital decisions. Most businesses fail because they don't understand their numbers. You might be a great appraiser, but if you don't know how to run a business, you could be setting yourself up for failure. This is particularly true in the current economic climate, where understanding your numbers is more important than ever.
When reviewing the profit side of your statement, don't just look at the total income. Break it down to understand why and from whom the income is coming and for what type of product or service. Asking these questions allows you to make informed decisions as a business owner and helps you determine the best path forward.
Understanding the profit side of your profit and loss statement is crucial for the success of your appraisal business. Make sure to wear your CEO hat and analyze your financials at least on a quarterly (or monthly) basis, so you can stay on top of your business's performance and make informed decisions.
Check out The Appraiser Coach Podcast for more info on this topic:
840 Understanding the Profit Side of a P & L Statement VIDEO AUDIO
