How to Build a P&L Statement for Your Startup

A P&L statement is a one-page answer to the question “is this business making or losing money, and where?” That is it. It is not a tax document. It is not something only your accountant should understand. It is the single most useful financial summary you can produce as a founder.

If you cannot build a basic P&L for your own company, you are flying blind. You might feel like revenue is growing, but you will not know whether the growth is profitable until you lay out the numbers in this format.

Here is how to build one from scratch. No MBA required.

The Structure

Every P&L follows the same skeleton. Revenue at the top. Costs subtracted in layers. What remains at the bottom is your profit or loss.

Revenue — total money coming in from your core business.
Minus COGS (Cost of Goods Sold) — direct costs tied to delivering what you sell.
Equals Gross Profit — what you keep before overhead.
Minus Operating Expenses (OpEx) — salaries, rent, tools, marketing, everything to run the business.
Equals EBITDA — earnings before interest, taxes, depreciation, amortization. Your operating profitability.
Minus Interest, Taxes, D&A — usually small for early-stage startups.
Equals Net Income (or Net Loss) — the final answer.

Let me walk through each line with what actually belongs there.

Revenue

Only include money from your core business. Subscription revenue for SaaS. Product sales for ecommerce. Client fees for agencies. Do not include investment money, grants, or one-time consulting gigs you did on the side. Those are not revenue; they go on your balance sheet or get classified as other income.

For SaaS companies: use recognized revenue, not bookings. If a customer pays $12,000 upfront for an annual plan, you recognize $1,000 per month on your P&L. The other $11,000 sits as deferred revenue until you earn it.

For ecommerce: use net revenue. Subtract refunds and returns from gross revenue before putting the number on the P&L. A $100K revenue month with $18K in returns is an $82K revenue month.

Cost of Goods Sold (COGS)

This is where SaaS and ecommerce diverge significantly.

SaaS COGS includes hosting and infrastructure (AWS, GCP, Vercel), payment processing fees (Stripe takes 2.9% plus 30 cents), customer support team costs directly tied to serving customers, and third-party APIs you call per user. SaaS COGS is typically low, which is why SaaS gross margins run 70-85%.

Ecommerce COGS includes product manufacturing or wholesale cost, packaging, shipping and fulfillment (3PL fees, postage), payment processing, and any marketplace fees. Ecommerce COGS is much higher, and gross margins typically land between 40-65%.

The mistake founders make: lumping marketing into COGS. Marketing is an operating expense, not COGS. COGS only includes costs that are directly tied to producing or delivering the product. If you stopped selling tomorrow, COGS would drop to zero. Marketing costs would not disappear on the same timeline.

Gross Profit and Gross Margin

Revenue minus COGS. This tells you how efficiently you deliver your product. If your gross margin is 20%, you are keeping 20 cents of every dollar after direct costs. That leaves very little room for salaries, marketing, and everything else.

Target gross margins: SaaS should aim for 70%+ (80% is excellent). Ecommerce should aim for 50%+ (60% is strong). Agencies typically run 50-70% depending on how much work is outsourced versus done in-house.

If your gross margins are below these ranges, fix that before scaling. Pouring marketing dollars into a low-margin product just scales the losses.

Operating Expenses

Everything it costs to run the business that is not COGS. Break it into categories:

People costs (salaries, benefits, contractors) — usually 60-70% of OpEx for startups. This is your biggest line item.
Sales and marketing — ad spend, content, events, sales tools, agency retainers.
General and administrative — legal, accounting, insurance, office, software tools.
Research and development — engineering salaries and tools for product development. Some startups capitalize R&D, but at early stage, just expense it.

Do not create thirty subcategories. Nobody needs to know you spent $47 on a Canva subscription. Group things into five to eight categories that give you a clear picture of where money goes.

EBITDA

Gross profit minus operating expenses. This is your operating profitability before the accounting stuff (interest, taxes, depreciation, amortization). For early-stage startups, EBITDA is usually negative. That is fine. The goal is to see it trending in the right direction.

VCs look at EBITDA margin (EBITDA divided by revenue) to understand the path to profitability. A SaaS company with -40% EBITDA margin that is improving 5-10 points per quarter has a visible path. The same margin staying flat for four quarters raises questions about unit economics.

Net Income

EBITDA minus interest, taxes, depreciation, and amortization. For most early-stage startups, the difference between EBITDA and net income is small. You probably have no debt (so no interest), minimal depreciable assets, and any tax liability is offset by losses.

Once you are profitable, the gap between EBITDA and net income matters more. For now, just include the line so the format is correct.

SaaS P&L vs. Ecommerce P&L

The structure is identical. The numbers look completely different.

A SaaS company with $50K MRR might have $7,500 in COGS (85% gross margin), $55K in OpEx (mostly engineering salaries), and a net loss of $12,500 per month. The high gross margin means the path to profitability is about growing revenue, not cutting COGS.

An ecommerce company with $50K in monthly revenue might have $22,500 in COGS (55% gross margin), $20K in OpEx (mostly marketing and fulfillment overhead), and a net loss of $2,500 per month. The business is closer to breakeven but has less room to invest in growth because every incremental dollar of revenue carries significant COGS.

Neither model is better. They just work differently, and your P&L has to reflect the economics of your actual business, not a template you found online for a different business model.

Automate It

Building a P&L in a spreadsheet works, but it requires manual updates every month. You enter expenses on one tab, revenue on another, and the P&L tab pulls from both. Miss an entry and the whole thing is wrong.

Kartib generates your P&L automatically from the revenue and expense data you enter in the finance module. It categorizes line items, calculates gross margin and EBITDA, and updates in real time. When you add an expense or log revenue, the P&L reflects it immediately. No formula maintenance. No broken cell references.

Related Reading

Your P&L feeds directly into your cash flow forecast. Once you have last month's P&L, projecting the next twelve months becomes much easier. And if you want to understand what VCs look for in these numbers, read about what VCs actually look at in your burn rate.