Profitability modeling software for small businesses

The best financial profitability model is the one that puts you in the driver’s seat of your business. As a small business owner, you don’t need a complicated analytic model created for Fortune 100 companies. And you definitely don’t have time to be buried in Excel spreadsheets. You need a simple, actionable snapshot of your business drivers and how changes to them can affect business profitability. From asset turnover to the impact of various product offerings to the cost of labor, Profit Frog gives you full visibility of what matters so you can forge your own destiny.

The simplest profit model formula is that profit equals net revenue minus Cost of Goods Sold minus expenses. It doesn’t need to get more complex than that. Some forecasting methods overcomplicate things. We don’t. Our profitability analysis software has everything a small business needs; nothing it doesn’t.

Net profit is the most important KPI for measuring profitability. Some types of profit models focus on gross profit, which is not true profit. We focus on net profit, which is true profit.

Gross profit is total revenue minus direct expenses. It does not factor overhead, taxes, or other “indirect” expenses.

Net profit is actual profit. It’s gross profit, minus ALL other expenses. It’s the number that you as a business owner really care about. And it’s the number we help you maximize.

To create a profit model for your small business, log in to your ProfitFrog account and enter your business variables. It’s so easy. Our forecasting software will generate a profit model, and you can dynamically interact with it by changing various inputs and watching how they affect profitability. It’s magic for your business.

A profitability projection, also termed a profit and loss forecast (or P&L forecast for short), is a prediction or projection of how much money your business will make based on specific conditions you define. For example, you can forecast how much your profit will be if you release a new product or service, if you alter pricing, if costs increase or decrease, or for any number of other variables. Profit forecasting is crucial for navigating changing market conditions and unknowns.

Profit Frog allows small businesses to do this type of P&L forecasting easily and without needing to wade through complicated analytical models.

Improving profitability in your small business comes down to three factors:

1. Increasing revenue
2. Decreasing cost of goods sold (COGS)
3. Decreasing expenses

Profit Frog gives full visibility into all three aspects, and allows you to dynamically model how profits will be influenced by various potential future influences and fluctuations.

The three most common types of profit ratios are net profit margin, operating profit margin, and EBITDA margin.

1. Net profit margin: the metric that small business owners care about most. Profit Frog focuses on this one. Net profit is simply income minus expenses. All business expenses are factored in. Net profit is the best measurement of how your business is doing.
2. Operating profit margin is factored by subtracting operating expenses from revenue. Operating expenses are defined as those expenses that are incurred as costs of running the business day to day, or in other words, the costs of actually delivering your product or service to the customer. These are also sometimes called “cost of goods sold” and abbreviated COGS. The operating profit margin does not account for overhead, taxes, and other non-COGS expenses.
3. EBITDA margin: similar to the operating profit margin, but neglects depreciation and amortization. The EBITDA calculation looks like this: (Net profit + Taxes + Interest + Depreciation + Amortization) / Revenue x 100.

Does all this sound a bit too complicated? Don’t worry: that’s why we created Profit Frog. You don’t really need to lose sleep over different profitability ratios; nor do you need to know how to perform a linear regression, build a complex historical model or hire a full time data analyst. We give you fast and easy insights into the profit drivers of your business so you can make the choices that matter for your future.

The best measure of profitability is how much money your business has remaining after it pays all expenses. This is money that you as the owner can draw—or you can choose to reinvest it into the business. It’s “extra” money, and it’s the entire reason you’re in business: to have more of it. Profit Frog helps you get more of it by modeling the drivers of profit under different conditions (“what if scenarios”), so you can make better choices and eliminate uncertainty.

Depending on who you ask, there are anywhere from three to five profitability ratios in business. Let the Wall Street analysts focus on these.

As a small business owner, you really need to model one: net profitability. Here at Profit Frog, our core value proposition is that we make profit modeling accessible to Main Street businesses by making it simple. Net profit is simply your total business revenue, minus total business expenses. We give you the tools to forecast and maximize what matters: net profit.

From the profit model we generate, you can play with different scenarios and forecast the effect on your bottom line if you (for example):

• Are more effective at generating sales
• Allocate costs more efficiently
• Get a better rate of return on your business’s surplus cash
• Have a lower asset turnover ratio (extend the life of your company assets)
• Give employees a raise
• Find a lower-priced vendor for important inputs to your business

We focus on the financial results that matter to you: money the business can put in your pocket.