A P&L (income statement) starts with all the money that came in and subtracts costs in order until you reach profit. Read it top to bottom and it tells you exactly where the money goes.
The waterfall — pick a year
Each bar is what's left after the next cost is removed: Revenue → minus COGS → Gross Profit → minus Operating Expenses → EBITDA → minus depreciation & interest → Net Income.
Line by line
Figures from the FactorDrones 3-year pro-forma income statement. "Pass-through LLC" means net income is taxed on the owner's personal return, not at a corporate level.
What each line tells you
- Revenue — total sales. Here it's two streams: owned-inventory resale plus consignment/marketplace fees. Watching the mix shift matters.
- COGS — what the sold units cost you. Revenue − COGS = gross profit, and gross margin % is the headline health metric (39% → 44% here as scale improves).
- Operating expenses — the cost of running the business: owner pay, shipping, fees, marketing, lease, insurance, software.
- EBITDA — earnings before interest, taxes, depreciation, amortization. A clean proxy for operating cash generation, and what lenders use for coverage.
- Net income — the bottom line after depreciation and loan interest. Thin in Year 1 ($7.7k), growing to $45.7k by Year 3.
The trap: profit ≠ cash
Year 1 shows a $7.7k profit but the business actually consumed cash because it was buying inventory. That gap is why the next lesson exists → Cash Flow & Working Capital.
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