A P&L, or profit and loss account, shows money in, costs out and what is left over a period. Read marketing through it: a campaign returning four times its cost in revenue loses money below 25% gross margin.
The number: Marketing ROI Calculator.
Three lines matter most. Revenue, or turnover, is everything you invoiced. Gross profit is revenue minus the direct cost of delivering it. Net profit is what is left after overheads such as rent, software and marketing.
What it means in practice
The mistake is judging marketing on revenue. Revenue sits at the top of the P&L; the bills for materials, staff and the marketing itself come off before you keep anything.
The move is to put each month’s marketing spend beside the gross profit it produced, not the sales. That is margin-true ROI.
Whito stage: Start. Read your own P&L before you spend on growth.
The numbers to hold onto
- Margin-true ROI measures marketing return on gross profit, not revenue. Marketing ROI Calculator.
- A 7.8% of revenue marketing rule gives a £40,000 sole trader £260 a month. UK Marketing Budget by Revenue.
- A five-person UK service business pays about £2,635 a year for its software stack, one overhead line. UK Business Software Price Index.
Where to go next
Related: KPI, Advertising ROI, Marketing budget