Business Track - Three Worked P&Ls

Three Real P&L Walkthroughs: SaaS, Restaurant, Consultancy

Every business has a different P&L shape. A SaaS company has 82% gross margin but reinvests heavily, ending at 24% net. A restaurant has 30-35% gross margin but thin net. A solo consultancy has 100% gross margin but pays high self-employment tax. Three models, three completely different income stories.

EXAMPLE 1

SaaS Company at Scale ($10M ARR)

Revenue (ARR)$10,000,000
100% margin
Hosting & Infrastructure-$900,000
9% margin
Customer Success Headcount-$600,000
6% margin
Third-Party APIs-$300,000
3% margin
Total COGS$1,800,000
18% margin
Gross Profit$8,200,000
82% margin
R&D (2 engineers + PM)-$2,500,000
25% margin
Sales & Marketing-$1,800,000
18% margin
General & Administrative-$900,000
9% margin
Total OpEx$5,200,000
52% margin
Operating Income (EBIT)$3,000,000
30% margin
Add back D&A (software amortisation)+$400,000
EBITDA$3,400,000
34% margin
Income Tax (21% C-Corp)-$630,000
21% of pre-tax margin
Net Income$2,370,000
23.7% margin

Why the SaaS Margin Shape Looks Like This

SaaS has the highest gross margins in any industry (70-85%) because software is cheap to copy and deliver. But net margins at scale are 20-25% because companies invest aggressively in R&D and S&M to grow ARR. The EBITDA-to-net gap ($3.4M vs $2.37M) is driven by capitalized software amortization. A pre-scale SaaS burning $2M/year has negative net income despite positive gross margin. Valuation is typically EV/ARR or EV/EBITDA multiples, not P/E. See saasvaluationmultiple.com for current multiples. For C-Corp vs S-Corp election at scale, see ccorpvsscorp.com.

EXAMPLE 2

Independent Restaurant ($1.2M Revenue)

Total Revenue (80% food, 20% liquor)$1,200,000
100% of rev
Food Cost (28% of food revenue)-$268,800
22.4% of rev
Liquor Cost (20% of liquor revenue)-$48,000
4% of rev
Total COGS$316,800
26.4% of rev
Gross Profit (traditional accounting)$883,200
73.6% of rev
Labour (kitchen + front of house)-$420,000
35% of rev
Rent-$96,000
8% of rev
Utilities-$48,000
4% of rev
Insurance-$18,000
1.5% of rev
Repairs & Maintenance-$24,000
2% of rev
Marketing-$12,000
1% of rev
Admin & Misc-$36,000
3% of rev
Total OpEx (incl. labour)$654,000
54.5% of rev
Operating Income$229,200
19.1% of rev
Depreciation (equipment)-$30,000
Interest on SBA loan-$15,000
Pre-Tax Income$184,200
15.4% of rev
Tax (30% effective, pass-through)-$55,260
Net Income$128,940
10.7% of rev

Why Restaurants Have Thin Nets Despite Good Gross Margins

The traditional accounting gross margin (73.6%) looks misleadingly high. The restaurant industry uses a concept called “prime cost” (COGS + labour) as the real efficiency measure - here $736,800 or 61.4% of revenue. Industry targets: food cost below 30%, labour below 35%, prime cost below 65%. A restaurant with prime cost above 70% is likely unprofitable. Net margins of 5-10% are healthy for this industry; below 3% means the owner is essentially working for free.

EXAMPLE 3

Solo Consultancy ($400k Revenue)

Gross Revenue (billable hours)$400,000
100% margin
COGS (no subcontractors)$0
0% margin
Gross Profit$400,000
100% margin
Tools & Software-$6,000
1.5% margin
Travel-$8,000
2% margin
Professional Development-$4,000
1% margin
Insurance (E&O, health)-$4,000
1% margin
Benefits & Retirement-$15,000
3.75% margin
Misc-$5,000
1.25% margin
Total OpEx$42,000
10.5% margin
Operating Income / Schedule C Net$358,000
89.5% margin

Sole Prop / LLC (Schedule C)
SE Tax (15.3% x 0.9235 x $358k)-$50,569
Half-SE Deduction-$25,285
Standard Deduction (2026 single)-$15,000
Taxable Income (approx.)~$267,715
Federal Income Tax (~32-35%)~$83,000
Total Tax (SE + income)~$133,569
Net Income~$224,431
Effective Total Rate~37.3%

S-Corp ($120k Salary + $238k Distribution)
FICA on $120k salary (employer + ee)-$18,360
Payroll admin cost-$2,000
Federal Tax on $358k total (approx.)~$95,000
Total Tax~$115,360
Net Income~$242,640
Saving vs Sole Prop~$18,071
Net saving after payroll cost~$16,071
Effective Total Rate~30.5%

Why Entity Choice Matters for Consultants

The S-Corp election saves about $16k annually at $400k revenue - meaningful but not dramatic. The saving grows with higher income because SE tax is uncapped on the Medicare portion. At $600k revenue, the S-Corp saving could be $25-35k. But payroll compliance, accounting, and state fees reduce the net benefit. For a full analysis, see llcvsscorp.com.

Cross-Industry Comparison: What Is in COGS vs OpEx

Industry	Gross Margin	Net Margin	Typical COGS Items
SaaS (scale)	82%	24%	Hosting, CS headcount, APIs
Restaurant	35%*	8-10%	Food + liquor (*prime cost conv.)
Consultancy	100%	55-65%	None (subcontractors if used)
Ecommerce	35-45%	3-8%	Product + shipping + returns
Manufacturing	25-35%	5-12%	Materials + direct labor + mfg OH