Let me set the scene. You run a sports brand that has just crossed seven figures, maybe £2m, maybe £3m: nutrition, some kit, a subscription that lands every month. TikTok is flying, the club orders are stacking up, and your accountant sends the latest profit and loss. Something feels off. Gross profit looks too high. Amazon fees are nowhere you expect them. The stock you bought for the season ahead is sitting in there as a cost. It's the question I get from sports founders more than any other: how should a 7-figure sports brand structure their P&L?
Here's the direct answer. Six layers: revenue by channel, cost of goods sold, channel costs, marketing, overheads, then the financing and tax lines below EBITDA. Same skeleton as any good e commerce P&L, but a sports brand loads different weight onto each bone: athlete deals, seasonality, and two product natures, consumables that expire and kit that goes out of season. Get the layers right and the P&L shows you which channel makes money, what a sponsored athlete really costs you, and what a buyer would pay for.
This post walks the structure line by line, with a full worked example for a brand doing £3m of customer takings. Every figure is an illustrative example, made up to show the shape; your numbers will differ, the structure shouldn't.
Here's the Short Version
- Show revenue by channel, gross, and net of VAT. A settlement is not revenue, and VAT is never profit
- Cost of goods includes the purchase, conversion and other costs of bringing stock to you: factory price, freight, duty, product packaging. Fulfilment, dispatch packaging, platform fees and athlete payouts stay out
- Build a contribution line per channel: gross profit minus the channel fees, fulfilment and marketing that channel consumed
- Sports drinks and many dietary supplements are standard rated for VAT at 20%, but treatment is product specific, so check each SKU. Kit follows its own rules too
- Athlete and creator money is marketing. Spread sponsorships across the deal, book gifted kit at cost, keep a scoreboard for every deal
- Your year has a shape. Find it, and let stock cover and cash plans follow it, not a flat average
- Manage EBITDA with a real founder salary in it. Interest and tax are consequences of decisions made above the line
Why Is a Sports Brand's P&L Different?
We walked the full structure for supplement brands in our post on how a 7-figure supplement brand should structure their P&L. Three things break differently for sports brands, and each one hits a different row.
First, you sell two kinds of product. Protein, creatine and gels are consumables: they carry dates and turn over fast. Kit and equipment don't expire, but they go out of season, and last year's colourway is worth less than it cost you. Second, your year likely has a shape. Many sports brands see seasonal peaks, but the timing and size differ, so let stock cover and cash plans follow your own sales data rather than a flat average. Third, marketing has faces attached. Athlete, club and creator money needs one visible home, because it's the line you'll make your boldest decisions on.
What Should the Revenue Lines Look Like?
One line for the whole business is the fastest way to hide a problem. A 7-figure sports brand usually sells through three or four doors: its own Shopify site, TikTok Shop, Amazon, maybe a subscription, and often wholesale to clubs, gyms or teams. Each has a different fee stack and margin, so the top of your P&L splits revenue by channel, and every channel gets its own economics further down.
Two rules apply to every channel line. First, record sales gross, at what the customer actually paid, and show the fees as costs. TikTok Shop and Amazon settle net: they take their commission, refunds and fees off, then pay you the leftovers. Book the settlement as revenue and you understate sales by the fee amount, while the fees never appear as a cost. Our post on why TikTok Shop brands fail at reconciliation is the place to start.
Second, strip VAT out before anything else. Sports drinks and many dietary supplements are standard rated at 20%, though the treatment is product specific. A customer paying £25 for a standard rated tub of protein is handing over £4.17 of HMRC's money. If all £3m of customer takings are sales charged at 20% VAT, £500,000 of it is output VAT and net revenue is £2.5m. Book the £2.5m. Exports, zero-rated products and mixed liabilities would change the result. If you sell a subscription, recognise revenue when control of each delivery passes to the customer, not when the money arrives, and report revenue by month: in a business with seasonal peaks, the annual number hides everything that happened.
What Goes Into Cost of Goods for a Sports Brand?
Cost of goods sold, COGS, is the cost to get one sellable unit into your business: factory price, freight, import duty and product packaging, plus any other cost directly attributable to bringing the stock to you. For nutrition, that's a tub of powder or a box of bars. For kit, a set of bands or a stack of shakers. If you buy in dollars, translate at the day's rate; later exchange movements hit the P&L, not your stock. We wrote the full version in our post on ecommerce landed cost.
Duty is part of that landing cost, and it's where sports brands get caught, because the range spans different duty worlds. Finished nutrition is classified as a food preparation and generally sits in chapter 21 of the tariff, where the third country duty is 8%, and 12% for certain compositions. Kit is entirely different: as an illustration, general exercise equipment like dumbbells and benches sits in heading 9506, where the third country duty is 2%, and the moment a product is classified as textile, electrical or a toy, the number changes again. Classification follows the goods' objective characteristics as presented. Your marketing copy does not decide the code, though intended use and packaging can be relevant. The full procedure is in our guide to duty and commodity codes for imports.
Here's what does not belong in COGS, however natural it feels: fulfilment fees, dispatch packaging, platform commissions, payment processing, ads, athlete payouts. Those are costs of selling, not the cost of the goods. Put FBA fees in COGS and your Amazon line shows a margin that looks nothing like your Shopify line, and you can't see which channel is cheaper to serve.
Two traps sit in this layer. Timing: £250,000 of stock bought ahead of a busy season is not a £250,000 cost in the month it lands. Stock is an asset, and it becomes a cost as it sells. Expiry and obsolescence: nutrition runs out of date, kit goes stale for other reasons, and both sit at the lower of cost and net realisable value, the estimated selling price less the costs needed to complete and sell. Review monthly, because a write off discovered at year end was usually knowable in week three.
Where Do Platform Fees and Athlete Deals Live?
Between gross profit and overheads sits the channel contribution layer: for each channel, gross profit minus its fulfilment, platform fees and marketing. What's left is the contribution: what that channel pays towards running the business before it earns its keep.
The fees are knowable and mostly published. TikTok Shop's standard commission is 9% including VAT on most categories, plus a 50p fee on each parcel you ship yourself, charged when it's delivered. Amazon's UK referral fee is 15% in Sports and Outdoors. In Vitamins, Minerals & Supplements it is 5% where the total price is up to £10, then 15% above. The fee is the greater of that percentage on the item price plus shipping and gift wrap, or a £0.25 per item minimum, and FBA fees sit on top if you use Fulfilment by Amazon. Your own site avoids marketplace commission, but payment processing and your platform plan still apply, so compare the total cost of each channel before calling one cheapest. Treat the numbers as starting points, but the structural point stands: if you can't see fees per channel, you cannot see which channel is subsidising which.
Marketing is the line that separates sports brands that scale from brands that just grow. In this illustrative example it takes 21% of net revenue, and the percentage tells you nothing on its own. What matters is contribution after it. A channel doing £1m of sales at 20% contribution is worth more than one doing £1.2m at 8%, and a blended P&L will tell you the opposite. We covered the difference in our post on net profit versus ROAS, and one mechanic matters for anyone paying athletes and affiliates on TikTok Shop: commission is calculated on the product price net of tax and seller funded discounts, not the VAT inclusive checkout value, so a 15% rate costs you less than the headline suggests. Our post on the multi marketplace finance stack shows how to run all of this in one view.
How Should You Treat Athlete and Sponsorship Money?
Athlete and club money comes in three flavours, and each has one right home.
Cash sponsorships. A £12,000 deal for twelve months is not a £12,000 hit in month one. It's a marketing cost spread across the term it covers, held as a prepayment until it's used up. Front-load product and it's the same in reverse: the season's kit is marketing as the season runs.
Product placements and gifted kit. Value it at what it cost you and put it in marketing, not COGS and not revenue. It wasn't a sale, and it wasn't a cost of goods. It was an advert you paid for in product.
Commission and affiliate arrangements. On TikTok Shop, affiliate commission is calculated on the product price excluding tax, less seller funded discounts, and TikTok's own playbook describes 10% to 15% as an average creator commission rate. Direct athlete deal rates vary by contract. Two things founders forget: commission reverses on refunds only if the refund is processed before the creator is paid, and the commission is a marketing cost of the channel it drove, not a cost of goods.
Then give every deal a scoreboard: what it cost, in cash and product at cost, and what it demonstrably brought back. Some deals are brand building and take years, fine, say so deliberately, but if you can't split the roster into those two buckets, the roster is running you.
Which Overheads Do Sports Founders Forget?
Below contribution sits the overhead list, where the P&L goes wrong in its quietest way: not by mis-stating what's there, but by leaving rows out. For a sports brand:
- People, including the founder. A £90,000 salary is at least £90,000 of people cost before employer NIC and pension, and your EBITDA only means something once it's in. We covered the mechanics in our post on founder finance: paying yourself, share structure and R&D claims
- Warehouse, storage and fulfilment support. Kit is bulky, and bulky things cost money to store. Build stock ahead of a busy season and you pay for that space for months
- Insurance. Product liability for anything a human puts in their body or hangs their bodyweight off, plus stock cover, plus public liability for events
- Compliance and testing. A food business must be registered with its local authority, including online only sellers, at least 28 days before trading. On top sits batch testing, label checks, and the safety rules for whatever kit you sell. It's the first row founders cut when they shouldn't
- Software: the Shopify or marketplace stack, the 3PL system, reconciliation tools, Xero or QuickBooks
- Professional fees: accountants, legal, trademark work on your brand name. A sports brand's name is a chunk of its value, and trademark filings are cheap until they're disputes
- The boring stuff: travel to events you supply, trade show stands, bank fees, subscription creep
One discipline makes this layer work: the monthly close. A P&L is only as good as the accruals underneath it. Athlete commissions earned but unpaid, club invoices and refunds each need a home in the month they belong to, not the month the cash moves. The VAT bill is not an expense; it sits on the balance sheet until it is paid. Our 12 step monthly accounting checklist is the practical version.
Illustrative Example: The P&L of a £3m Sports Brand
Here is the whole structure in one table. Remember the label: this is an illustrative example with synthetic numbers, built to show the shape and the arithmetic. It is not a client, and your mix will look different.
| Line | Amount | Share of revenue |
|---|---|---|
| Customer takings, VAT included | £3,000,000 | |
| Output VAT at 20% | (£500,000) | |
| Revenue, net of VAT | £2,500,000 | 100% |
| Cost of goods sold, landed | (£950,000) | 38% |
| Gross profit | £1,550,000 | 62% |
| Fulfilment and dispatch packaging | (£175,000) | 7% |
| Platform and payment fees | (£150,000) | 6% |
| Marketing: ads, creators and athlete deals | (£525,000) | 21% |
| Contribution | £700,000 | 28% |
| People, including £90,000 founder salary | (£230,000) | 9.2% |
| Warehouse, storage and operations | (£55,000) | 2.2% |
| Software and subscriptions | (£30,000) | 1.2% |
| Insurance, compliance and testing | (£40,000) | 1.6% |
| Professional fees | (£30,000) | 1.2% |
| Travel, events and other | (£15,000) | 0.6% |
| EBITDA | £300,000 | 12% |
| Depreciation and amortisation | (£55,000) | |
| Interest | (£25,000) | |
| Profit before tax | £220,000 | 8.8% |
| Corporation tax, after marginal relief | (£54,550) | |
| Profit after tax | £165,450 | 6.6% |
Read it top to bottom and the story is clean. In this illustrative example, gross margin is 62% for a range mixing nutrition with kit. The channel layer eats £850,000, and 21% of revenue goes to marketing before a single overhead is paid. Contribution of £700,000, 28%, is the number the founder should manage hardest: what's left to run the business on. Overheads of £400,000 include a real salary for the founder. EBITDA lands at £300,000, 12% of revenue.
Below EBITDA the lines are consequences, not decisions. Depreciation spreads equipment cost over its life. Interest is the price of the stock funding that growth ate. Profit before tax of £220,000 sits inside the marginal relief band, so rather than a flat 25%, tax works out at £54,550, an effective rate of about 24.8%. At £50,000 of profit or less the small profits rate of 19% applies, above £250,000 it's 25% all the way, and both thresholds shrink for short accounting periods and where there are associated companies. The bill lands nine months and one day after your year end, assuming taxable profit matches accounting profit.
Profit after tax of £165,450 is a long way from the £3m the year started with, and it is not automatically cash the founder can draw: dividends need distributable reserves and actual cash behind them. That gap is the whole point of the structure: every layer made a claim on the money, and now you can see exactly how much each layer took.
What Should Never Be in the P&L?
- VAT. Output VAT is not revenue, and recoverable input VAT is not a cost. Irrecoverable VAT sits in the related cost or asset. It mostly passes through your bank account and your VAT return, so if your P&L software shows VAT as income or spending, fix the settings
- Stock purchases. An asset until sold. Only the sold portion, and any write down, hits the P&L
- Capital equipment. The van with your livery on it is not a cost in the month you buy it; depreciation spreads it over its working life
- Dividends, director loan repayments and personal spending. Drawings are not business costs, including personal training and race entries that feel on brand. If something is genuinely advertising, book it as marketing and say why. If it isn't, it stays personal
- Corporation tax as an operating cost. It belongs below profit before tax, and in a monthly management P&L it should sit below EBITDA so you judge the trading, not the tax bill
- Transfers between your own bank or payment accounts, including the sweep from your payment provider. They are not income, and marketplace settlements are just cash arriving against sales you already recorded, not a second revenue line. Brands that book them as revenue pay tax on money that was never theirs
FAQ
How should a 7-figure sports brand structure their P&L?
In six layers. Revenue by channel, gross and net of VAT. Cost of goods at landed cost only. A contribution line per channel for fees, fulfilment and marketing, including athletes and creators. Overheads that include a real founder salary, storage, insurance, compliance and software. EBITDA as the line you manage, with depreciation and interest below it. Then corporation tax, which at £220,000 of profit in our illustrative example comes to £54,550 thanks to marginal relief. Each layer answers a different question, and mixing them is how brands end up profitable and confused.
Are sports nutrition products zero rated for VAT like food?
No. This is the trap. Most food is zero rated, but HMRC's food notice, VAT Notice 701/14, is explicit about sports products: sports energy and sports nutrition drinks have been standard rated since 1 October 2012, and that includes syrups, concentrates, essences, powders, crystals and other products for making them, even products containing milk or whey. Sports tablets are standard rated, except glucose, dextrose and Horlicks tablets, which are zero rated. Compressed fruit bars and sweet tasting cereal bars are standard rated unless they qualify as cakes, and products made wholly or mainly of creatine are standard rated. Dietary supplements of a kind not normally bought and used as food are standard rated too. The line is product specific, so get each SKU checked rather than assumed.
How should we treat kit and products we give to sponsored athletes?
As marketing, valued at what the kit cost you, not its retail price. It was not a sale, and it is not a cost of goods. The same logic runs your cash deals: a twelve month sponsorship is a marketing cost spread across the twelve months it covers, held as a prepayment in the meantime. And keep a scoreboard for every deal, so athlete spending is measured clearly.
The Bottom Line
A 7-figure sports brand does not need a cleverer P&L. It needs a correct one. Revenue gross and net of VAT, split by channel. COGS that stops at landed cost, with duty treated per product line. A contribution line that carries the fees, fulfilment and marketing each channel consumed. Overheads that include the founder, the storage and the compliance. EBITDA as the line you manage, with tax and interest as consequences below it. Every mistake I see in this industry's P&Ls is one of those layers leaking into another, and every leak moves the profit somewhere that feels better and informs worse. Turnover is vanity, profit is sanity, cash is reality, and the P&L is the map that shows you where all three actually are.
If your P&L doesn't look like this yet, that's fixable. We're specialist social commerce accountants, and we can help rebuild it. Run your own numbers through our free tools first if you want a feel for them, then Book a call and bring last year's accounts.