Let me set the scene. You run a supplement brand that has just crossed seven figures in revenue, maybe £2m, maybe £3m. Orders are flying out, TikTok is working, and your accountant has just sent the latest profit and loss. You stare at it and something feels off. Gross profit looks too high. Platform fees are nowhere you expect them. The stock you bought in February is sitting in there as a cost. This is the question I get from supplement founders more than any other: how should a 7-figure supplement brand structure their P&L?
Here's the direct answer. Structure it in six layers: revenue by channel, cost of goods sold, channel costs, marketing, overheads, then the financing and tax lines below EBITDA. Get the layers right and the P&L tells you which channel actually makes money, what a pot of pills really costs, and what a buyer would pay for. Get them wrong and you make decisions on a number that flatters you.
This post walks the structure line by line, with a full worked example for a brand doing £2.4m of customer takings. Every figure in the example 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. VAT is never profit, and a marketplace settlement is not revenue
- Cost of goods is landed cost only: factory price, freight, duty, packaging. Not fulfilment. Not TikTok's commission. Not ads
- Build a contribution line per channel: gross profit minus channel fees, fulfilment and the marketing that channel consumed. That line decides where to spend next
- Supplements are standard rated for VAT at 20%, unlike most food. Your P&L works on net of VAT numbers either way
- Stock is an asset until it sells. Expiry write downs belong in the month you spot them, not the month it gets embarrassing
- Put founder pay, compliance, testing and insurance in overheads. Hidden costs still count
- Manage EBITDA. Everything below it, interest and tax, is a consequence of decisions made above it
What Should the Revenue Lines Look Like?
One line for the whole business is the fastest way to hide a problem. A 7-figure supplement brand usually sells through three or four doors at once: its own Shopify site, TikTok Shop, Amazon, maybe wholesale or a subscription. Each has a different fee stack, a different customer and a different 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. If you book the settlement as revenue, you understate sales by the fee amount and the fees never appear as a cost. The P&L then flatters your margin and hides your fee drag. Second, strip VAT out before anything else. In the UK, most everyday food is zero rated, which is exactly why supplements catch founders out: vitamin and mineral supplements, and other dietary supplements not normally bought and used as food, are standard rated at 20%. If a customer pays you £100 for a bottle, £16.67 of it belongs to HMRC. A brand taking £2.4m a year in customer payments has £400,000 of output VAT inside that number, so its real revenue is £2m. Book the £2m. We covered the threshold and registration rules properly in our guide to VAT for ecommerce brands growing past the threshold.
If you sell subscriptions, and most supplement brands do eventually, recognise the revenue as each pot reaches the customer, not when the money lands. Take a year of prepayments and you hold a deferred revenue liability on the balance sheet, releasing it month by month as you deliver. Cash flow and revenue are different lines, and subscription brands that confuse them drift into the problems we set out in our post on churn versus cash flow for subscription brands. Run three channels and a subscription off one combined number and you're heading for the £1m revenue trap: growing sales while the P&L quietly stops making sense.
What Goes Into Cost of Goods for a Supplement Brand?
Cost of goods sold, COGS, is the cost to land one sellable bottle: what the factory charges, plus freight, import duty and packaging if it isn't included at the factory. If you buy in dollars, translate the purchase at the exchange rate on the day of the transaction; exchange movements after that hit the P&L, not your stock. That's it. We wrote the full version in our post on ecommerce landed cost, because most brands understate this line by a mile.
Here's what does not belong in COGS, however natural it feels: fulfilment fees, FBA charges, TikTok Shop commission, payment processing, 3PL picking fees, ads, creator payouts. Those are the costs of selling the goods, not the cost of the goods. The distinction sounds like accounting pedantry until you try to compare channels. Put FBA fees in COGS and your Amazon line shows a gross margin that looks nothing like your Shopify line, and you can't see which is cheaper to serve. Fulfilment and commissions live in the channel layer, covered next.
Three supplement specific traps sit in this layer. The first is timing. Buying £200,000 of stock in September is not a £200,000 cost in September. Stock is an asset. It becomes a cost as the bottles sell. Book the purchase as an expense and your P&L shows a catastrophic September followed by magical margins for the next six months, and neither number is real. The second is expiry. Your batches carry expiry dates, and stock that won't sell before its date gets written down to what it will actually fetch, which is usually not much. Stock sits on the balance sheet at the lower of cost and net realisable value: what you paid, or what you'll get back, whichever is lower. If nobody reviews expiry dates monthly, the write off lands later as one ugly lump instead of a steady truth. The third is free gifts and samples. A gift with purchase is a discount on that sale, visible in your unit economics. Samples sent to a creator are marketing. Pick a home for each and stay consistent.
Where Do Platform Fees and Marketing 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 the channel pays the central costs before earning its keep.
This is the layer where supplement brands discover the truth about TikTok Shop. The headline commission is 9% including VAT on most categories, eligible Electronics and Beauty & Personal Care products pay an effective 5%, and there's a 50p fee on each Shipped-by-Seller parcel, charged when it's delivered. Amazon's UK referral fee for vitamins and supplements is 5% on a total price of £10 or less and 15% above that, with FBA charges on top. Those numbers move, so treat them as a starting point. The structural point stands: if you can't see fees like these per channel, you cannot see which channel is subsidising which. And if a creator earns commission on every sale a video drives, that payout is marketing for the channel it drove.
Marketing is the line that separates brands that scale from brands that grow. Fast growing paid social brands usually land in the 20% to 30% of revenue band, and the number tells you nothing on its own. What matters is contribution after it: does the channel still pay its way once the ads and creators are paid? A channel doing £800,000 of sales at a 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 between gross profit, contribution and ROAS thinking in our post on net profit versus ROAS, because this is where 7-figure brands quietly stop being profitable.
Which Overheads Do Supplement Founders Forget?
Below contribution sits the overhead list, and this is where the P&L goes wrong in its quietest way: not by mis-stating what's there, but by leaving rows out. The full list for a supplement brand includes:
- People, including the founder. If you take a £90,000 salary, it is a £90,000 cost, and your EBITDA only means something once it's in. We covered the salary versus dividends mechanics in our post on founder finance: paying yourself, share structure and R&D claims
- Compliance and safety. A food business must be registered with its local authority, and that includes businesses selling online only, and you're meant to register at least 28 days before you start trading. On top sits batch testing, label checks, product liability insurance and, depending on what you sell, novel food or claims paperwork. It is not a big line, £20,000 to £40,000 a year at this scale, but it is real, and 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. Small rows that add up
- Professional fees: accountants, legal, patent or trademark work on your brand name. A supplement brand's name is a chunk of its value, and trademark filings are cheap until they're disputes
- The boring stuff: insurance beyond product liability, office or storage, travel, bank fees
One discipline makes this layer work: the monthly close. A P&L is only as good as the accruals underneath it. Creator commissions earned but unpaid, refunds still coming, the VAT bill not yet due: each needs a home in the month it belongs to, not the month the cash moves. Our 12 step monthly accounting checklist is the practical version. The year end version arrives too late to steer anything, which is why every seller needs a monthly management report, not just a year end.
Illustrative Example: The P&L of a £2m Supplement 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 | £2,400,000 | |
| Output VAT at 20% | (£400,000) | |
| Revenue, net of VAT | £2,000,000 | 100% |
| Cost of goods sold | (£560,000) | 28% |
| Gross profit | £1,440,000 | 72% |
| Fulfilment and packaging | (£150,000) | 7.5% |
| Platform and payment fees | (£115,000) | 5.75% |
| Marketing: ads and creators | (£480,000) | 24% |
| Contribution | £695,000 | 34.75% |
| People, including £90,000 founder salary | (£230,000) | 11.5% |
| Software and subscriptions | (£40,000) | 2% |
| Compliance, testing and insurance | (£30,000) | 1.5% |
| Professional fees | (£40,000) | 2% |
| Office, travel and other | (£15,000) | 0.75% |
| EBITDA | £340,000 | 17% |
| Depreciation and amortisation | (£60,000) | |
| Interest | (£15,000) | |
| Profit before tax | £265,000 | 13.25% |
| Corporation tax at 25% | (£66,250) | |
| Profit after tax | £198,750 | 9.9% |
Read it top to bottom and the story is clean. Gross margin of 72% is the shape supplements are known for: cheap to make, expensive to sell. The channel layer eats £745,000, and 24% of revenue goes to marketing before a single overhead is paid. Contribution of £695,000, 34.75%, is the number the founder should manage hardest: it's what's left to run the business on. Overheads of £355,000 include a real salary for the founder. EBITDA lands at £340,000, 17% 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 £265,000 sits above the £250,000 upper limit, so corporation tax applies at the main rate of 25% on the whole amount, £66,250, assuming taxable profit matches accounting profit. Between £50,000 and £250,000 of taxable profit, marginal relief drags the effective rate below 25%, and below £50,000 the small profits rate of 19% applies. Both limits are scaled down for short accounting periods and where the company has associated companies. Profit after tax of £198,750 is what the founder could draw or reinvest, a long way from the £2.4m of customer takings the year started with. 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. Neither in revenue nor in costs. It passes through your bank account and your VAT return. The one exception is irrecoverable VAT, rare when everything you sell is standard rated, and it belongs in the cost it attaches to. 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 labelling machine 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, however tempting it is to bury them
- 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 accounts. They are not income, and brands that treat settlement transfers as revenue end up paying tax on money that was never theirs
FAQ
Should I show TikTok Shop sales gross or net?
Gross, if you're the seller of record, which on TikTok Shop you usually are. Record what the customer paid as revenue, take refunds off that revenue, and show commission and fees as costs. Your settlement is the net cash that landed, and it is not revenue. Book settlements and you're hiding your biggest cost line from yourself. Our post on why TikTok Shop brands fail at reconciliation walks through the practical version.
Are supplements zero rated like other food?
No. This is the trap. Most food is zero rated for VAT, but dietary supplements of a kind not normally bought and used as food are standard rated at 20%, and that includes vitamin and mineral supplements of all kinds and fish oils sold as supplements. The line is genuinely product specific, so if you sell powders or bars that sit close to ordinary food or drink, get each SKU's liability checked rather than assumed. HMRC's own guidance, VAT Notice 701/14 on food products, sets out the position, and it's worth reading before your first big labelling run.
My accountant puts FBA and fulfilment fees in COGS. Does it matter?
It matters for reading the business, not usually for the tax bill, as long as it's consistent. The danger is that fees inside COGS hide the difference between what a product costs and what a channel costs to serve. Keep COGS to landed cost, and fee stacks in the channel layer, and the P&L starts answering the questions you actually ask it.
What's a realistic EBITDA for a 7-figure supplement brand?
After a proper founder salary is in the numbers, 10% to 20% of revenue is the healthy zone at this scale. Below 10%, the brand is usually buying growth with marketing it can't switch off. Negative EBITDA at seven figures means something structural, usually channel economics, stock write offs or a fee stack nobody mapped. The structure above is how you find out which, before the cash runs out. The gap between profit and cash is its own problem, and we wrote about it in our post on why you can be profitable and still broke.
One P&L for the business, or one per channel?
Both, in layers. The statutory accounts and the tax bill run on the whole business, one set of numbers. But inside that, the P&L should carry a per channel contribution view, because that's the layer you make decisions on. Structure is not a compliance exercise. It's how a £2m brand knows which of its four channels is actually paying for the other three. If you'd rather not run three channels off one blurred number, the fix is the multi marketplace finance stack we recommend for TikTok Shop, Amazon and Shopify sellers.
The Bottom Line
A 7-figure supplement 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. A contribution line that carries the fees, fulfilment and marketing each channel consumed. Overheads that include the founder, the compliance and the testing. 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 quietly moves the profit to a place 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, usually faster than founders expect. We're specialist social commerce accountants, we work with UK ecommerce brands from £1m to £20m, and we rebuild P&Ls like this every week. Book a call and we'll take a look at yours.