5 Financial Lessons Behind Gymshark’s Growth

In this weeks business insight series we dive into the UK's biggest apparel brand: Gymshark.

Gymshark started out as a small garage business and has grown into one of the UK’s most recognisable global fitness brands, largely through smart use of social media, influencer marketing and a strong sense of community.

What’s often overlooked, though, is how the company has managed its finances to support that growth. From using flexible credit to manage cash flow, to investing heavily in marketing and building a loyal customer base, Gymshark has made deliberate financial decisions to scale quickly.

At the same time, its journey highlights the trade-offs between growth and profitability, making it a useful example for small eCommerce brands looking to improve their own financial performance.

• Use short term credit facilities to help manage cash flow - Gymshark has a revolving credit facility which allows it to meet sudden spikes in sales, fundings its large inventory balance during this period as well as its international expansion The best part this facility is only paid back when you actually make the money back in the form of sales, ensuring you best utlising external funds. Similar facilities include

• Marketing - we all know the reason for marketing is to get eyeballs to your brand, but when you try to sell to everyone that CAC (customer acquisition costs) becomes significantly higher. In other words, more spend is required to earn £1 in sales. Gymshark spends approximately 40% of its revenue on marketing! The company took advantage of cheap influencer marketing when it first started which allowed it to make money despite having low economies of scale. Company at Gymsharks size can now afford to spend a good proportion of its sales on marketing. For you its important to pick a sub niche over being a generalist will allow you to attract the right customer lowering both CAC and increasing conversion.

• Increase the customer LTV - Repeat customers are far more profitable than marketing to new ones. Once someone’s bought from you for the first time they are 27% more likely to buy from you a second time. This increases with every time a customer buys from you. The more times the more loyal they will be to your brand. This is what GymShark has built - a cult like following and brand recognition which makes customers come back for more.

• Revenue Growth does not equal profit - Gymshark has rapidly increased revenue over the past couple of years as the company expands to different markets abroad and investing more heavily in phyicial location. However, this has meant profit after tax has decreased. As a small business, growing in this way is not sustainable and is why focusing on improving Gross Profit (i.e lowering CAC by increasing customer LTV) and lowering Admin Costs (I.e through the use of AI) before expanding is important.

• Keep Fixed Costs Lean - Gymshark has a significant fixed cost base, including a start of art head office and phycial locations, which is great for inspiring employees within the company. However, the fixed costs gives Gymshark less flexibility for moveability when demand is lower, ultimately putting greater pressure on profitability since more revenue will need to be earned to cover the fixed costs (i.e break even).

Hope these financial lessons will help you run your business more smoothly. Feel free to share this post to other business owners that might benefit.