Roc Pilon was just 19 years old when he turned his passion for power lifting and working out into a business. He launched Gymreapers, an equipment and apparel company that makes affordable, stylish products or gym goers and athletes. In this episode of Shopify Masters, Roc shares his methodical approach to building a multimillion dollar business—all while working full time.
Through my powerlifting, weightlifting, and history, I was aware of weightlifting belts, knee sleeves, wrist straps, and products that I was using in the gym–I just wasn't using my brand. It took a few years, but I came to a realization that I should merge these two aspects, and that's the direction that got planted.
After reading these things and learning more about margins, I was working for this guy who had a huge business, he was teaching me about profit and loss statements, gross margins, and the finance behind business. I was able to take the brand name and the concept I had–because the concept was good–and apply it over a business model that would work. You have to let that ego go, that, "This is the way I want it to be." You have to pivot and move with where the market is and what it needs. Today, we would be known for our premium equipment, the quality, the appearance, all those things factor in, but now we're starting to produce more apparel because our market is asking for it, they need it. That shift has happened, but it took seven almost eight years. That timeframe had to occur and we had to start with a different product line.
At that time, I was making like 13 bucks an hour working customer service, so spending $100 on some knee sleeves to me is a fortune. Looking at all those factors coming into play, I was able to pick something that I needed. I was able to do the research on if other people needed it, looking at sales volume, Google trends. What are the top three to five brands in this industry doing in terms of volume? I was also able to find out where it's being produced. If they're manufacturing in-house, what are the odds that I can compete with them there, versus is it imported?
I had looked at other ideas and products before. I don't want to make it sound like I came out the gate with a success on day one. I started Gymreapers in 2014 and didn't really launch knee sleeves until late 2016. During that period, I was trying other ideas. I had deductively analyzed, over time. After failure, after failure, you're piecing together, "Okay, product market fit," and being an ideal customer myself, it makes it a little bit simpler.
For Roc, success comes from experimenting and launching failed businesses.
Felix: What are some examples of product areas that have failed in the past?
Roc: I'll talk about a couple of different products. I had launched a supplement company in the past and it was sheerly based on the thought that other people want this product. It was an anxiety supplement, and I had done it with a partner. He brought me the idea and over time we molded it. One of the issues was market saturation and supplement efficacy. It's subjective a lot of the time with supplements, especially if you're dealing with something performance based. Over time, I was able to realize, "This product is not built for, one, the consumable, or two, leaving it subjectively." If you put our knee sleeves on today and you start to work out with them, you will feel the difference immediately. Same thing with the support that a belt gives you.
I try to not do products that have subjective results, because it's easy to stand behind a product that you can tell, "This is going to work. It's worked for 1,000 people before you and it will work for 1,000 people after you." I wouldn't say their mistake, but learning lessons that I've gone through.
The other is launching products. I've done this a bunch of times, I seem to not be able to learn the lesson. You need to launch products that have the right margins and understand margins so that you can scale a business off of it. It's one thing to sell a product and create a sale, it's another thing to be able to figure out that you should have a 40% margin so that you can reallocate capital into more inventory, because your inventory demand will increase if you start to get traction, and be able to actually build a business off the back of that. I would say those two were some of my biggest mistakes that I have to constantly remind myself of when we're moving forward in new product development and new ideas.
On pricing for profitability
Felix: What is your cost/benefit analysis when it comes to determining margin when developing a new product?
Roc: It would work across most brands, but what I try to look for is a 40% margin after product cost and selling expenses. This is not factoring ad spend or overhead, but if I could have a 40% margin, I’m happy. "A lot of the time people don't understand their margins so they become a solopreneur. They don't have enough to get out of the business, they work in the business instead of on it."
Let's just say, instead of making a product for $8 and selling it for 20, I don't have the margin in there to incur selling expenses that would scale because the $12 profit that I do make is going to get sucked up into Facebook ads almost immediately. It's very rare that you're going to get CPAs that low. If I had a $50 product that I made for $7, if it costs me $25 to acquire a customer, I have a margin to not only allocate more inventory, but be able to scale my business operations. A lot of the time people don't understand their margins so they become a solopreneur. They don't have enough to get out of the business, they work in the business instead of on it, and don’t understand their margins. It's not that you have to be huge, you just have to be consistently in line with the right numbers. Some products will be home runs and others might be duds, but the home runs sell consistently for the duds.
For example, I might have a Hero product that sells 10,000 units a month, but then I will carry an ancillary product that has less margin but is consistently purchased together as a package. Those are things you factor together. Understanding the numbers is essential to getting out of the business and working on it.
Felix: What is your methodology for determining the correct price point to release a product at?
Roc: A good calculator for that is if you 5X it. That's a pretty good standard, and this goes for whether you're selling on your website, or on Amazon. Retail might be a little bit different. We don't do too much retail, but 5X. If I'm making a product for 10 bucks, I want to sell it for 50. That's just back of the hand math.
You asked about how I underwrite a product. It’s similar to how you underwrite an asset, like a real estate asset. You take your MSRP, let's say it's 50 dollars, and let's just say you have your fees factored in. Those might be whether you're using a three PL, whether you have selling expenses, everyone incurs selling expenses through their Shopify or wherever. Then you factor in your product cost. After that point, I try to be almost always around 40%. If it's under 30, I'm probably going to move on to the next product. Not to say it's a dead product, but if I'm scaling a business, I need to have products with good margins at the start because that's how I'm going to keep scaling the business. Maybe when we're at scale–let's just say we have tens of thousands of skews, I can come back to those products because I have the market share and the brand established so that those lower margin products will move more.
Generally, I try to target around a 40% margin, and I'm deducing from the MSRP selling expenses and product cost.
Felix: You bootstrapped the business with $5, 000 to invest. What were the most valuable areas that you allocated those funds to?
Roc: Definitely. To preface this, I worked. I had a full-time job. I don't want to make it sound like I had 5,000 and that's all I needed. I was working at bodybuilding.com, making 14 bucks an hour at the max, and I was living with my dad in a trailer. My dad lost everything in the recession. It took me six months to save $5,000. That 5,000 was invested into my first order of knee sleeves. But the whole time, I had a full-time job to cover my living expenses. I moved out shortly after or during that process of that order. "We were a multimillion dollar company before I quit my job, and it's because I was running it so lean, I had systemized so much."
To cover my rent, my car payment, my cell phone bill, I was working full-time up until two and a half years ago. We were a multimillion dollar company before I quit my job, and it's because I was running it so lean, I had systemized so much. What that allowed me to do was keep reinvesting all the capital within the business. That $5,000, when I placed that order for, I was able to get like 500 or 1,000 knee leaves. I turned that product over and I took all that capital–any profit I made–I used it to continue to make larger and larger orders, and then I moved to the next product.
I didn't want to stay stuck on just knee sleeves. Then we made elbow sleeves, and lifting belts, and it grew horizontally. That process took four years before I quit my job. It came to the point where we were earning in gross revenue, every two weeks what I was making at my job annually, and I was like, "Okay, I've built enough of a moat. My business can pay me, it can reinvest in itself at a known rate, and it can sustain all its existing expenses." Those are the three things your business needs to be able to do before you can step out of your job. That just allows a peace of mind and allows you to keep reinvesting. Once it's at that scale, then you have your systems and your processes down and you know your numbers, so there's no guesswork. It's not like I have to hope that I have sales.
It's significantly more work, though. I would wake up at 7:00am, work from 8:00 to 5:00, and hit the gym from 6:00 to 7:30, 8:00. I got my degree during this time so if I had night school do that and then I would work on Gymreapers from like 8:00 to 1:00. I did that delusionally for like three and a half, four years, but that's what it took to get to this scale. I don't want to make it sound like I just started with five grand. I do think you can start with 5,000 and you should put that money into inventory, because if you don't have it, you can't sell it.
Building a recession-proof business
Felix: What was the thing that pushed you over the edge and encouraged you to go all in with the business?
Roc: I think it's multiple factors. One, watching my dad lose everything through the recession–he had one stream of income. When you're in the lumber housing market in 2008, that is the wrong industry to be in. Watching that happen puts a level of understanding in you that good markets don't always last. You never know what's around the corner, only the paranoid survive is a famous business saying, and that rings in my head all the time. I had met a mentor shortly after leaving BB.com. I left BB.com and he had beat it into me that you need to have those three factors in your business. You need to be risk averse but also aggressive with growth, and you need to understand your numbers. "You need to be risk averse but also aggressive with growth, and you need to understand your numbers."
He had built a massive self-storage empire, his name's A.J. Osborne. Today it's probably hundreds and hundreds of millions of self storage. I would work with him and he had shown me the finance behind business. I was with those guys for three years. That's where I worked full-time while I was building Gymreapers. Being around those guys, it beat into me the level of business acumen that you need to be able to sustain and build a business that endures recessions, bad times, which we saw at the start of COVID, and those factors that could protect you.
I also have interests in real estate, so I've been investing in buying real estate, starting with house hacking a duplex and repeatedly doing that over the years. I needed the bank financing as well, which really is difficult to get when you're a self-funded entrepreneur and you're only making income off your business. Having a job that shows a W2 consistently made it way easier to walk into a bank and get bank loans, and I was able to build a portfolio of real estate on the side while working there. It also allowed me to just get a business line of credit going. We don't really tap a line of credit, we've grown off no credit, but it was something that was beat into me. It's like, "Hey, you need to have that lined up because when you need it, you can never get it, and when you don't need it, it's always available." Establishing those relationships and being risk averse and thinking what's around the corner is what keeps you alive and being able to grow.
Gymreaper is also built on a model that is designed to be recession proof to ensure all costs are essential.
Felix: Can you elaborate a little on the recession proof measures that you built into the business? Did they have a significant impact when covid hit?
Roc: This is super common when you start to see a little bit of success. Let's just say you're making $100,000 a month in revenue. If you're new to this and you've never made that kind of money before, and it's gross revenue, obviously you have your business expenses running through it, the initial thought is Lambo dreams. Let's go get a new car, let's go spend, spend, spend. What was beat into me was that you need to create and harvest assets. Liabilities are something that you shouldn't even look at. If you want to buy a nice car, buy it cash, but when you have enough cash to buy a nice car like that, you'll probably just put it into investments because you understand the power of a dollar.
I know the cost of a dollar spent outside of my business versus inside of it, and so I would never go buy a Lamborghini. If you have those habits, when you're making 30 grand a month in revenue, 100 grand a month or two million a month in revenue, it scales in proportion and so your business benefits proportionally. That was one of the most important things, because it would be so easy to go buy a Rolex the second you see success, but that Rolex is your next PO, it's your next product, it's your next employee.
The next thing is just investing back into the brand and your systems. Most companies have trouble scaling because they never developed inventory management systems or hired the right people to manage their inventory. In brands that are CPG based where it's inventory in, inventory out, it’s about investing in the right system–which, today we use BrightPro, and they've done extremely well to help us scale. It's not a cheap system, it needs people to operate, and it's constantly in and out flows. Investing into those types of systems has enabled us to scale and endure so that when we're trying to forecast or see what's going on, there's no guesswork. Sometimes it's easy to place a PO based on a guess, but you don't realize the cost of your capital being sucked into inventory versus being allocated somewhere else in the business that would be better.
Fundamentally, investing into your inventory management systems and understanding your numbers, are paramount for success. You'll struggle to scale otherwise. When I first started, I didn't really care about the numbers because it's not the exciting part, it's not the sales. The more you realize how much gross margin matters, what your operating expenses are, what your net income should be, the better off. If you have a high net income, you should be investing back into your business, you probably want to be around 15 to 20%, not 30%.
These numbers are speaking to you, but if you don't know how to read them, you're not really going to know those things to be able to scale, to be recession proof. If you have high operating expenses and you're paying yourself way too much and you're paying too much in tax–not to get too much in the weeds, but you could be hiring more people, lowering your QBI deduction, because it's not about what you make, it's about what you keep. By hiring more people, your QBI deduction would be reduced and you would get that benefit.
There's little factors that you just don't realize until you're in it, and if you're not paying attention, it's death by 1,000 cuts, and those things get propelled really quickly in bad times. You could see that at the start of COVID. The government did a good job of stimulating and a decent job to keep everybody moving, but you never know what's around the corner.
Why you should understand your small data, to achieve large scale profits
Felix: You had mentioned that the numbers weren’t the main area of focus in the beginning, but as you scaled you realized it was time to double down on leaning out, which I think is important for sales in those early days. At what point did you decide it was time to start focusing on the numbers?
Roc: Totally. Part of it is not that I didn't realize the importance of numbers, but it's just amazing to get your first sale. I remember getting the first sale and being like, "Oh, my gosh, this is going to work." Today, we have in-house accounting, we have outside accounting as well. I'm constantly getting fed numbers daily, weekly, and monthly–we're constantly planning ahead. When I started, I would have to go into QuickBooks or Xero and do all my own bookkeeping, do all my own inventory accounting, PO placing, and aligning my expenses. That was the one thing I wanted to procrastinate on. I did not want to do that work. One of the first things I did was I hired an outside accounting firm that does it specifically for e-commerce businesses. I paid them somewhere between $300 to $800 a month. Sure, that seems like a lot at the time, right?
This is why you keep your day job, so that you can fork that over, but then what they're doing is they're able to do your numbers for you. You can start to see inside your business, and you should be studying a profit and loss statement. There's good videos on YouTube to learn more about that. Then you can start to look at your business and say, "Well, hold on. I have 10 products and only two of them are making actual revenue in sales." Then that might lead you down the line to kill off other products that you thought were doing well. It might cause you to go and create new products that are in line with the ones that are successful. As long as you understand your business, you can start to deductively analyze where the numbers drive your next business decisions. It's better to start when you're small, because it's not as complex.
If you went and looked at the public financial records of whatever public company out there, one, it's going to be too boring, and two, you're not going to be able to really understand the movement of what's going on. If you're making $300,000 to $500,000 in revenue per year, you can see where every dollar in the business goes. Let's just say your net income is super high, so on $500,000 in revenue, you're making $200-250,000. If you go and hire an e-commerce manager or somebody to help with ops for 50,000 a year, your net income isn't disappearing, right? But now you're getting somebody else to come on board eight hours a day or whatever work structure you want to build, or you go contact an agency, but you're getting that help on your business. If you know what drives your revenue and drives your sales, that's where I would target that help and that's how you can start to scale.
Understanding your numbers early on makes it easier as you scale. We get pretty granular with not only forecasting, but just tax planning, new product development, all these factors are playing into the P&L both today, a year from now, two years from now, and beyond that. Things can move so quickly, but we can live in today thinking about tomorrow and it's not a question of, "I wonder if I'm profitable or I wonder when I'll be able to pay myself?" These things shouldn't be questions, they should be things that you're planning towards.
Hiring at Gymreapers has been targeted to areas of growth.
Felix: Are there certain questions that you do ask that you wish you could just see on a dashboard that you haven't captured yet?
Roc: One of the things that's been the hardest for us–and we recently brought a CPA in-house and she's amazing–but one of the things that I would struggle with is the impact of if my new product is going to work or not and what the opportunity cost of those dollars in that new product would be versus in another product. Everything's opportunity cost, and what you're trying to do is identify the highest ROI so that you can keep scaling your brand and be competitive.
We’ll have 21 employees here soon. As it scales, not only does the product opportunity cost increase, but I also get to know my overhead. What benefits we're offering, our space requirements, all these things are factoring in, and I never could forecast that. I could never see what X amount of skews or X amount of sales per day would cause our overhead and down. Today, there's margins of error, but we're able to see pretty accurately at what level of growth what requirements will be needed. We can plan ahead, plan backwards and make adjustments almost in real time, and that's just done through Excel and tons of Excel spreadsheets. That's been the hardest thing to forecast. Obviously, I'd love to be able to gauge the success of a product before it's launched but those things just come down to what the market looks like.
Felix: You mentioned that when hiring you need to focus on a target area, then hire for that specifically. How did you know it was time to start expanding your team?
Roc: It happened in a couple of phases. Initially as we were scaling, I was working quite a bit with agencies. This is how I was able to work full-time. I had come to a digital marketing agency and I was able to get the services for a monthly flat rate to do Google, Facebook, and all that stuff. That's how we really started to scale. My first in-house hire was when I hired my sister. She's been with me from the get go, and she was helping me pack, do photography. Today, she's our lead designer. She does like three jobs, but lead designer and photographer is her role. She's a very creative person and she's a huge help, but my first official outside hire that was in-house was our e-commerce manager, and I think this was the right move.
The reason I went there is I took my daily schedule, wrote this out on a notepad, and I went from like 8:00 AM to whatever time I stopped working like 6:00 PM, 7:00 PM. I would track what I was doing every hour, every 30 minutes, and I just went down the list. A lot of my time was either spent shipping products and communicating with suppliers or it was spent working on our website and trying to get the email marketing going, trying to get more SEO stuff done, get our listings up, managing that website process. When I hired our e-commerce manager, I put him in charge of basically Shopify, plus Klaviyo, plus anything owned media, and it was rough at the start. It was daily grinds, trying to implement systems, implement procedures, teaching him, because it is a fringe subject that most people don't really get to start their career with.
Over time, he's gotten better and better. He's a beast now, and we have these systems that have evolved. The e-commerce manager got me out of the day-to-day of working in the business as the guy doing it and then I could focus on it. That was when, "Now I got my sales problem fixed, now I got to get my inventory problem fixed," and where I talked about managing inventory. The next hire was a shipper, a guy came in to help with the warehouse, and then our ops manager.
Felix: Once you did onboard someone, how long did it take before you were able to completely offload?
Roc: His role was probably the most difficult. He came into no structure. The company was being run in my head and I had no SOPs created. His was the most challenging to teach. It was really trial and error like jumping off the cliff and building on your way down. I put him in charge of the Shopify on day one and said, "Tinker around," and then each initiative would come up like, "Okay, hey, we need to..." I'm just trying to think of one of the early ones. We implemented Sezzle, which is the buy now, pay later, and this is prior to everybody having buy now, pay later. One of his tasks would be, hey, check them all out, Klarna, Afterpay, all of them, and he did calls with all of them.
He's discerning and he brings me the result of what he thinks would be best, I sit down with him and we make a decision, and then we might have a product launch. He's working on listings. It's like trial by fire. If he has questions, he's sitting right next to me. We have an open office layout. I don't like the segmentation in just office by office. I like everybody to be open, so it's like constant communication, everything moves faster. I don't like the bureaucracy of a traditional office layout. Everything moves quickly and he was able to ask questions and he taught himself over time, and there was no formal training.
Felix: What does your product development process look like? How do you decide whether or not to move forward with a product idea?
Roc: We look at the needs of our target demographics. It's like two businesses, right? We have our equipment and then we have our apparel. For equipment, we will look at powerlifting, weightlifting, Olympic lifting, bodybuilding, CrossFit, strong man training, and just normal fitness enthusiasts. For apparel, we'll look at men's, women's, and what's trending. Each segment has its own product needs. Certain strong men will use certain equipment that is niche to their sport across different categories, and we will determine if that's a market we want to enter right now, by analyzing the numbers and the market, if that's something we want to get into. We're planning. We have a product sync chart that lays out the year so that we can see where things are fitting and keep our buying and planning ahead.
We will analyze by niche and by category where we want to enter for the year and start the process of implementation and meeting the needs of those customers, right? I never want to approach it from the perspective of, "Hey, I want to do this," or, "Hey, this company's doing this, let's do that." That's not the right approach because you don't know the advantages of what that company has and what I want isn't necessarily what's best for the company or the customer. A lot of it's knowing the industry and being in it every day. Employees here work out and love the gym, they're in it, they can see what everyone's wearing at the gym and we're always talking about it. Those things come into play in determining what would be next. There's not much more behind it. Honestly, it's like a feeling too. It's knowing what's going on in the industry.
How to use content to build your word of mouth reputation
Felix: I would assume you have an array of customers, from the serious competitor, to the hobby gym goer. How do you market to such a diverse audience?
Roc: When it comes to how we're marketing, it's been debated internally. My thing is staying on brand all the time. Gymreapers, obviously, is a play on words, and then our logo is like a skull, and most of our models in apparel–I don't want to say it's aggressive, but the undertone is more hardcore, grimier work ethic based, and we try not to deviate. We will stand behind our products and our quality and our branding. One of the mistakes we made is we let what's going on in the market dictate one of our releases, and it didn't do great. It didn't do bad, but it didn't do what our internal expectations were.
When we did a post-launch meetup, we came to the conclusion that we shifted off brand. Part of that was because the company was growing so quickly. I'm not sitting with everybody every day teaching them about what the brand is and what it stands for, so everyone's bringing in their old work experience and molding this brand image. That was part of the component. The other component is that, once again, it's not discussed internally what this brand means. After that launch, we've had long in-depth discussions about who we are, what we're marketing to, what this brand stands for, where we want to go. We use EOS internally, which is an entrepreneurial operating system, which is derived from the book Traction. Utilizing the vision and the traction components, we keep everything on brand. I'll never deviate to market towards whatever some other brand would market towards.
As we continue to grow, it's not to say we won't have an IFBB pro bodybuilder as an athlete and we will have a general CrossFit athlete or influencer along the same lines, right? We might have both of those people, but they fit into our brand in some way. One of our guys is above knee amputee green beret, and he's on active duty today, and so that's one guy who's in our brand. Then we may have just somebody who's super in-depth and passionate about fitness and they're a huge influencer on Instagram. Those two people don't necessarily align with each other, but through the brand of what Gymreapers stands for–which is hard work, nothing is given, everything is earned–it aligns itself, if that makes sense.
By keeping the organized focused, it allows Roc and team to not get side tracked by trends and stay true to their values.
Felix: How do you make sure you’re not sacrificing the vision or brand mission, for the trends and perceived promising endeavors? I think a lot of entrepreneurs can get sucked into the promise of new products, they sometimes lose track of the original vision.
Roc: Keeping the organization focused. One, keeping yourself focused. As entrepreneurs, we all have the shiny object syndrome. Once something starts to work, we have to get the other thing going, you have to have seven income streams. All that stuff happens, everyone thinks that, but the reality is true: focus on one idea, one business, and one mission is what will yield the deepest success.
What happened in that instance that I described was I took my eye off the ball in terms of the brand, because I was focusing on growth. I just spent so much time looking for the next warehouse, looking for more talent, and took my focus off product brand–I didn't really pay attention. Not that I didn't pay attention, but I let it happen because I was spending time elsewhere, which is where establishing those brand guidelines and potentially hiring a brand manager or director would've come key. To not divert your focus would be number one.
Then establishing your vision and communicating it to the team that you have so that everybody's aligned with what we do. If you see a brand being successful in their own way, and you might have aligned towards doing the same thing, you could take it as inspiration and you could see what's happening in the market, but just going and copying it doesn't mean it's going to work for you. If you focused on your own brand and what works extremely well for you and put all your energy into that and your team's energy into that, you could probably have your own success in your way dependent on your own products. You could take inspiration from everywhere, and everybody does, right? Everybody takes it from other companies and whatever inspires them themselves, but coming back to what the brand means and what the brand stands for and pushing that through the brand needs to be top of mind.
Felix: Product quality has always been very important to you. How did you make sure that message and value was conveyed in your early days, when you didn’t have customer testimonials?
Roc: You can do it through creative assets, whether it's video or photo, to try to explain and show why the product's better. Doing 3D modeling of your product, taking close-up photos, descriptions, all those things are things you should try to convey on the product page and do as much as you can on your website.
The other thing is ensuring that your product is great. We get contacted all the time to make it somewhere else for a better price, but it's like, that's not the point. The point here is to provide the best product. The best product will beat out decent marketing with a poor product any day. And, customers talk. We look for word of mouth. We want people to talk about our brand and talk about the quality. So, having a great product, and then ensuring that your returns or refund process is aligned with that. If you don't like one of our products, you can just return it. We'll refund you 100% or we'll exchange it. If you have an issue with your product, we'll exchange it or refund it. Generally, you don't even have to return it, we'll just refund you. We don't want there to be an issue, and then we'll always try to either root out that issue. Something could happen with the product where it doesn't work anymore, so, A, you get a new one, or B, you get a refund.
This was always an ethos at bodybuilding.com when Ryan DeLuca was running the company: you take care of the customer first and then they'll take care of you. That's such a basic thing that everyone talks about, but truly implementing those values into your company and living them is a different thing altogether. It's easy to sneak by on it, especially as you scale and get bigger, if you're not teaching those things down through customer service and operations, but that's probably one of the biggest ways of standing by your word and being able to make it right for the customer so they keep coming back.
Felix: What is one area of the business that you would dedicate all of your time and efforts on, if you could?
Roc: The biggest thing would be people. As you start to scale your company, finding the right people, giving them what they need to be successful, establishing a great culture in your company, and investing in the right people is what will drive the growth of your company and the growth of your brand.