How to start a clothing company is a common question that you can find tons of answers for if you type those exact words into google. However, if you dig deeper and want to learn more about concrete cost factors and scaling of a clothing company then good answers are rather scarce. From the broadcaster BBC to the various celebrities, many people go through the technicalities of producing their own garments. In this wiki guide, we will give you a thorough costing guide on how to start a clothing company. Here are the determining factors when starting a clothing line.
Costing Factors to Consider when Starting a Clothing Line
1. Manufacturing costs
This is the main costing factor for which a large part of your capital will be spent on. Manufacturing cost is the central focus of your business plan and it can dictate the size of your business along with your target market. Most importantly, there are sub-factors to consider which are related to materials and the production process. Make sure that your production cost and target price line up.
Manufacturing cost decreases as order quantity increases and this applies to all of manufacturing, not only in garment or apparel manufacturing. Factories always charge less when you are ordering in large quantities (because they have setup cost). If you are planning to make 500 shirts you would obviously save money in terms of manufacturing cost if your previous order quantity was 20 pieces. While some custom clothing manufacturers can still realize such small quantities, there is still a premium to that.
However, the quantity you would like to produce is also crucial to the outcome of your business. When starting out, it’s still recommended to order a small quantity. The market has to be tested and feedback collected.
Manufacturing cost will largely depend on your manufacturing location because of the labor fees involved which is different for each country. When it comes to small scale manufacturing, this is particularly important. The premium for making low quantities and minimum order sizes (MOQs) are significantly higher in Western countries. For large scale manufacturers, the labor price difference is more important. This is also the reason why countries such as China, Bangladesh and the Philippines are much more common manufacturing locations compared to the US and other European countries. Product development consulting and product design consultancy still commonly take place in Western countries.
It is advisable to start a clothing line in phases to determine whether you are suitable to move up in terms of quality and scale. For DIY clothing businesses, the following sub-factors aren’t relevant but could be major considerations when moving up.
4. Material costs
The costs of raw materials you will use for your clothing business is a major costing factor. Expenses for materials such as fabric, packaging, labels etc. should be summed under materials cost. Taken together with the labor cost based on the production location and the order quantity, this constitutes your manufacturing cost.
5. Marketing costs
A lot of businesses take advantage of social media as a form of free marketing since it will not cost you anything to sign up for social media accounts. However, if you want your clothing brand to compete with other established brands out there then you might have to spend money for marketing schemes. Allot a few dollars for ads, which are mostly spent online in Google, Facebook, Instagram and co these days. You can also give out shirt samples to a few friends and target customers to spread awareness of your brand.
No matter how you advertise yourself, shell out some money for your marketing campaign if you do not simply want to rely on free marketing that the internet and your friends can provide. Spending on marketing is not necessary, but it certainly helps your how to start a clothing business venture. Learn how you can go viral as for instance Patagonia did with their “don’t buy this jacket” campaign.
6. Design costs
Your shirt designs are a crucial factor when starting a clothing line. This serves as the backbone of your products. A lot of people simply purchase shirts because of its print and only bother about the garment quality or comfort later. This does not mean you have to compensate quality and comfort for design, but it only goes to show you need to spend for your designs to sell your products.
If you have graphic design skills and do all of your shirt designs personally, then you would not have to pay for professional graphic designers or garment product design agencies to do it for you. But in the long run, you cannot do it alone and you will eventually need the help of other graphic designers for a helping hand. Designing costs is inevitable when starting a clothing line.
7. Licensing or business permit
Registering your business is a must to legalize your operations. You can only make so much money legally as a private person (depending on your residence). There are some expenses involved in processing the business permit and as well as paying for taxes involved when starting a clothing business. You must have a budget for the license acquisition and not allow this to become a hindrance on how to start a clothing company.
8. Labor costs
No one will advise you to become a one man wrecking crew on how to start a clothing company. You need to have a staff working with you including third-party service people (like fulfilment) that will be part of your operations. Pay these employees for their worth to expect quality work from them. Employees who are underpaid are the ones who will not work up to the right level expected from them. They allow you to grow.
9. Start a website
E-commerce is the way to go for any form of businesses these days. The low cost and reach the internet can give is its biggest advantage as it allows you to have customers which are beyond your store location and potentially anywhere in the world. If you are starting a clothing line, you should consider to start a clothing business online at least in some form (not just classic retail). Building a website will not cost you a fortune and with the availability of online platforms like Amazon or eBay, it will be more convenient to connect with the customers of your clothing business.
The costs of starting a clothing line depends on the scale and business size you are planning. For small batch clothing production, you can already jump start with $500. If you are thinking of a medium sized clothing company then $1,500 up to $5,000 should be sufficient enough.
However, if you are thinking of a major clothing business then $20,000 to $50,000 is a perfect investment amount. These numbers could vary depending on the costing factors involved but they generally give you an idea of the amount you need to prepare when starting a clothing business.