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business advice

560 315 Zack Hurley

5 Budget Mistakes To Avoid As a New Designer

Costing and pricing are among the most difficult – and most crucial – decisions new designers undertake in building their first line. The financial logic that goes into launching a successful fashion line can be counter-intuitive and sometimes requires that we readjust the way we approach costing and pricing. After many years helping burgeoning designers get started on their brands, I’ve come up with a list of the 5 most frequent false starts that hinder new designers.

1. STOP ASKING: “How much does it cost?”

The problem with the “how much does it cost”question is that costs are just one part of the equation. Costs alone won’t tell you if your business is viable. Is $1,000 a lot? Or is $10,000 more realistic? Do I really need $100K to start this line? When you look at costs first without understanding your business and how your business fits into the market at large, you’re really only thinking about your current spending habits. But starting a business isn’t the same as shopping at Forever 21. Comparing a capital investment in your business to the cardigan you bought last week isn’t the best way to grow a lucrative business.

Instead, everything comes down to risk. The question isn’t, “How much does it cost?” but “How much am I willing to invest – or risk – in the business?” If that number is identifiable as one part of your overall business objectives, and you’re clear about it, then congratulations, you now have what we call a budget. Your budget will drive your decision making and, once you decide your budget is the #1 priority over price or quality, then you will find a way to either:

  1. Make costs work within your budget, or
  2. Realize this business is not for you and you want to start a service business that requires less startup capital

2. START ASKING: “What is a customer willing to pay for my product?”

Many new designers fall into the habit of looking at pricing as “cost plus”: understand the costs and then add a profit margin, but there are two main problems with this approach. First, this approach mentally chains you to the product, rather than to the customer, and leaves you vulnerable to changes in customer preference. Second, when costs increase, and they will, you will suffer from established prices and lower profit margins. “Cost plus” leaves you doubly at the whim of the market. Instead, the question is, “What is a customer willing to pay for my product?” and for that you have to roll up your sleeves and do some research. The first follow-up question is:

“Is there something comparable in the market to my product?”

If YES, we’ve got more to figure out:

  1. What products in the market are competing with your’s and how are your’s different?
  2. What are the price points of the competing products on the market?
  3. Who is buying these competing products? Is it a different demographic than you expected?

List out these answers in an excel document to start putting together your market research. This is preliminary, but will give you a great starting point for pricing your product. Once you know your retail price points you can start to build out a budget for product cost, operations, marketing, and more.

IF NO:

Then, good news!  You now have the opportunity to pave the way for something unique and entirely different than anything in the market.  With no competition, you’re in a great position! On the other hand, you may not have a market for your product either. Your job will be to make your prototype sample and take it out into the market to test viability before you begin to produce at scale. For steps on how to do this, see last week’s post on how to start a fashion line that sells.

3. Remember that developing your product has a cost separate from production

While you may be excited to get started, try not to get ahead of yourself! Before producing 300 units to turn a profit, you need to build prototypes and samples of your products. This stage is called the product development stage. It is the most important phase in the creation of your business. This is where you get to source fabrics, engineer your fit, and create the styles you’ve envisioned. The product development costs vary according to how many products you’re developing, the complexity of the products, and the source materials. At the end of the process, you’ll understand exactly how much your cost per unit will be when going into the next big stage: production.

4. Build a budget for your Proof of Concept (PoC) and Market Fit Testing

If your company wants to stay lean, the best recommendation is not to rush into production after creating your samples. Instead, go to the market and talk to your consumers to gather insight. It would be even better if you can get pre-orders! Take this time to create strategies to build awareness and buzz for your product. Use brand ambassadors, social media advertising, and sampling events to create demand and test marketing channels and messaging. While these ideas can be costly, it’s better to lose a few thousand to find out that your idea isn’t viable than to spend a hundred thousand only to realize nobody wants to buy your product. Include in your budget line items for market fit testing and decide what success would look like.

The ideas below will cost you almost nothing:

  • Convince retail shops to let you put your samples in their shop and watch how customers react to your product
  • Give out gift cards and other promotional goods to potential consumers to take surveys about your product
  • Go out and earn your first paying 30 customers and make them excited about your product. Give them something special for believing in your vision and pre-ordering. Just make sure you and your manufacturer are very clear about how many weeks production will take so you can keep your delivery promises.

5. Invest 100% of the profits back into your company

When starting out, it is absolutely important to put any profits back into the company. By putting every cent that you make back into your business, the business revenue has a chance to stabilize. A stable business can pay dividends throughout your life. In addition to having a marketing budget from the get-go, use the profits from your sales to invest in more marketing, development, and production where needed. Remember not to overproduce and, once you have a hold on inventory, make sales and marketing your number one priority.

How to Start a Clothing Line that sells
560 315 Mary Vallarta

How to start a clothing line that sells

While anybody can start a clothing line, not everyone can build a profitable fashion business. It takes entrepreneurial spirit to have consistent revenue and profit. How can someone create a successful clothing line? Fashion entrepreneurs need to work hard, understand market trends, and be flexible. Sales data and customer feedback will help you determine price, design, distribution, and everything else you need to be successful.

Before going through each step of creating a successful clothing line, it’s important to adopt a sales mindset. One of the biggest mistakes that new fashion business owners make is to get stuck on the idea of creating and protecting their brand. Instead, they should be focused on creating a profitable business. While having a flawless social media presence is important, for example, it more important to concentrate on the bottom line. I’m here to show you how!

My name is Mary Vallarta and I’m behind FAB Counsel, a consultancy with the sole purpose of empowering entrepreneurs to build successful fashion companies. I have almost a decade of retail experience after buying for Macy’s, BCBG, Metropark, and Bebe. Wanting more creative freedom, I co-founded FAB Counsel with my business partner to help independent designers take their concept to market. My partner, too, has extensive experience under his sleeve, having owned and run a menswear boutique and managed contemporary brands. Starting with just $150, we turned FAB Counsel into a 6-figure business.

I am not sharing this with you to brag, but to make it clear that what you are reading comes from professionals with experience in the field.  Our experience is a mix of corporate professionalism and small business industriousness. In this guide, you will get the benefit of both large and small business wisdom.

So, let’s get to those steps: here’s how to start a clothing line that sells!

1. Start small and test, test, test

Research and data are essential to starting a new business. Research can help show trends in the market that business owners should be listening too. Many new businesses have no data on whether or not their fashion merchandise will sell. The best way to minimize risk is to test the market and understand your consumers. Here’s how to do that.

Identify the market void your product serves

Ask yourself if your product line fills a void in the market. Does the market need another shoe or jewelry brand? The answer would be NO. However, the market may have space for an affordable line of sustainably-made casual basics for petite women. By examining the market and getting granular, we have an opportunity to identify both a need and a target market.

Be precise about your target customer

Once you have narrowed down the market, you can begin to understand your target customer. Knowing your target customer will help you determine design, price, marketing strategy, and distribution. In the example above, we saw that petite women who care about sustainably-sourced material would be our customer. Now that we have our customer segment, we need to understand their demographic.  What is her age, income level, profession, and likely geographic location? The answers to these questions will already start filling the gaps in your marketing strategy.

Figure out how you will distribute your line

The Internet is the most popular method that many startup fashion brands use to reach their customers – and for good method. It is more convenient and inexpensive to market directly to your shoppers than to find intermediate buyers without a track record of sales. Whatever method you use, remember to pick a plan that will be the easiest for your customers to find you while fitting your budget.

Next, comes production

Start small with a starter collection. An extensive collection will be a challenge when it comes to managing inventory and marketing styles, especially when you do not have any hard data on what will sell. Make your starter collection streamlined and cost-effective. It is better to have five amazing pieces rather than 25 that are so-so. Then, when it comes down to ordering units per style, order the minimum, so you do not get stuck with extra inventory. Being sold out is a better problem than surplus stock. Plus, once you see which styles will sell, you can order more and start to get a handle on movement.

Start marketing your line

Marketing is key to getting the word out about your fashion line to your target customers. Without any promotion, how will consumers know you exist? Knowing and understanding your target customer will help you to identify which promotional channels to use. Even better, get potential customers involved in the development of your line and ask them about their shopping habits along the way.

Get out there

The mantra in entrepreneurship is, “If you are not embarrassed by the first version of your product, you’ve launched too late.” While this is less applicable to fashion lines than software, there’s a valuable lesson there for fashion entrepreneurs as well. Do not let perfectionism get in the way of putting your merchandise in front of potential customers. Whether it is hitting ‘publish’ on your website, setting up shop at a farmer’s market, or launching Instagram ads, taking the jump is the first step towards understanding your market and improving your sales numbers.

Analyze the data

Now it is time to look at the data and understand who bought how much of which styles. Most likely, you will be surprised by who bought what and have your assumptions challenged. Take Timberland. They thought their target market was blue-collared men who worked labor-intensive jobs in construction and home improvement. It turned out it was the hip-hop community that embraced them. While it is important to outline a target market, it is also equally important to go with the flow when you find out you were off. Analyze the data, listen to the market, and be flexible.

2. Use the data to improve your line

Combine your sales data with customer feedback to make improvements to your line and move the company forward. If one product is not selling, change or remove it. If another is going gangbusters, order more units and make additional styles. Analyzing and understanding data will be crucial to continued revenue and growth.

3. It is time for some critical decisions

After running tests and seeing the data, you need to ask yourself if your company has a place in the market. Is your business still not selling even though you have listened to the market and made changes, whether it was to your merchandise, marketing, distribution, or operations? If so, it may be either that there isn’t demand for your product in the market or that it is not differentiated enough from the competition. If on the other hand you see growth and profit, then you just might have a concept with wings!

4. Scale up your business

Now that you have decided that your concept works, your new focus is to make sure that it grows! Growth can mean many different things: investing in branding and marketing, hiring employees, or diversifying your product line, or all of the above. Whatever you decide, identify quarterly goals and focus on incremental growth. Always concentrate on the bottom line and make sure your growth decisions make sense for you and your budget.

After reading these steps, you have a better understanding of why starting small is more beneficial than starting big. Small tests give you the flexibility to stay nimble and reduce risk when market forces push you in new directions. Now, you may be thinking, ‘What do I do now?’ Now is the time to take action and use this information to start your fashion empire.

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