You have an idea for your first clothing line. You know what you want your collection to look like, and you are ready to make the dream happen. Next comes the uncomfortable step that most creatives dread: how do you budget and price your first clothing line?
Fashion lines are typically developed on a 6-month cycle. It takes six months from concept to floor. For new designers who are usually developing fewer pieces on a smaller scale, that timeline can drop down to 6 weeks.
Even so, A LOT needs to happen between the design and delivery of the question. The truth of the fashion business is that you will incur many costs before you see any revenue, so budgets are king – and how you price your garments queen. This is part 1 of a 4 part mini-course on budgeting and pricing for designers working on their first clothing line. Sign up here to be emailed the remaining 3 parts and we’ll also give you access to the costing template we use for all of our customers!
What can you afford for your first clothing line?
It might seem elementary, but the first step to a budget is to look at your finances and determine how much you can spend in total. Lots of new fashion designers will say they do not have a budget, but that they are ready to spend whatever it takes to get their first clothing line up and running.
Let’s be honest. Most of us do not have an unlimited pile of cash to funnel into a new business. So sit down and take a look at your finances to see just how much money you are willing to invest in your new brand. Fashion designers generally look to three different possible sources of funding for their first clothing line.
An equity investment is an investment that others make into your business in exchange for part ownership. Equity investors will expect some level of decision-making authority after they buy in. While angel investors, like friends and family, may be easier to land, the best equity investors will also give you expertise and contacts and serve as high-level advisors to your growing business.
Debt financing, otherwise known as a loan, means you need to pay back any money you borrowed plus interest according to the fee schedule you arranged with the bank or institution. If you decide to take on debt, it means you will have upfront money without giving up any control of the business, but you will have an additional monthly expense in the form of interest payments.
Of course, there are many other options for financing too. You might start your fashion line as a side hustle and be able to finance it through another line of work, whether it is a full-time job or part-time consulting or freelancing gigs. As well, there are many awards, competitions, and grants available to new designers. The benefit of this financing is that you do not have to give away control. The drawback, however, is that these commitments can sap your time and energy and slow down development of your business.
Whatever you choose, it is important to get comfortable with an element of fundraising from the beginning. The more successful you are, the more your funding needs will grow. You will take bigger orders and need more cash upfront to front collections before buyers or customers pay you. If you want to expand aggressively, and who does not, money earned from previous seasons will not be enough to fund the next round. Even if you can finance your first collection from your own bank account now, this may not be true in the future. Every new collection will pose a challenge, and you will need some financing to bridge the gap.
The three major expenses of your first clothing line
Once you have an overall budget, the next step is to understand how to allocate your funds. The first step is to split the budget into three main buckets, product development, production, and marketing. With international production and larger orders, these buckets get more complex, but we will assume you are starting small and your first clothing line will be USA-made.
For product development, you can use our in-house process as a guide. For fabric sourcing, trim sourcing, pattern making, and cut and sew for your samples, clients typically spend between $1,500 to $2,000 per sample. We recommend that you devote at least $2,000 to each sample to create a quality product that will be successful in the marketplace.
Product development costs depend on a few factors, including how many products you are producing, each product’s complexity, and the quality of the materials you are using. At the end of the development process, you will understand exactly how much your cost per unit – and how much you plan to price your items – as you move into the next big stage: production.
Development has a cost separate from production. Development means getting your samples perfect; production means manufacturing them at scale. Unfortunately, there are no simple guidelines for manufacturing costs. Manufacturers are famous for charing retailers different costs even for the same products. Ultimately, the price depends on volume, leverage, and even relationships. The general rule is that volume is king. The more you buy, the cheaper the cost per unit.
That said, you shouldn’t produce more just because you get a lower price per unit. For designers working on their first clothing line, lower volumes are important. You need them to test demand, experiment with marketing, and create buzz. You will end up paying more, but you also don’t risk having unsold inventory. That, more than lower margins, is the largest challenge you will face – and it won’t go away as your brand grows.
As in most any industry, relationships in fashion are crucial to pricing. Building relationships with buyers, retailors, and manufacturers will help you negotiate better prices. Of course, it takes time to build relationships, but a great network is a valuable piece of the pizzle. Ultimately, keeping down costs is a constant balancing of high and low volume prices while keeping in mind the margins you need to keep the business healthy.
Marketing is another topic that should be addressed from the beginning, no matter how uncomfortable. Luckily, marketing a first clothing line these days does not have to be expensive. Websites through Wix, Shopify, Squarespace, or WordPress are fairly inexpensive to set up and maintain. As well, it is possible to test ads on social media networks like Facebook, Instagram, and Pinterest without a large outlay of cash.
If you have already identified influencers that cater to your audience, reach out to them and see what they charge. We also recommend signing on a free or inexpensive email marketing service, like Mailchimp, so you can start list building. No matter what, it is important to allocate some amount of money to marketing, so you can start building an audience and testing the market.
You made it! This is just part 1 of a 4 part mini-course on budgeting and pricing for designers working on their first clothing line. Sign up here to be emailed the remaining 3 parts and we’ll also give you access to the costing template we use for all of our customers!