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budget

Development Costs
1024 683 Zack Hurley

A Deeper Dive into Development Costs: Part 2 of the Budget & Pricing Mini-Course

This is part 2 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 2 parts and we’ll also give you access to the costing template we use for all of our customers! Read part 1 here.

Let’s dive into the development costs that will go into your development and production budget.  It is crucial from the get go to learn how to manage cost of your garment. These 7 important factors will help you understand sample and production costs as well as your eventual pricing.

Development Costs 1: Fabrication

60% of your garment cost comes from the fabric chosen. When designing and planning pieces, the most important element is the fabric price point per yard. As an example, if it takes 2 yards per shirt and fabric is $8/yard, the cost for fabrics is $16 per shirt.

The trims are another important factor. Being aware of the price added by each buckle, bow, and binding placed on the garment will help you control costs from the start. For example, if you’re making a button-down shirt, you will need:

  • Fabrics
  • Buttons
  • Interfacing

Each of these items will have a specific price per unit that will need to be added to the overall cost of each garment.

Development Costs 2: Additional product elements

Fabric, cut, and sew are obvious items to include but don’t forget about things like care or size labels, hang tags, and poly bags. Also, think about the interior of your product. Is there interfacing or a stabilizer needed to hold shapes or a button placket? Make sure to  include every tiny item into your costing!

Development Costs 3: Construction

Taking into account the finishes, specialty stitches, and amount of seams within a style will help to control your price point.There will be times that the more seams you add to a piece the price will increase (in labor cost), and sometimes the lack of a seam will cause a higher price (in fabric consumption). Adding in French seams, baby merrow stitches, 5 needle flat locks, all take specialty machines. These types of construction, also dictate where your line is produced.

When it comes to construction, it’s likely you’ll need to work with a professional pattern maker with experience in creating production ready garments. The pattern maker should have access to work directly with the sample team to ensure that pattern specifications will be executed correctly. For example, you could budget $15/hour for easy cost calculation and start by allocating 40 hours to create the first pattern and first fit sample. If you have ten styles, multiply the cost of of the pattern and sample by 10.

Development Costs 4: Location

Fully lined garments with inner support construction, and hand work will most certainly be produced in a different factory location than a 4-way stretch legging with 5-needle flatlock seaming. Identifying a factory that specializes in shirt making, for example, before you hire a technical designer or pattern maker is good business practice. It is not uncommon for sewing factories to not have every kind of machines and skilled labor. The more efficiently the factory can make a shirt, the better pricing they can offer your brand in production.

Alternately, you can partner with a full-service production and manufacturing house to help you source pattern makers and manufacturers. The price may not be higher than doing the legwork yourself since the business will have in-house employees and established relationships with specialty manufacturers. They may be able to offer some of the benefits of scale that you as new designer lack.

Development Costs 5: Quantity

The amount of items that you are purchasing from a contractor will always affect the price of that garment. The higher the quantity, the less the price. Learning how to produce apparel with your intended aesthetic, fit, finishes, and market level, while simultaneously staying within your price point, are invaluable to a designer’s success.

Development Costs 6: Packaging

Are you selling directly to the consumer, through resale channels, or both? If you’re selling direct, you’ll need to account for packaging costs. Whether it be a hanger or polybag for an apparel item, custom boxes, tissue paper, ribbon, brand information inserts, or luxury mailing containers, there is a cost. There will be fewer packaging costs if you’re going through resale channels, but of course the middle retailer will also take a cut of your profit margin.

Development Costs 7: Shipping

This industry is global, so your fabrics and trims could be coming from Japan, Italy, India, or any number of places. Without knowing the exact price of shipping, you can always take the total cost of your materials and multiply it by 10%. This estimate will work initially. When you get your final invoices from the vendors you can update the price per yard or piece with the actual amount, including shipping.

Once you understand these 7 items, you’ll be able to start putting together a cost for your sample – and look into cost-saving alternatives. Next comes the equation for pricing your garment. Sign up here to be emailed the next two blog posts in this budget & pricing mini course. Plus, we’ll give you access to the costing template we use for all of our customers! Read part 1 here.

first clothing line
560 315 Jesse Dombrowiak

Your First Clothing Line: Part 1 of the Budget & Pricing Mini-Course

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.

Equity

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

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.

Other Income

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.

Product Development

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.

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

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!

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 budget mistakes 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.

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