There is a large amount of information you need to assimilate in order to write an effective business plan. You must evaluate your competition, map out your channels of distribution, forecast your cash flow, develop your product, etc. In researching your clothing line, El Pico Distribution also urges you to “learn the lingo” and be prepared to properly identify the fabric you wish to use by weight (yield), content, and construction. We strongly recommend that you develop a business plan prior to making your first sample. Before you spend your first dollar, your plan must make sense from both a financial and market standpoint.
Estimating Startup Clothing Lines
Part of your clothing line research will involve determining what your garments will sell for at retail and working that back to the price you need to achieve to be profitable long-term. As a startup, you must realize that the products you will be competing with have the advantage of higher volumes and established supply chains. It is unrealistic to expect profitability in your first year of operation.
Your prices are defined by your channels of distribution, product differentiation, and saleability within retail price points. You can work backwards from retail by knowing that most retailers keystone (wholesale x 2) or even use wholesale x 2.5 to achieve their margins. Ultimately, as a wholesaler, it would be realistic to target a gross margin of 40%. Therefore, a garment that you believe should retail at $60 would be sold at wholesale between $20 and $25 and would be purchased by you from your manufacturer at between $14 and $16 including freight.
Funding Clothing Startups
As a startup you are acutely aware of how difficult it can be to fund a new operation. Even with the best of business plans it is difficult to secure bank financing without pledging personal assets. Assistance can sometimes be found at the state or local level through business incubators or economic development funds. At El Pico Distribution, we are often asked how much it costs to start up an apparel business. This is a difficult question to answer, as the product itself may range from a dollar a unit to upwards of $30 or more.
Our experience with dozens of startups provide us with a general guideline of $6,000-$15,000 per style for mid-priced apparel at a minimum order level. Keep in mind that this amount is for product only and that you will need ongoing funds for operational expenses. For all custom orders El Pico Distribution requires a 50% deposit upon order placement. The balance of this payment may be applied with credit card (MasterCard, Visa, Discover), COD, or pre-payment when ready.