No industry is easy to break into, but that is especially true about apparel. While other industries enjoy a 50 percent or higher business success rate after four years, retail and apparel do not. Indeed, a full 53 percent of clothing lines will fold by the fourth year’s end.
One reason for the higher rate of business failure is competition. New designs are abundant, and today’s in-demand style will be tomorrow’s forgotten look. Competition alone isn’t the reason many lines fail, however. Another significant reason clothing businesses have lowered success rates is the business end itself.
Many individuals who launch clothing lines do so because they are artistic, yet these individuals generally are not entrepreneurs who understand how businesses operate. Before launching an apparel line, individuals should consider the following seven start-up steps.
Understand the commitment
The potential business owner must understand the time and money commitment necessary to make the clothing line succeed. Individuals aspiring to start a clothing line would be wise to double their estimates about the time and capital required to start a business.
Sportsbikeshop founder James Mitchell attested to this principle in a recent interview. “There is no way one can escape the hard work - there will be touch of luck, but being creative, hardworking and thinking out of the box is what that sets the trajectory of your business.”
Plan the business
Any experienced entrepreneur knows a company without a business plan is like a fish without water. The plan does not need to be lengthy at first. Rather, it should be one or two pages, identifying the key elements of the clothing line’s business strategy. This initial rough draft should include the:
General Company Description. In this section, the owner should describe the company’s name and any other owners, what industry it’s in, what product lines will be offered, and the company’s goals.
Products Overview. This section allows the clothing line entrepreneur to divulge its current and future product line.
Operational Overview. The owner should know – at the bare minimum – how the company will operate and manufacturing options.
Executive Summary. Although this should be the first item in the business plan, individuals should write this last, summarizing the key components of the business model.
Clothing line entrepreneurs should work toward a complete business plan as the business further develops. Individuals can seek out business plan templates online that include significantly more detail.
Organize the business
The most-overlooked aspect of creating a business is the fact that the company is an entity all of its own. Unless the business owner plans to work exclusively out the back of their car or an e-commerce site like eBay, the entrepreneur will need to establish the business legally.
Decisions that should be made at this point are a business’ tax structure and legal name. Individuals would be wise to consult a tax specialist or lawyer to find out the advantages each type of tax structure presents.
Prepare for manufacturing
Knowing where to produce the clothing line is an extremely important decision. A small business may choose to manufacture its products, but outsourcing should also be considered. The clothing line’s initial quality will be what the business’ reputation is based on, for better or for worse.
Although minor expenses are incurred in organizing the business, manufacturing is the stage where expenses really mount. Entrepreneurs will begin to use the start-up money necessary to launch their business. This initial investment will range from a few hundred dollars to several thousands, depending upon inventory and quality.
Capital can be secured through investments from others -- typically loans -- or provided by the entrepreneur’s personal money. Beyond inventory, all advertising or promotional activities should be included in determining how much capital is needed.
Establish a pricing model
Making a profit off the clothing line is necessary to the business’s success. Profit comes from making more revenue than the fixed and variable costs combined. Fixed costs are expenses that have already been invested and cannot change. These include equipment purchases or buying a facility for the business. In contrast, variable costs are expenses that can vary from one period to another. Examples include the price difference between manufacturers or the cost to produce different apparel items.
To ensure profit, the entrepreneur must establish wholesale and retail rates higher than the expenses. A target for these rates would be to earn a profit margin 30-50% higher than associated expenses.
Market the clothing line
After the business’ essentials have been developed through previous steps, entrepreneurs should start to consider the following items in their marketing strategy.
Build The Brand: A clothing line is identified by its company name and logo, so selecting appropriate ones are essential. Further, promotional activities must consistently display the apparel.
Identify The Target Audience: This is key in any marketing plan. Clothing lines designed for business women need to target business women. Targeting other individuals will not yield the best results.
Create An Online Presence: A business without an online marketplace misses too many opportunities. E-commerce is growing rapidly as billions are spent monthly. And you have a lot to lose if you don’t move your business online, because the online commerce market is more important than a brick-and-mortar location.
Analyze and adjust
“It’s really about the loopholes that you leave open in your marketing strategy, figure out where you are bleeding money, identify the bottle neck in your sales funnel and eventually you’ll have a fine-tuned machine," says Sergiu Poenaru, founder of t-shirt business Teehunter.com.
Efficiency is essential to the business’ survival. After launch, entrepreneurs should re-examine their business model to ensure the company is meeting projected profit estimates if not, efficiencies or stream-lining the process comes are necessary next steps.