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The first question is, do you really know your product cost? Have you factored everything into your cost sheet that needs to be in your cost sheet?

Fabric
Trim

• Linings

• Buttons

• Zippers

• Labels

• Tags

• Tickets

Packaging

• Hangers

• Bags

• Boxes

Embellishments

• Screen printing

• Embroideries

• Appliqués

Cutting
Sewing
Working Losses
Damages

TOTAL COST

Once you are sure you know your product cost you then need to know your operating costs.

First what are your billing terms? Are you offering a discount off the invoice price for prompt payment? Are your terms “net” meaning no discount? What does the customer have to pay you on your selling price?

Second, what is going to be the cost of sales? What are you going to pay in sales commissions? What are you going to pay in other selling expenses? (Showroom costs, show event costs, sample costs, and travel costs).

What, if anything do you plan to spend in marketing and advertising? Many companies are successful spending very little in marketing and advertising. Many in the designer business and better contemporary business hire a public relations firm, others hire product placement companies and some do advertising. Many invest in Look Books which showcase their line requiring photography and printing, an expensive marketing cost. What do you plan on spending on these elements?
What market are you targeting your product for? What is the price range in that market for your type of products? What is the maximum you can charge?

The market and customer type determines the expense structure and the profit you must charge.

For example these are profit margins in the garment business based upon markets or store types.

People selling:

Wal Mart 15% to 30%

Macy’s 40% to 60%

Saks 50% to 70%

This means that the cost of the product when selling Wal Mart is 70% to 85% of the wholesale price.

So if you want to sell Saks, Neiman’s and better boutiques and your product cost $20.00 with everything included, your wholesale price would be somewhere between $40.00 to $66.00.

For small companies starting in the better business or designer business, sales commission can be 12% and other selling expenses can be 5% or 6%. So before any operating expenses are paid and before a profit can be realized 18% is taken out of the profits.

You want to be sure your profit structure allows you to make a profit. Business is about profit and when your product has sufficient profit built in to it, you can find financing if you need it, investors if you need them or your profits generate the financing you need to grow your business.

Some companies have charged 5 times their cost. That is why a truckers cap can wholesale for $18.00 and retail for $42.00. With the right brand or marketing. So sometimes it is just about having the courage to charge a lot for the product. Just keep in mind, it is about making money and keeping your expenses in line with your profit margins.
How much are you charging for your products? Are you calculating in all your cost? Turning a profit? Let us know.

“This is a Guest Post by Billy Kapler of Kapler & Associates”
1223 Wilshire Blvd. #810
Santa Monica, CA 90403
310.394.0504
william@kand.com

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