Costing For Initial Apparel Development

You have an idea for an apparel line. You have been waiting for your vision to take off. How do you budget for product development? If this is where you are right now, I hope you will find the following tips helpful.

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1) Plan for long-term growth.

Why start building a house if you don’t want to complete the structure? My first advice for entrepreneurs and designers is to plan as if you were already a 30-person company with a multi-million dollar revenue stream. This starts with treating yourself as one of the employees when you are working on your business plan. If you are the DIY type, you are focused and you are resourceful. You want to do it all. Item #1 of your budget under Operating Expenses should be $10/hour for yourself. You are not actually going to pay yourself a salary at the initial stage, but it helps to figure out overhead expenses so you don’t get surprises as you grow your company. We all need to hire assistants someday.

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2) Price your brand right.

Are you planning a concept store with small batch merchandise? Do you have an innovative idea for performance wear? Do you want to capture 85% of the market share? Your customers matter. If your target customers are consumers who are spending an average of $45 to $75 for a button-down shirt, can the shirt be made in the USA? You can only source at the right cost if you know how to derive the cost from your product’s retail price. Here is a general formula I like to use to determine how much I can actually “afford” in order to make a shirt that retails at $75:

Retail price: $75 (divide by 3 to get the wholesale cost)

Wholesale cost: $25 (divide by 3 to get the product cost)

Product cost (materials + labor): $8.50 (cost ceiling)

Based on the above calculation, I will not be able to make the product in any country that has a minimum wage of $7.50/hour or higher, so if I’m aiming to produce in America, I would need to adjust the retail price. Cost ceiling will also limit my selection of materials.

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3) Get your sample costs and your pattern production ready.

We will continue to use our generic button-down shirt as an example to look at the cost of apparel development of a shirt collection.

Materials

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What goes into creating a button-down shirt? You will need a) fabrics, b) buttons and c) interfacing. If it takes 2 yards per shirt and fabric is $8/yard, the cost for fabrics is $16 per shirt.

Sewing Capabilities

Identifying a factory that specializes in shirt making 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.

Pattern to Sample

Work with a professional pattern maker with experience in creating production ready buttondown shirts. The pattern maker should have access to work directly with the sample team to ensure that pattern specifications will be executed correctly. In this case, you may budget $15/hour for easy cost calculation, and you may start by allocating 40 hours for creating the first pattern and first fit sample. If you have ten styles, multiply the cost of pattern + sample by 10.

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4) The true cost of apparel development – what else is there?

To prepare for a successful launch, ring in those sales orders and go into productions, you need to understand the cost of sample making. Sample revisions can quickly add up to the overall cost of apparel development. With new visual aided technology, 3D prototyping offers an alternative way to visualize the designs on virtual models. If you end up making 7 samples to get one button-down shirt to fit correctly, consider costs of 40 hours X $10/hour X 7 samples = $2800. This does not include the cost of materials, cutting, shipping and lost time. We are only scratching the surface on this topic. Sales come from samples that your customers will want, and they will impact your brand’s marketing campaign. It’s important to work with an apparel development team who can communicate and understand your requirements.

Inspired to start sourcing for your own brand? Take our free Sourcing 101 e-course.

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