Minimising the costs of starting a clothing business

What are the main expenses of starting a clothing business?

It’s fair to say that a clothing business isn’t one of the cheapest or lowest-risk business ventures. You’ll need to invest a fair amount in order to be in a position to sell your products and the operating costs can be high. On the flipside, establish your brand and there are huge profits to be made. Just look at the likes of Boohoo, Missguided, and PrettyLittleThing – all based in Manchester – who’ve emerged in the last decade to become household names.

In this article, though, we’re going to set our sights a little smaller. We’re looking at the small business end: bespoke wedding dress makers, t-shirt designers, milliners, jewellers and shoe manufacturers to name a few.

Let’s look at some of the main costs you’ll need to invest in, either starting out or as-you-go.

• Website
  If you’re selling to consumers, having a high-performing ecommerce store is essential. If you’re looking to sell to wholesalers, you still need to have a basic website.  
• Premises
  Will you be making your clothes from home or in a dedicated workspace? This could be the back of your shop or your own factory (expensive). You’ll also need to think about storage costs too if you’re going to have a lot of stock.
• Suppliers
  If you’re looking to produce at scale, it’s likely you’ll need to use suppliers to produce the goods. This can be a significant cost as you have to commit to minimum order quantities, delivery, and potentially agent fees (if you’re not dealing directly with the factory).
• Fabric
  Sourcing your own fabric and materials is essential if you’re producing the goods in-house. However, if you’re using suppliers this is usually handled by them.
• Machinery
  If you’re producing the goods, you’ll need to factor in equipment costs. What you require will depend on the nature of your business – e.g. a t-shirt designer will need a printer, a dress maker will need sewing machines and mannequins, and jewellers will need engraving machines.
• Delivery
  Large bulk orders will be expensive to deliver, especially if you’re shipping from overseas. You’ll need to factor in custom fees and tariffs too.
• Staff
  Running a clothing business on your own is going to be very difficult. Depending on the scale of your operation, you may need a sizable workforce from designers to salespeople.
• Marketing
  In order for your target audience to find you and buy from you, you’ll need to invest in marketing.

How can I minimise costs easily?

Before we go into detail on each of the main expenses where you’ll be able to save money, there are some fundamentals. 

• Think about your business model. Selling to wholesalers can be less risky as it guarantees cost price sales and would help with minimum order quantities when working with suppliers. However, consumer sales offers more mass market potential. 
• Start small to begin with. Gauge demand for your products by selling at markets and craft fairs, or, via online marketplaces. This can help you to refine your offering and ensure you invest based on real sales figures. 
• Online or offline or both? Selling online is clearly the cheaper option to having a physical store but doesn’t offer the same visibility to begin with – you need to spend on marketing. If you rent a store, location is all-important.
• Focus your range on your strengths. Don’t try be everything all at once, otherwise you’ll stretch yourself and potentially dilute your offering. 
• Brush up on pricing methods. As well as knowing your numbers, you also need to research your target customers and your competitors to ensure your pricing is right. 
• Have a plan in place. As a starter you need a business plan, budgets, and a marketing strategy. 
• Open a business bank account. Find the best small business bank account for your clothing business and make sure that it helps you to manage your expenses 

Website

The type of website you need will really depend on your business model. If you’re looking to primarily sell to consumers, you’re going to need a solid e-commerce solution. If you’re selling to wholesalers, there may be less emphasis on sales through your website, however, it is still important.

Building a website yourself is clearly the cheapest solution. Wix and Squarespace are low-cost DIY website builders, easy-to-use with good e-commerce solutions and design templates for clothing brands. This is a good way to minimise costs when you’re starting out rather than designing a bespoke solution.

Another option, is to sell your products through marketplace websites. In this scenario, your products will be showcased on a website like Etsy, eBay or Amazon. Whilst you will have to pay a % fee on your sales, the advantages are:

• it’s quick and easy to set up
• there’s a readymade audience
• it’s a good low-risk way to test appetite for your products.

Premises

If you plan to own the production process, you’re going to need somewhere to produce your products. If you’re a low-scale maker, it’s possible you can save costs by doing this in your home, shed or garage. (Your regular home insurance is unlikely to cover this – you’ll need to look into business insurance)

It’s more likely, though, that you’ll need another location both to produce your clothing products and potentially a store too. Clearly, this becomes more expensive. Therefore, think about what your minimum requirements are. For example, industrial units in railway arches can offer a cheaper and unique alternative whilst you’re starting out.

You might determine it’s more cost-effective to use suppliers to manage your production. One of the advantages of keeping the production process in-house, though, is it does allow shorter lead times. Clothing brand Zara is atypical in that it operates in this way and, as such, is able to get new products to market quickly and cheaply. However, this is only a consideration if you have the funds and revenue-generation to justify this investment.

Suppliers

In many cases, clothing businesses will work with suppliers to source materials or to produce your products in their factories.

Cross Costing involves getting as many quotes as possible from different suppliers and vying between them to get your cost prices down. Of course, the cheapest is not always the one you should go with but you may be able to negotiate discounts. Buying in bulk will save money but it also risky as you may lumbered with stock you cannot sell.

Using factories in the Far East and parts of Europe is usually a lot cheaper than UK factories. However, lead times are longer and it can be harder to maintain quality control. For example, obtaining and approving samples is not a quick process. Also, Brexit may have a major impact on how cost-effective it is to work with overseas suppliers.

• Read more: How will Brexit affect my supply chain?

Fabrics

The advantage of using suppliers is that you can specify what fabrics to use and they will source them for you, factoring this into their cost price. This can save you time and negates the need to have a dedicated fabrics team (something a bigger brand is likely to have).

If you are purchasing fabrics to produce your clothing products in-house, you’ll need to find wholesalers. Trade shows are a good way to meet wholesalers as well as recommendations from others in your industry. Again, cross costing is a good idea.

Past season fabrics are cheaper to purchase as they may involve designs and colours that are not currently on-trend. You might also look to pick up vintage clothing to upcycle and/or reuse the materials. This might not be as polished as factory-produced gear but can lend a quirky charm that is well-suited to selling on Etsy and at craft fairs.

Machinery

Large-scale industrial machinery for clothes production doesn’t come cheap. Hence why, if you’re looking to produce at scale, your best bet is to outsource production to suppliers.

If, however, you’re looking at machinery to use at home or in your workshop – sewing machines, cutting machines, printers, engravers, computers – you might want to look at buying these second hand through eBay to save on costs.

Another alternative is to lease equipment as opposed to buying it outright. This saves you having to make a large initial outlay, allowing you to spread the cost. It also means you can afford better quality equipment and maintenance costs may be included within the lease agreement. Finally, although you don’t own it, you’re not lumbered with a depreciated asset on your books when you need to upgrade.  

Delivery

Shipping costs are a significant but necessary cost for any clothing business. But you can be smart with your packaging to reduce the weight and size of shipments – and reduce your costs.

For example:

• Getting rid of dead space and excess materials
• Reducing box height
• Use versatile boxes that can be cut to different shapes and sizes
• Shipping bags instead of boxes (if the product is not delicate)

Staff

Ultimately, the more staff you have on the payroll the more money you’re spending. This is one of the biggest expenditure lines for any business. On the flipside, the more resource you have the more you’re able to do – provided it’s directed in the right way.

When you’re starting out, think about the skills you need in the business. Can any of these be outsourced? For example, can you use freelance designers? Could you use websites like Society6 where you can pay for licensed designs from artists and designers?

Think too about utilising software solutions to ensure your resources are utilised efficiently. The following software options can massively streamline your workload by cutting down on admin and duplicated work:

• HR software
• Payroll software
• CRM software
• Accounting software
• Point of Sale software
• Email marketing software

Some software options are free. Wave, for example, offer free accounting software. You can also take advantage of free business bank accounts – many of which automate admin tasks like invoicing and tax calculations.

Marketing

Ultimately, all of your efforts will be squandered if people don’t know about or can’t find your business. Ensuring you have a well-thought out marketing strategy at the outset will ensure you’re targeting the right customers and reaching them in the right places with the right messaging. By planning your strategy and tactical approach, you’ll ultimately save money in the long run.

To help you, we’ve put together a comprehensive list of 43 low-cost marketing ideas. Whether it’s using social media influencers, guerrilla press campaigns, content marketing, SEO, Google Ads, Facebook advertising – many of these are highly relevant to a clothing business.

We’ve also produced this handy ebook – digital marketing on a budget – which contains all the insights you need to promote your business online in a cost-effective way.