How to start a clothing business in 11 steps
If there’s one thing the pandemic has taught us, fashion will endure...even when hidden behind a mask. For some entrepreneurs, it’s been a passion since they designed their first Halloween custom way back in grade school, and for others, fashion has always been a healthy albeit expensive addiction. Or perhaps, you just want to sink your teeth into a 2.5 trillion-dollar industry.
No matter what’s causing you to start your own business, it’ll take more than a keen sense of design to avoid being part of the 50% of ventures that fail in the first 5 years. So here’s a step-by-step guide to help your new outfit become a successful business that will suit you for life.
1) Create a clothing line business plan
"I don't design clothes. I design dreams."
Before you can become a Ralph Lauren, you have to follow his words. How else do you design your dreams but grab a piece of paper and scribble down your plan? So when you’re ready to create your future, here are some questions to ask before starting a business:
- Executive Summary: How would you describe the business and your potential success?
- Overview: What's the business's background, legal structure, and other key attributes?
- Industry Analysis: What does market research reveal about the clothing industry in your area, including size, opportunity, and current trends?
- Competitive Analysis: Who are your competitors, and what are their strengths and weaknesses?
- Marketing: What is your marketing strategy to reach potential customers?
- Management: What unique skills do you bring to the business?
- Operations Plan: How will you manage the day-to-day tasks of the business?
- Financials: What are your estimated revenues, expenses, and profits for each of your first 5 years?
2) Find your clothing business niche
Finding a niche is as easy as narrowing your focus to a smaller part of the broader clothing market. A niche is your bullhorn to speak over the noise to the ears of your target market. New entrepreneurs might focus on one type of apparel before expanding their brands. Here are some niches you may consider for your clothing business:
- Children’s clothing
- Men’s casualwear
- Men’s dress clothes
- Used clothes
- Women’s casualwear
- Women’s dress clothes
You may choose to specialize even further with a focus on 1 or more:
- Long sleeve shirts
- Short sleeve shirts
3) Uncover your clothing business's unique selling proposition (USP)
Your unique selling proposition tells potential customers what sets you apart from other apparel companies. People can get clothes from just about anywhere, so why should they choose your brand? Top business thinkers would tell you that the way to build a following in today’s hypercompetitive marketplace is to focus on winning 90% of a small pie rather than 10% of a big one.
Your USP helps you carve out your cut of the market. For example, a fashion design entrepreneur might scratch her own itch with the USP, “High Fashion for Women 5’ 2” and Under.” The USP rolls out the red carpet for all the women who have the same fashion sense as a supermodel but in a slightly smaller package.
A USP done right should sound memorable, attention-grabbing, and laser-focused. Our example entrepreneur’s brand identity helps her reach her dainty target audience. Strong USPs lead to strong brands that command higher price points relative to similar competition because their target market feels the clothing is made just for them.
4) Craft your clothing brand name and logo
Iconic fashion brands have unforgettable names and logos. It doesn’t take 4 years and fashion design school to create a moniker. In fact, many successful new clothing lines were launched in the owner’s living room. Your name should creatively marry your niche and USP. For example, the designer above might try a name like Petite Chic.
A sharp pencil, a business name generator, and a bit of competitor research could spark a winning name. And friends and family can join the brainstorming process. If all else fails, you can always fall back on your name, especially if you’re aiming for high fashion. Whatever name you choose, make sure it’s as timeless as the brands you admire.
Once you have the winning name, you can try an online logo maker or shoot over to a site like 99designs.com. If employing outside help gives away too much creative freedom, perhaps you can work as a team until your vision and aesthetic become a reality.
5) Design your own clothing line
With a niche, USP, name, and logo, it’s time to draw. But avoid the new clothing business owner’s mistake of creating too large a collection. For example, Donna Karan launched back in 1985 with her “Seven Easy Pieces.” Another benefit of launching small is it reduces inventory headaches. Something you can learn more about in the next step.
6) Choose your business model
Your clothing business can have several business models. Check out some of the most common:
If you’ve ever paid for screen printing, the process is similar. This business strategy uses a third party to print and distribute pre-existing wholesale items (such as hoodies or t-shirts) to your consumers.
Your unique patterns or prints are put to the suitable garment and sent out to your customers as orders come through. As a result, you don’t need to keep inventory or handle fulfillment. It's one of the most straightforward fashion company ideas to start up, but it also produces some of the lowest income since much of your earnings get swallowed up by the third party fulfilling your orders.
- High-quality prints
- No or minimal set-up expenses
- Unlimited color choices
- One-off printing and small order quantities
- Variety of clothing options
- Lack of volume discount
- Limited print selection
- Little finishing options (labels, tags, packaging)
- Not cost-effective, especially for large quantities
Custom wholesale companies buy pre-made wholesale clothes and then customize them by hand. To suit your concept, you may appliqué, embroider, print, or otherwise enhance the current clothes. This approach requires a commitment of both time and money. You will, however, keep more of your earnings than with the print-on-demand approach.
- Bigger margins than print-on-demand
- Cost-effective for large production runs
- Volume discounts offered
- Expensive for larger clothing lines with various pieces, colors, and sizes
- Limited to simple designs and images (for example, can’t print a photograph)
- Minimum orders may require 10 or 25 units per color or size
- Inventory and shipping responsibility on entrepreneur
Cut-and-sew and private label
This is what many fashion entrepreneurs think of when they say, “clothing design.” A private label model requires you to manage the sourcing of the fabrics, décor, and components needed to construct your clothes. Also, you'll need to track inventory and complete your orders.
In addition, you'll need to find a clothing manufacturer, negotiate production costs, collaborate with a pattern maker, design tech packs, test fabric, and most likely produce several prototypes before you ever get a final product through the manufacturing process.
- 100% custom clothing
- Bigger margins possible with exclusive clothing items
- High perceived value
- High startup costs
- Lots of complexity, especially for a beginner
- Time frame is months
Designers should beware that this fashion business model falls under the high risk/high reward category. Custom couture clothes are handcrafted to suit each customer. The intricacy is time and labor-intensive and exorbitant to create. However, if your designs capture the attention of wealthy clients, your company may take off to the stratosphere.
- 100% custom clothing
- Biggest margins
- Highest perceived value
- Limited target market
- Strong brand image required
- Years necessary to build a reputation
7) Figure out your financial plan
Although clothing businesses can enjoy healthy gross margins, it takes a financially literate owner to put those dollars in the back pocket. But, of course, if numbers aren’t your thing, you can always lean on bookkeepers, software, or accountants for help.
Estimate your startup costs
If you want a true side-hustle, you can get a t-shirt business going for $1,000 or less. Conversely, according to Startup Fashion, $15K-$30K is an excellent place to start if you're launching a new clothing line. And, that number can shoot higher for high-fashion and couture brands.
Don’t have tens of thousands of dollars in your piggy bank? Here are some simple ways to pay upfront expenses and launch your new business:
- Ask friends or family
- Create a crowdfunding campaign
- Finance equipment and with vendors
- Invest your savings
- Open a line of credit
- Secure a personal or business loan
- Use personal or business credit cards
Plan your pricing strategy
When you’re confident in the math, you can move on to your pricing strategy. Many small businesses and clothing line owners use the cost of goods sold (COGS) to steer them toward the right price. COGS includes how much you pay for materials, labor, and production.
Then you’ll have to factor in overhead such as warehouse rent, shipping costs, and employee payroll. Once you have a grasp on expenses, you add in profit to have enough cash flow to pay the bills. A standard pricing method, called keystone markup, involves doubling the cost. So, if that t-shirt costs you $15 you charge $30 for wholesalers and $60 on your online store.
The crucial thing is understanding your target audience’s demographics and what they’re willing to pay. Perhaps, experiment with higher pricing and consider discounting as a strategy to create higher perceived value.
8) Get your paperwork in order
Your business idea is rapidly becoming a reality. But, first, you have to put pen to paper.
a) Trademark your brand name and logo
Check Google for your name and head over to U.S. Patent and Trademark Office website. Next, apply for a trademark with the U.S. Patent and Trademark Office. You’ll need to complete a form, pay a fee, and wait up to six months.
If approved, no other clothing business can use your name or design. One of the most frequent grounds for a trademark denial is because the mark resembles another registered brand in appearance or sound. Trademark issues can be tricky, so you may want to talk to an attorney.
b) Register your business name with the state
While you’re waiting for your trademark to arrive, you can register your new business with the state and local authorities. Then, it’s off to pick your type of business structure, such as sole proprietorship, limited liability company (LLC), or corporation.
c) Apply for your EIN
Your employer identification number (EIN) identifies your business for taxes. Fortunately, getting one is both free and easy. Get your EIN here.
d) Insure your clothing business
Too many first-time clothing business owners forget about insurance. However, every fashion designer needs reliable small business insurance—that's why it's essential to shop around for the best deal. Check out this overview of important coverages you may need to insure your retail business:
- Workers' compensation. This coverage protects your employees if they get sick or injured while working in your clothing business. Every state requires worker's comp, and the consequences of skipping this coverage could cause the state to close your business. (You can get a quick estimate on what you'd pay for workers' comp with our 60-second workers' compensation calculator.)
- General liability insurance. This policy protects your clothing business if you're sued for an injury or property damage claim. (Expensive lawsuits can quickly shut a clothing company down.)
- Property insurance. This policy protects your clothing business equipment and inventory.
- Business interruption. Supplements your lost business income if you must temporarily suspend the clothing business's operations for any reason.
- Business Owner's Policy (BOP). This policy includes general liability, business property insurance, and business interruption coverage—all in one bundle for clothing companies that qualify.
9) Choose where to sell your clothing
Here are 3 possible sales channels:
- Direct to consumer (D2C)
Within each sales channel, there are different types of distribution:
- Boutiques/trunk shows
- Department stores
- Other retailers
- Sales rep and road reps
- In-home shows
- Markets and fairs
- Pop up shops
- Your store
- Your website/eCommerce business
- Drop-shipping (through other websites)
Of course, you can mix and match how you sell your product through various sales and distribution channels. If you’re hiring employees to run your clothing store or online business, you'll need workers' compensation insurance to operate legally. You can get help on hiring from the Small Business Administration.
10) Spread the word about your new clothing brand
Here are some ideas for your marketing plan:
- Build a website. Get the URL for your business name. A service with templates like Weebly or Squarespace can make this easy, and, of course, Shopify doubles as a website builder and eCommerce platform.
- Buy online advertising. If you can afford the pricing, focus on longer keywords related to your niche and USP to win over your target audience.
- Launch your social media accounts. Get your unique Facebook, Twitter, LinkedIn, Instagram, Pinterest, TikTok, and other handles relevant to your niche.
- Partner with Influencers. Instagram Influencers are ecstatic to promote up-and-coming fashion brands for free merch, of course.
11) Check out these tips for running a successful clothing business
Running a successful clothing line is an endless runway. But at least this fashionable journey has some pointers along the way. Check out a few of them here:
- American Fashion Podcast: This podcast is a weekly interview show with a thorough analysis of the inner workings of every aspect of the fashion business.
- Startup Fashion: A site that’s all about actionable information like where to get fashion design education, how to pick a factory, and what’s the best place to find fabric sourcing. There’s also a community of other fashion entrepreneurs who have launched their own businesses and are right in the trenches with you.
- The Business of Fashion: “The Business of Fashion is recognized around the world for its authoritative, analytical point of view on the $2.5 trillion global fashion industry. Our mission is simple: build fashion’s global membership community to open, inform and connect the industry.”
When you’re strutting through what can be a chaotic and crazy clothing world, sometimes it’s good to step back and ponder how to stay sane as an entrepreneur.
And, if you’re still madly in love with everything fashion, you can get business insurance with Huckleberry almost as fast as you whip out your sketchpad when inspiration strikes. (Getting a quote is free, easy, and 100% online.)