Over the years, my idea of a line plan has grown to a 60-column wide spreadsheet that can give me every detail of my product plan, budget and potential revenue at a glance. But it’s really not necessary to include so much information when you’re just getting started.
I’ve put together the 10 items you need to start your apparel line plan:
Naming your product can be as complicated or as simple as you want to make it. I like to start with something generic when setting up an initial line plan. For example, I’ll just write: “TECH TEE” in the style name description at the beginning of my process. Eventually, that could evolve into a more personalized name for the item that ties back to your brand. But to start out, you just need to know what kind of products you plan to make and sell. Keep it simple at first, because we’re going to get into some more complicated items that will take up a good deal of your time in this process.
Target Product Cost:
What do you think your product will cost you to make at the factory? Understandably, this is a complicated question. Working with an expert who understands apparel manufacturing and costing can help you to estimate a realistic cost that can then become your “target.” Don’t guess. This piece of information is crucial to understanding everything else about your costing and revenue plan. All of the below cost components will be calculated off of this target cost, so you really want to be as close to a real cost as possible.
Before you can calculate your importing and customs duty rates and their cost per garment, you need to understand what country you plan to manufacture your apparel in, and where you plan to ship it to. This can be the simple part if you already know what factory you plan to use to produce your garments.
The trickier part is that you also need to have an understanding of international duty rate classifications. For example, if you want to make a polyester tech tee in China and ship it to your warehouse in New York, you are going to pay more than 30% as the duty rate on the cost of the product. However, if you want to make that same tech tee in Mexico, you can greatly benefit from NAFTA agreements and you will pay 0% to import your goods to New York.
Every single type of garment has its own duty rate percentage for each country it could export from. Not only that, but the main fabrication of each garment will also affect your duty rate. It is one of the more complicated parts of manufacturing to understand, and getting it wrong could mean hold-ups, fines and rejections through our customs clearance processes. Working with an expert in this area is crucial for your business and for your line planning purposes. You can’t know your projected costs if you don’t know the cost of importing your goods.
Importing your goods will also cost you in shipping fees. Ideally, you want to get these costs calculated down to cost per garment instead of per box or palette, so that you can eventually understand the exact total cost per unit that you plan to purchase. It will include the fees typically paid to customs for importing goods into the country, any shipping insurance you have and the actual cost with the carrier.
Target Landed Cost:
Once you have all of these details figured out, you can calculate the “landed” cost of your garment. Essentially, this means: What did you pay for the garment to land on the ground in your warehouse? This adds up your target product cost, duty rate fees and shipping costs to come up with a grand total.
How much do you want to sell each garment for? Do some research here with competitor brands. If other apparel brands in your segment are selling their tech tee for $50 and you want to sell yours for $100, you might find that you’ve over-priced yourself, and you won’t see a lot of sales. Be careful not to under-price yourself though either, because consumers tend to equate super low prices with low quality.
Target Margin Percentage:
Here is where we start to get into your revenue plan for profit. Knowing the total landed cost of your garment and the price at which you plan to sell it will help you to calculate your margin of profit. This will be different for companies selling their goods as a wholesale product (selling to a store who then turns the product around and sells to their customers) or for companies selling their goods direct to consumers (DTC). Your percentage of profit is what will allow you to grow your business, so this is something key to pay attention to.
Units to Purchase:
Now that you know what your garments are going to cost to produce and ship to your warehouse, you can determine how many units of each garment you can afford to make. Many factories will hold you to a minimum order quantity (MOQ), so you need to make sure to take that into account when choosing a factory. If you can’t afford to buy 1,000 pieces of each garment and that is their MOQ, then you need to find a new manufacturing partner to get yourself started.
And maybe you’re thinking, “But wait… didn’t you say that I need to know which factory I’m working with to know my Country of Origin to calculate my duty rate first?” Yes, I did say that. Line planning and understanding the intricacies of building an apparel line are extremely complex, and it is crucial that you find someone who can navigate the ways in which all of these pieces come together for you. Again, don’t try to guess. It will just create issues for you down the road.
Adding up your cost per garment with the number of units you plan to buy will give you a total cost for that particular piece. Then, add up all of your garments’ total costs to come up with your first purchase order amount. This is the amount of money you need to have on-hand to bring inventory into the country.
This is my favorite part. Seeing the potential profits of your line in dollars and cents really brings it all together. From here, you can subtract your cost from your revenue and know just how much you’ll benefit from selling your line.
And there you go! If you can work through those ten items and put your plan on paper, you will know what is possible for your apparel business. From here, you can add, remove, refine and update the plan until you have solid numbers in place. Starting with target costs can evolve into evaluations against true costs and then you’re really getting somewhere! Contact me when and if you need any help.