We are one step left to production, so now it is time to talk about costing your garments. No, this is not going to involve a lot of math, I promise. But it does require a basic understanding of the numbers involved in pricing your garments and how all these numbers will affect your selling price.
When working on cost per garment it is better to work directly on an excel sheet with all the formulas already applied, but to keep it simple and list everything that you will need to know when pricing your garment, let me try to explain in the best way I can part by part.
1. List out everything that goes in your garment
By “List out everything that goes in your garment” I really mean everything. From care label, brand label, embroidery (in case you have one), hangtags, tissue paper for the package wrapping, “thank you” cards, box for the packaging, buttons, fabrics, lining, zipper, snaps, production cut & sew price, literally everything that goes in one single garment.
2. List out the prices of each material that goes in your garment
Once you have a list of all materials that go in each garment, start listing out the price of these materials. How much was the button? How much was the fabric per yard? All prices need to be listed.
An important detail here is that you will not be listing the prices you paid for the entire production order, but only the price per item - that is why I mentioned the price of the fabric per yard.
Here you will list the materials along with the price you paid per unit. For example:
Care label: $0.49
Brand Label: $0.69
Thank you cards: $3
Box: $9
Tissue paper: $0.15
Hangtags: $1.79
Fabric: $12.95
Buttons: $0.75
Lining: $5
3. Material quantity
Ok, so the reason why it is important to list the price of materials per unit is that, when ordering for production, you will be ordering a lot of quantities, but you are obviously not using 200 zippers in one garment, for example.
Once listing the materials that go in each garment, it is important to list the number of materials that you will be using. 1 care label, 1 brand label, 1 hangtag, 3 buttons, 1.5 yards of fabric, 1 zipper, 1 yard of lining…
Since, at this point, we already have production markers and we know the exact quantity of yards used per garment, and we know exactly how much trim is needed in each garment, it is easier to list all prices and calculate exactly how much is needed per garment without overestimating or underestimating.
4. Production cut & sew price
You should have one costing formula per garment regardless of how similar your garments are, but one of the main points of creating this formula is because each garment will have a different cut and sew price. It always depends on how complicated and how much time it will take to finish up the entire garment.
Also, you may be using the exact same fabric and trims in two very similar skirts, but the quantity of fabric used will hardly be the same. That is another reason why it is important to have one costing sheet per garment.
5. Total costing number plus 10%
When you work in product development and production management for a while you just learn (and accept) that shit happens. It just does. Sometimes it is small details, like a zipper that was cut the wrong way, a fabric that was produced 2’’ shorter on the fabric width, the factory does not provide the thread color you want…
Shit just happens and you have to be prepared for anything. That is why, at the end of your costing formula, I always recommend adding a 10% room for error. It gives you the little extra budget that might be needed in case you have to reorder trims or fabrics.
6. Adding wholesale and retail prices
Once your costing is done (with that 10% added) you finally have the total costing per garment. This number shows you exactly how much it costs you to produce that garment, and, once you have this number, you can calculate wholesale and retail prices.
The industry standards are pretty basic, wholesale is 25% on top of your costing and retail is double your cost.
These numbers will show you how much your customers will pay per garment and that is why it is so important to have your costing listed out perfectly. Exactly how much fabric is used per garment, how many buttons, lining… if you do not have the perfect number, you will either be overestimating or underestimating your cost which can increase the selling price (something that is never good when you are a startup) or decrease your selling price (which is even worse since you will end up with no profits).
As I said, it is definitely easier to explain and work on costing directly on an excel sheet, but here is a brief explanation of how costing your garments works. Please remember that you can always have a 101 coaching class with me to go over notes and I guide you through the actual excel sheet (it comes with the coaching class). But I hope this post helped open your mind and clarify the process.
The next step: production and working with manufacturers.
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