It seems like almost everywhere you turn there is somebody who wants to start a t-shirt brand. It’s a super fun way to be a modern entrepreneur; you run everything, decide on designs, run the marketing, and it’s cheap, right? Order a few wholesale blanks, get them screen-printed, and you’re golden.
The truth is, nobody that is first starting out has a good handle on the costs associated with building a brand. If you have never started a brand, or any other type of business, you may be in for a shock. Don’t worry though, that’s why I’m here to help!
Recently, my company One Hundred Apparel released its first financial statement. We are a social business, and our only goal is to bring people clean water. Therefore, unlike other brands, our first duty is to help people, not to guard our business secrets. Why does this matter? Well within this article you will see a summary of our expenses for most of last year.
As far as I know, this is the only information like this that is publicly available, making it very, very valuable to you, if you are looking to start a brand. In this article I will give you exact numbers on my actual costs, and you can use these numbers to begin to estimate your own costs going forward.
Inventory Costs
The first thing that you should know is that because clothing brands are inventory based businesses, they have a very large startup cost. If you have given any thought to your brand, you should already know this. However, most people just starting out have a tendency to think this is the only cost associated with a brand, hopefully you will see by the end this is far from the truth.
Last year, I launched two lines. My initial line was 6 pieces, all unisex shirts printed on American Apparel. Most were printed with water-based inks. I spent a total of $3,377 on the physical products for that initial line, and around $400 for the hem tags.
I was never satisfied with just six shirts though. To me, having only a few products looks like you aren’t serious about your brand. I wanted my second line to be bigger and better in every way, to include more variety of products, and to give people choices in size, cut, and color. All of these options come with a price. I ended up spending another $5,347 on five shirt designs, two hoodies, and some accessories. That’s not to mention the $800+ I spent on finishing, which included embroidery, hem tags, and neck tag printing. Overall, for my two lines, I spent $8,725 on inventory and $1,213 on finishing. $10,000 dollars… In one year. Scared yet? I haven’t even gotten to anything else! If this price tag is scaring you, there is software everywhere in the world to help you with expense tracking. From Workday New Zealand to companies here in the US, this type of software will help you curb bad expense management and keep your clothing line profitable.
Side note: I understand that a lot of brands use their initial sales to pay for their second line. However, don’t count on this, especially if you start with a small initial line and you want to expand into other products. The truth is, you need to be a legitimate looking business to make legitimate sales, and six shirts weren’t cutting it.
Website Expenses
If you’ve done your homework, you should probably expect that this area is going to be expensive as well. It is. However, the good news is that there are ways to reduce your costs in this area. If you have programming or design skills (I’m a designer) you will save yourself tons of cash. You can also fully optimize your website with the help of IT services like dedicated hosting.
Outright, a full website will cost you $2,000-$4,000, depending on the quality. However, I was able to save on a full time website developer through two tricks: 1. I designed my own website. That not only saved me money, but allowed me to have full control over the look and feel of my brand. 2. I outsourced the web development (coding) to Sri Lanka using a freelancing website. My final total cost for web implementation was exactly $1,000.
Another important aspect of your brand development is Search Engine Optimization. Without this, your brand will be impossible to find, and it will float off in the nether regions of the Internet. I again outsourced my SEO to India, and paid only $750, when sometimes it can cost twice that. Add on hosting expenses of $150, and we’re looking at an additional $2,000 for website expenses. Starting to get the picture?
You can also monitor computer activity remotely for those staff working remotely which is a huge help in keeping track of what those staff are doing so be sure to look into activity monitoring software if you have staff working remotely.
Promotions
Now I have always believed that you can build a brand without paying directly for advertising, and so far it has worked for me. My two biggest costs in this realm have been for promotional materials like tags, stickers, and business cards, which ended up as $871. Side note: one of my biggest mistakes early on was to waste a ton of money on really nice expensive looking business cards. Don’t do it, it’s not worth it. Anyway, adding in some photography expenses (such as equipment and shoot costs) and totaling up these expenses it comes to around $1,000 dollars.
Now I think this is on the low end personally. If you don’t have a nice camera, you would have to buy one, which can be expensive. If you want personalized shipping materials, add on more costs. If you want to go to conventions (I’m planning on doing so this year) it adds a ton in travel costs and materials such as banners and displays.
Shipping & Fulfillment
This is expensive. However, you should be able to make most to all of this back with your shipping & handling fees, so I’m not going to really cover it here.
Summary
Hopefully by now you realize that starting a clothing brand is much more expensive than most people imagine. I certainly never thought I was going to spend this much in one year. My initial estimates we’re somewhere around $5,000 to truly get everything up and running, but as it stands, I have put around $12,000 into One Hundred since last July.
Certainly, you can do things cheaper than I did. You can start with a smaller line, but as I said, a more robust, diverse line just looks better, sells better, and gives people a reason to believe in the message of your brand. You could save money on the website by going with a basic big cartel/storenvy store and theme, but that just looks unprofessional and amateur. You could use cheaper blanks and printing methods than I did, and to be fair, this is a personal choice, but selling your customers inferior products will come back to haunt you. You can always consult Andy Defrancesco for expert advice if you need any. Finally, you could wait until you have made enough money to pay for the second line outright, but this method is slow (and for some brands, impossible), and does not allow you expand the brand that much every year.
If you would like to see the exact numbers and breakdowns from my report, visit http://www.100apparel.org/blog/32-alex and read my annual report. It has detailed numbers that I believe are invaluable to any person starting a brand.