How to Start a Clothing Line

Starting your own clothing line requires equal parts of style and substance. You'll need designs that appeal to consumers and a plan for turning your designs into a business.

• Building Your Clothing Line Strategy
• Identify the Target Market for Your Clothing Line
• Create Your Designs
• Manufacturing Your Clothing Line
• Setting Prices
• Marketing Your Clothing Line
• Setting Up Your Clothing Business

Building Your Clothing Line Strategy

Walk into any department store or browse the internet and you'll quickly see there's no shortage of apparel design ideas. With so much competition for consumers' dollars, your clothing line must stand out from the competition, and you'll need a strategy for doing that.

Begin to formulate your strategy by researching the competition and looking for gaps in the types of customers served, the sizing available, the price points, or other characteristics. For example, you might notice that activewear designs are mostly aimed at younger consumers and identify a need for designs that appeal to an over 40 demographic.

Be careful, though, about fashioning an entire clothing line from something you, yourself, would like to wear. While fashion is a form of personal expression, your clothing line must appeal to many customers to be successful.

Identify the Target Market for Your Clothing Line

A target market is the group of consumers you want to attract with your product.

Create a profile of your target customer by asking yourself questions such as these:

• What's the age range of customers who will buy this product?
• What kinds of jobs do they hold?
• How do they spend their leisure time?
• How much disposable income do they have?

How you define your target market will inform not only the way you market to your customers, it will also play a role in product development.

For example, if you are designing T-shirts for millennials (age 26-41), you might choose to use eco-friendly cottons because this demographic tends to be more environmentally conscious than consumers in other age groups.

Create Your Designs

When you know what you are making and who you are making it for, it's time to start designing.

Designers typically start with a sketch of the piece they want to create, and use computer-aided design (CAD) software such as Adobe Photoshop or Adobe Illustrator to develop their ideas.

Many design software programs allow you to do everything from creating sketches to making patterns and experimenting with the fit of a garment, using virtual models.

A collection typically includes ten to 12 styles, each with several variations. But as a beginner, you might want to start with a much smaller collection of three or four styles and debut them in a soft launch to establish what's called proof of concept. These initial designs will allow you to test the demand for your designs. If you advertise on social media, you can also use tools like Google Analytics to better understand your customer and refine your designs.

Manufacturing Your Clothing Line

The type of manufacturing facility you'll need depends on the kinds of garments you want to make. Most clothing is manufactured in one of these three ways:

Print on demand. Clothing like T-shirts is often manufactured using a print-on-demand process. Print-on-demand factories provide the garment itself, and you provide the design, such as a logo, that you've created.

Print-on-demand shops usually allow you to manufacture small quantities at a time, and they ship the finished items directly to the customer, so you don't have to store inventory or fulfill orders yourself.

Custom wholesale. To manufacture a custom wholesale product, you'd buy a pre-existing garment and customize it with embellishments such as appliques, embroidery, fringes, or other decorations.

For example, you might purchase a denim jacket, and add an embroidered design to the back.

Making custom wholesale garments requires a manufacturing facility with more capabilities than a print-on-demand shop, and you will usually have to store inventory and fulfill orders yourself.

You might also need another third-party vendor to apply your own label for branding and care instructions to these types of garments.

Cut and sew. With cut-and-sew manufacturing, you control the entire process, from designing the garment to selecting and buying the fabrics and notions (zippers, buttons, and such), and overseeing the manufacturing. These types of factories are often located overseas in countries such as Vietnam and Sri Lanka.

You'll need to choose and buy your own fabrics and make the pattern for the garment (although some factories supply pattern makers) and oversee the entire manufacturing process.

Setting Prices

Before you can set pricing for your clothing line, you'll need to know the cost of the materials that go into the garment, the cost to manufacture and ship it from the factory, and all your business and administrative costs, including employee wages, marketing, and sales.

The retail price you set should cover your costs to make the garment and allow for a profit on your sales. You'll also need to evaluate the retail price you set to determine whether it's competitive with comparable garments on the market.

Designers measure costs in cost per unit—CPU. Once you know how much it costs to make each unit, you can add an additional amount for profit, usually 30 percent to 50 percent on top of the CPU.

Keep in mind that the CPU and profit add-in will tell you what your garment should sell for if you are selling directly to consumers (such as through an online store). If you are selling your line through other retailers, their retail price will be higher than what you would charge for selling directly to consumers because these stores will add on a profit margin for themselves. As a rule, retailers add another 40-50 percent onto what they paid you to buy the goods to arrive at a retail price.

You'll need to research the sale price of comparable items to determine whether your design and manufacturing plan is viable, and you might have to make changes to the fabrics you use or other cost factors to arrive at a price that the market will bear.

Marketing Your Clothing Line

Once you've completed the design and manufacturing of your clothing line, you'll have to let consumers know about it and start selling it.

To market your clothing line, you'll have to:

• Create a brand. The purpose of a brand is to help consumers identify your line and distinguish it from others. Branding can include many elements, but at a minimum, you'll need to name your business, create a logo, and introduce your business using press releases, launch events, and social media posts.
• Select a sales strategy. You can sell your clothing online, in your own brick-and-mortar store, or through other retailers. Some established brands use all three methods, and you can expand into new distribution channels as your business grows, but newcomers typically start out using a single channel.
• Advertise your line on fashion blogs, social media, and magazines.

Setting Up Your Clothing Business

Creating your clothing line is only half the battle. The other half is forming a company to manage your business and support its growth. Before you put your clothing line on the market, you'll need to don your entrepreneur's hat and follow these steps to turn your designs into a business:

Write a Business Plan

A business plan is the roadmap you will use to get your company off the ground and make it succeed. It includes research on the size of the market for your clothing line, how you'll differentiate it from the competition, the cost of making your clothing, the method you'll use to sell it, your sales goals, and milestones for meeting those goals.

One of the most essential elements of a business plan is the financial analysis. It should tell you whether you'll have enough funding to finance your clothing line company until it starts to generate enough revenue to cover your expenses, and it should include a plan for getting outside funding if needed. If you intend to borrow money to get your business up and running, or rent store space, you'll need a business plan to show lenders and landlords.

Decide on a Business Structure

You can structure your business as a sole proprietorship, limited liability company (LLC), limited or general partnership, or corporation. Each carries its own level of risk and tax obligations.

LLCs and corporations offer the most protection from personal liability from debts and obligations your company might incur, an especially important consideration in the apparel industry.

Manufacturers might fail to ship goods, or the merchandise might arrive damaged. Orders might be canceled due to shipping delays, or you can find yourself with inventory that doesn't sell. These events can result in unexpected loss of revenue, making it hard for you to meet the business's financial obligations. When your business entity is an LLC or a corporation, you won't have to dip into your personal finances to pay for financial liabilities that can arise from these events.

Sole proprietorships and partnerships don't require as much recordkeeping and are easier than LLCs and corporations to set up and run, but they don't provide the same personal liability protections.

The website of the Secretary of State will have information on the requirements for each type of business entity in your state.

Register your Business

If you choose an LLC or corporation, you'll have to register your business with the state where you operate. Sole proprietorships and general partnerships are automatically registered when they begin to conduct business.

Choose a Business Name

LLCs and corporations must choose a business name when they register with the state. State rules for naming a business vary, though all states require you to choose an original name that's not already in use by another company.

Sole proprietorships and general partnerships are automatically registered under the names of their owners. If you want to use a different name, you'll have to register a DBA (also called a fictitious business name) with the state or your locality.

If you plan to sell your clothing online, you'll also need a domain name, an address that allows consumers to find you on the internet. Unlike company names, which are registered with the state, domain names are issued by private companies like GoDaddy, for a fee.

Obtain Copyrights, Trademarks, and Patents

Copyrights, trademarks, and patents protect works of art and intellectual property from copycats. The laws give the owners of these protected products and designs legal recourse if someone else tries to copy them.

For the most part, though, the law considers clothing designs utilitarian, and not entitled to the same protections. (That's why you see so many knock-offs—copies of existing designs—in the fashion industry.)

Some rare exceptions do exist. You might be able to claim a copyright for an original artwork design you created and printed onto a garment (not the garment itself), and you might be able to obtain a patent for an article of clothing that has a unique function that is not already known or obvious.

For example, some zippers have been patented, as has a unique shoe lacing system designed by Nike. The designer of the 100-Way Strapless Brassiere also was able to obtain a utility patent for her design, and sued the parent company of Victoria's Secret for patent infringement in a case that settled out of court.

While you will be hard-pressed to copyright a garment design, you can often protect certain elements of your clothing line and have legal recourse if someone else uses it.

Logos and brand names can be copyrighted if they are unique, original, and can stand alone. A unique logo or brand name can be instrumental in promoting a fashion company, and you should conduct a search with the U.S. Patent and Trademark Office to make sure the logo or brand name you want to use for your clothing line hasn't been trademarked by someone else. Infringing on someone else's trademark can cost dearly in penalties and even a lawsuit.

Get Permits and Licenses

Every state that collects sales tax (there are just a few that don't) taxes clothing sales, and you'll need a seller's permit to do business in those states.

If you are going to be purchasing products for resale, you'll also need a resale license to avoid paying taxes on products you purchase for resale (such as garments you plan to print designs on or embellish).

Get an Employer Identification Number (EIN)

An EIN, issued by the IRS, is like a social security number for businesses It isn't required for every business entity type, but you'll need one regardless of your business entity, if you want to apply for a loan, hire workers, or apply for permits.

Get a Business Bank Account

LLCs and corporations must get a business bank account because these businesses are considered separate entities from their owners. Sole proprietors and general partners can use their personal bank accounts for business transactions, but having a business bank account can simplify recordkeeping, and you'll be required to have one if you apply for a loan or other types of credit.

Obtain Insurance

You aren't required to carry insurance by law, but you'll want to be certain you have adequate coverage to avoid paying out of pocket for things like inventory lost due to fire or customers who slip and fall on your store premises. Consider the nature of your business to determine the types of protection you need.

Online businesses that store inventory, whether in a home, garage, or warehouse, will need property insurance to protect against loss from circumstances like theft or fire. If you store business items in your personal residence, check with your homeowners' insurance carrier to make sure that it will cover the loss of business, not just personal, property.

If you are selling your clothing line in your own retail shop, you'll also need property insurance to cover items like inventory, store fixtures, furnishings, and equipment; and you'll want general liability insurance to protect against injuries to outsiders who enter your premises.

If your business employs workers, you are required to carry workers' compensation insurance as well.