First, I added up all our orders (some shops haven't given us quantities yet, so I left those out. Some pieces don't have confirmed prices yet, so I left those out, too).
Then I figured out how far away we are from our target of how much sales revenue we need to break even.
- We set the target on my first day of work by adding up all our expected expenses (by this I mean ALL: every piece of fabric, every printer cartridge, every taxi, courier etc. Be as specific as you can when you make your budget. It might be uncomfortable then, but imagine how uncomfortable it will be when you run out of money half way and have to apply for (yet another) loan?! So I strongly suggest a "contingency" amount as well for unexpected expenses, surprises etc)
Then I calculated our average price per piece and figured our how many more pieces we needed to sell to reach our target.
- This helps to decide how many more trade fairs to go on, how many more shops to approach with our collection. It might also mean that you realise your price needs to be higher, or perhaps you realise you had a lot of interest, but nobody was willing to pay the price. In which case you might decide to lower your price. Either way, this helps you map your progress and keeps you on your toes and working towards your goal.
Then I added up how many styles of each dress we had sold to figure out which ones were our bestsellers. I also figured out how many of each style we had sold in which colour/print, to give me an even clearer idea of what was popular and what wasn't.
- This helps, because it will inform our next round of designing (making it less of a guessing game and more directed towards our customers taste). This might also cut back on production costs, as hopefully, a higher percentage of our stock will sell. And also, because we want to know which styles to push at our next sales appointments and which dresses to send to agents as samples for them to show their clients...
Then I got our cost prices (fabric + production) and calculated our wholesale and retail prices.
- You and your partners have to decide what the margin is that you want to make i.e. how much you want to charge on top of the cost of designing, making (and perhaps shipping) your product. That gives you your wholesale price.
From wholesale, you get to retail prices.
In fashion, the average retail mark-up is 2.5 - 3. So you multiply the wholesale price at which you sell your product to the shop and then that gives you the recommended retail price - which I am sure you have seen on stickers: RRP. If not, look out for it next time you shop.
Please excuse me if you knew all of this already and you feel patronized.
Though I passively knew this, calculating it all has been incredibly helpful in really understanding how it works... I even played around a little with our own margins, adding / subtracting decimal points from the multiplier and seeing what the difference is on the retail price and trying to figure out when it got too high - when the psychological threshold is reached...
I also went through the budget for our LA launch party for the 15th time, trying to cut costs left, right and centre. Our PR mavens in New York and LA have done a fabulous job already and of course, we want our launch to be as fun and memorable as possible, so I am trying to be judicious and frugal in my decisions... We are calling in lots of favours, collaborating with sponsors etc.
Luckily, we have already secured the most amazing location: expat Brit and Issa fan Liberty Ross has kindly agreed to host our afternoon mummy and baby tea!
She, her children and their house are so beautiful and charming that it's bound to be a success already!! :)
Gold digger xx
PS: Have just finished reading the highly entertaining and very well researched "The Jimmy Choo Story", which mixes fashion, glamour and business better than any book I have ever read (and I've read a few on the subject). I can not sum it up better than the Observer "a book with a split identity - half fashion magazine, half business manual" - it's no coincidence it was written by a fashion journalist and a luxury goods equity researcher. Lauren Goldstein Crowe and Sagra Maceira de Rosen did a fabulous job at seamlessly interlacing these two usually disparate worlds and I highly recommend it! http://tinyurl.com/382va8e
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