Starting a successful fashion brand can be very profitable. With proper planning, execution and hard work, you can enjoy great success. Below you will learn the keys to launching a successful business.
Importantly, a critical step in starting a fashion business is to complete your business plan. To help you out, you should download Growthink’s Fashion Business Plan Template here.
15 Steps To Start a Fashion Business:
- Choose the Name for Your Fashion Business
- Determine the Type of Fashion Business You Will Launch
- Develop Your Fashion Business Plan
- Choose the Legal Structure for Your Fashion Business
- Secure Startup Funding for Your Fashion Business (If Needed)
- Secure a Location for Your Business
- Register Your Fashion Business with the IRS
- Open a Business Bank Account
- Get a Business Credit Card
- Get the Required Business Licenses and Permits
- Get Business Insurance for Your Fashion Business
- Buy or Lease the Right Fashion Business Equipment
- Develop Your Fashion Business Marketing Materials
- Purchase and Setup the Software Needed to Run Your Fashion Business
- Open for Business
1. Choose the Name for Your Fashion Business
The first step to starting a fashion business is to choose your business name.
This is a very important choice since your clothing company name is your brand identity and will last for the lifetime of your business. Ideally, you choose a name that is meaningful and memorable. Here are some tips for choosing a name for your fashion brand:
- Make sure the name is available. Check your desired name against trademark databases and your state’s list of registered business names to see if it’s available. Also, check to see if a suitable domain name is available.
- Keep it simple. The best names are usually ones that are easy to remember, pronounce and spell.
- Think about marketing. Come up with a name that reflects the desired clothing brand and/or focus of your fashion business.
2. Determine the Type of Fashion Business You Will Launch
The next step is to determine the type of fashion business you will launch. The main types of businesses within the fashion industry include:
- Retail Clothing Store: These stores sell various types of clothing items to customers.
- Wholesale Clothing Manufacturer: These businesses manufacture and/or purchase apparel to be sold in bulk quantities to retailers, boutiques and other fashion designers.
- Online Store: These fashion brands sell clothes online, typically via their own websites or a third-party platform.
- Fashion Designer: These individuals design fashion items such as clothing and accessories and find a manufacturing partner that can produce them.
3. Develop Your Fashion Business Plan
One of the most important steps in starting a fashion business is to develop your business plan. The process of creating your plan ensures that you fully understand your market and your business strategy. The plan also provides you with a roadmap to follow and if needed, to present to funding sources to raise capital for your business.
Your plan should include the following sections:
- Executive Summary – This section should summarize your entire business plan so readers can quickly understand the key details of your fashion business.
- Company Overview – This section tells the reader about the history of your fashion business and what type of clothing business you operate. For example, if you are launching a clothing store, state the type of apparel you will sell and your target audience.
- Industry Analysis – Here you will document key information about the fashion industry. Conduct market research and document how big the industry is and what trends are affecting it.
- Customer Analysis – In this section, you will document who your ideal or target customers are and their demographics. For example, how old are they? Where do they live? What do they find important when purchasing products or services like the ones you will offer?
- Competitive Analysis – Here you will document the key direct and indirect competitors you will face and how you will build a competitive advantage.
- Marketing Plan – Your marketing plan should address the 4Ps: Product, Price, Promotions, and Place.
- Product: Determine and document what products/services you will offer
- Prices: Document the prices of your products/services
- Place: Where will your business be located and how will that location help you increase sales?
- Promotions: What promotional methods will you use to attract customers to your clothing business? For example, you might decide to use pay-per-click advertising, public relations, search engine optimization and/or social media marketing.
- Operations Plan – Here you will determine the key processes you will need to run your day-to-day operations. You will also determine your staffing needs. Finally, in this section of your plan, you will create a projected growth timeline showing the milestones you hope to achieve in the coming years.
- Management Team – This section details the background of your company’s management team.
- Financial Plan – Finally, the financial plan answers questions including the following:
- What startup costs will you incur?
- How will your fashion business make money?
- What are your projected sales and expenses for the next five years?
- Do you need to raise funding to launch your business?
4. Choose the Legal Structure for Your Fashion Business
Next, you need to choose a legal structure for your fashion business and register it and your business with the Secretary of State in each state where you operate your business.
Below are the five most common legal structures:
1) Sole proprietorship
A sole proprietorship is a business entity in which the owner of the fashion business and the business are the same legal person. The owner of a sole proprietorship is responsible for all debts and obligations of the business. There are no formalities required to establish a sole proprietorship, and it is easy to set up and operate. The main advantage of a sole proprietorship is that it is simple and inexpensive to establish. The main disadvantage is that the owner is liable for all debts and obligations of the business.
A partnership is a legal structure that is popular among small businesses. It is an agreement between two or more people who want to start a clothing line together. The partners share in the profits and losses of the business.
The advantages of a partnership are that it is easy to set up, and the partners share in the profits and losses of the business. The disadvantages of a partnership are that the partners are jointly liable for the debts of the business, and disagreements between partners can be difficult to resolve.
3) Limited Liability Company (LLC)
A limited liability company, or LLC, is a type of business entity that provides limited liability to its owners. This means that the owners of an LLC are not personally responsible for the debts and liabilities of the business. The advantages of an LLC for a clothing line business include flexibility in management, pass-through taxation (avoids double taxation as explained below), and limited personal liability. The disadvantages of an LLC include a lack of availability in some states and self-employment taxes.
4) C Corporation
A C Corporation is a business entity that is separate from its owners. It has its own tax ID and can have shareholders. The main advantage of a C Corporation for a business is that it offers limited liability to its owners. This means that the owners are not personally responsible for the debts and liabilities of the business. The disadvantage is that C Corporations are subject to double taxation. This means that the corporation pays taxes on its profits, and the shareholders also pay taxes on their dividends.
5) S Corporation
An S Corporation is a type of corporation that provides its owners with limited liability protection and allows them to pass their business income through to their personal income tax returns, thus avoiding double taxation. There are several limitations on S Corporations including the number of shareholders they can have among others.
Once you register your business, your state will send you your official “Articles of Incorporation.” You will need this among other documentation when establishing your banking account (see below). We recommend that you consult an attorney in determining which legal structure is best suited for your company.
5. Secure Startup Funding for Your Fashion Business (If Needed)
In developing your fashion business plan, you might have determined that you need to raise funding to launch your business.
If so, the main sources of funding for a fashion business to consider are personal savings, family and friends, credit card financing, bank loans, crowdfunding, and angel investors. Angel investors are individuals who provide capital to early-stage businesses. Angel investors typically will invest in a fashion business that they believe has a high potential for growth.
6. Secure a Location for Your Business
Having the right space can be important for your fashion business, particularly if you’d like to meet clients there.
To find the right space, consider:
- Driving around to find the right areas while looking for “for lease” signs
- Contacting a commercial real estate agent
- Doing commercial real estate searches online
- Telling others about your needs and seeing if someone in your network has a connection that can help you find the right space
7. Register Your Fashion Business with the IRS
Next, you need to register your business with the Internal Revenue Service (IRS) which will result in the IRS issuing you an Employer Identification Number (EIN).
Most banks will require you to have an EIN in order to open up an account. In addition, in order to hire employees, you will need an EIN since that is how the IRS tracks your payroll tax payments.
Note that if you are a sole proprietor without employees, you generally do not need to get an EIN. Rather, you would use your social security number (instead of your EIN) as your taxpayer identification number.
8. Open a Business Bank Account
It is important to establish a bank account in your fashion business name. This process is fairly simple and involves the following steps:
- Identify and contact the bank you want to use
- Gather and present the required documents (generally include your company’s Articles of Incorporation, driver’s license or passport, and proof of address)
- Complete the bank’s application form and provide all relevant information
- Meet with a banker to discuss your business needs and establish a relationship with them
9. Get a Business Credit Card
You should get a business credit card for your fashion business to help you separate personal and business expenses.
You can either apply for a business credit card through your bank or apply for one through a credit card company.
When you’re applying for a business credit card, you’ll need to provide some information about your business. This includes the name of your business, the address of your business, and the type of business you’re running. You’ll also need to provide some information about yourself, including your name, Social Security number, and date of birth.
Once you’ve been approved for a business credit card, you’ll be able to use it to make purchases for your business. You can also use it to build your credit history which could be very important in securing loans and getting credit lines for your business in the future.
10. Get the Required Business Licenses and Permits
Every state, county and city has different business license and permit requirements.
Nearly all states, counties and/or cities have license requirements including:
- General Business License: getting your Articles of Incorporation as discussed above
- Sales Tax License or Seller’s Permit: for selling products
- Zoning Approval: typically at the city or county level, this provides authorization for the construction or use of a building or land for a particular purpose
- Food Service, Processing and/or Warehouse Licensing: to ensure safe food preparation
- Health Facility Licensing & Certification: to ensure the safe rendering of healthcare services
- Fire Department Approval: a process by which the local fire department reviews and approves the installation of a fire alarm system.
Depending on the type of fashion business you launch, you will have to obtain the necessary state, county, and/or city licenses.
11. Get Business Insurance for Your Fashion Business
Other business insurance policies that you should consider for your fashion business include:
- General liability insurance: This covers accidents and injuries that occur on your property. It also covers damages caused by your employees or products.
- Auto insurance: If a vehicle is used in your business, this type of insurance will cover if a vehicle is damaged or stolen.
- Workers’ compensation insurance: If you have employees, this type of policy works with your general liability policy to protect against workplace injuries and accidents. It also covers medical expenses and lost wages.
- Commercial property insurance: This covers damage to your property caused by fire, theft, or vandalism.
- Business interruption insurance: This covers lost income and expenses if your business is forced to close due to a covered event.
- Professional liability insurance: This protects your business against claims of professional negligence.
Find an insurance agent, tell them about your business and its needs, and they will recommend policies that fit those needs.
12. Buy or Lease the Right Fashion Business Equipment
Most fashion companies need a variety of equipment such as sewing machines, dress forms, cutting tables, fabric steamers, and other tools. You can either buy or lease these items depending on your budget.
If you don’t have the funds to buy these items upfront, leasing them may be a better option. This allows you to spread out the cost over time. You may also be able to find equipment at a resale or thrift store or online store at a discount.
13. Develop Your Fashion Business Marketing Materials
Marketing materials will be required to attract and retain customers to your fashion business.
The key marketing materials you will need are as follows:
- Logo: Spend some time developing a good logo for your fashion business. Your logo will be printed on company stationery, business cards, marketing materials and so forth. The right logo can increase customer trust and awareness of your brand.
- Website: Likewise, a professional fashion business website provides potential customers with information about the products and/or services you offer, your company’s history, and contact information. Importantly, remember that the look and feel of your website will affect how customers perceive you.
- Social Media Accounts: establish social media accounts in your company’s name. Accounts on Facebook, Twitter, LinkedIn and/or other social media networks will help customers and others find and interact with your fashion business.
- Online Marketing Strategies: Create an email list of existing, past and potential customers. You can use this list to keep in touch with them and share updates about your fashion business. Additionally, you may also want to explore additional online marketing strategies such as search engine optimization (SEO), pay-per-click (PPC) advertising, and content marketing.
14. Purchase and Setup the Software Needed to Run Your Fashion Business
Most fashion businesses need accounting software and customer relationship management (CRM) software.
While there are many different software options available, some of the most popular programs for accounting include QuickBooks and Xero. Some of the most popular CRM programs include Salesforce and Zoho.
Research the software that best suits your needs, purchase it and set it up.
15. Open for Business
You are now ready to open your fashion business. If you followed the steps above, you should be in a great position to build a successful clothing line business. Below are answers to frequently asked questions that might further help you.
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Starting a Fashion Business FAQs
Is it hard to start a fashion business?
Starting a fashion business can be challenging and requires dedication, hard work, and commitment. However, if you have the right knowledge, resources, and passion for fashion, it is possible to create a successful clothing line business.
How can I start a fashion business with no experience?
The best way to start a fashion business with no experience is to start slow and build your skills. Take courses, attend workshops, and research fashion trends to gain the knowledge you need to run a successful business. Additionally, consider hiring an experienced mentor or consultant who can guide you through the process of starting a fashion business.
What type of fashion business is most profitable?
The profitability of a fashion business varies depending on the type of business and the products you offer. A successful fashion business typically offers a variety of fashionable pieces for different types of customers. Additionally, concentrate on creating unique designs and establishing a strong brand.
How much does it cost to start a fashion business?
The cost of starting a fashion business depends on the type of business you want to create. Generally, it is recommended to have at least $2,000 to cover the basic costs associated with launching a fashion business. These costs include creating a logo and website, purchasing materials for your designs, registering your business name, advertising and more.
What are the ongoing expenses for the fashion business?
The ongoing expenses for a fashion business include rent or lease payments, salaries and wages, taxes, insurance premiums, marketing costs, raw materials for designs, and shipping and inventory costs. Additionally, you may also need to pay for business licenses and permits.
How does a fashion business make money?
A fashion business makes money by selling products to customers. Additionally, some fashion businesses may offer services such as styling or personal shopping in order to generate additional revenue.
Is owning a fashion business profitable?
Yes, owning a fashion business can be very profitable. With the right combination of knowledge, resources, and dedication, you can build a successful fashion business. Additionally, use online marketing strategies such as SEO, PPC advertising, and content marketing to promote your products.
Having the right information and resources will help ensure that your fashion business is profitable. Some of the key things you can do to make your fashion business more profitable include: providing quality products, creating a strong brand, leveraging online marketing strategies, and forming partnerships with other fashion industry professionals.
Why do fashion businesses fail?
One of the main reasons that fashion businesses fail is a lack of planning. This can include not having a detailed business plan, not doing research on the industry, and not targeting the right customers.
Another reason is a lack of marketing and sales skills. This can include not creating a sales process and not having a clear and strong value proposition.
The last main reason is a lack of financial management skills. This can include not having a realistic budget, not tracking expenses, and not investing in the business.
Who are the key players in the fashion industry?
The fashion market is made up of a variety of different players, including small businesses, large enterprises, and even individuals.
- Some of the key players in the clothing industry include:
- Karl Lagerfeld
- Tom Ford
- Giorgio Armani
- Marc Jacobs
- Calvin Klein
However, there are many other players in your specific target market, and it is important to research the market to identify the key players that may have the most direct influence on the success of your business.