Fabric of success: starting an apparel business takes more than cutting-edge designs. It requires research, contacts, and a whole lot of cash

Black Enterprise, Feb, 2005 by Wendy Harris

SOME GREAT BUSINESS IDEAS ARE BORN ON THE front of cocktail napkins. Others are created in 30-page business plans. For the partners of RyanKenny, an Atlanta-based high-end clothing line for men, their company was birthed from a simple conversation during a trip to Philadelphia in 2002.

"The concept happened in a car during the NBA All-Star Weekend," remembers Kenny Burns, one-third of the RyanKenny team and former vice president of Roc-A-Fella Records. "We had just gone shopping and were talking about the clothes we had on, how we love the Guccis, Pradas, and Etros of the world, and how there are millions of consumers out there like us who can afford to shop at these stores, but from a fit standpoint, don't. Finally, we said to ourselves, 'Let's go ahead and make our own clothing line. We can do this as well as they can.'"

So the design trio--which includes Burns and music executives Byan Glover and Derek Dudley--crafted a game plan. They would start with a line of dressy, Italian-made, button-up shirts and sell them in high-end department stores and boutiques around the country. If the shirts sold well, they would launch a full menswear collection to include suits, trousers, outerwear, activewear, denim, and accessories.

The three pooled $500,000 in personal savings to cover initial costs such as fabric, sample creations, overseas production of the shirts, travel to trade shows, incorporation, insurance, and payroll. And that was with only one type of garment under their label.

These days, the RyanKenny Spring 2005 collection can be seen in Nordstrom, Saks Fifth Avenue, Marshall Field's, Bloomingdale's, Bill Harmon, Fred Segal, Blue Jeans, and Atrium. It is expected to generate $2 million in revenues this year. The 10-employee company projects another $10 million in 2006.

Glover, Burns, and Dudley have found success in fabrics, but they aren't the only ones who have designs on the apparel manufacturing business. A U.S. Census Bureau report titled Annual Bench mark Report for Wholesale Trade: January 1992 through December 2003 indicates that companies within the apparel industry generated more than $86 billion in revenues. Clearly, there's lots of money to be made in this industry, but in the apparel manufacturing business, it takes money to make money. In this installment of BLACK ENTERPRISE'S Dream Business series, we'll look at the pros and cons of launching an apparel company.

THE FIRST STITCH

For every company reaping the rewards of this large industry, there are many that don't make the cut. Cost is one of the major factors. "A lot of new ventures probably fail the first eight or nine months after inception because they can't afford all the things that make this type of business run--for instance, the fabrics, the pattern makers, the equipment, the showroom space," says Gloria Hartley, one of the founders of the Black Retail Action Group and a former buyer for Bloomingdale's.

As with any business, getting started will require an initial outlay of capital. Actual startup costs for these kinds of businesses vary greatly and depend on a number of factors including the market you enter, the quality and quantity of fabrics used, and whether you will manufacture in-house or subcontract production, but many new designers can expect to spend anywhere from $500,000 to $1 million to set up shop. Leonard Bess, chair of the Fashion Design Department at New York's Fashion Institute of Technology, says there are standard startup costs for an apparel company:

Fabric: Cost can range from $2 to $400 a yard. Textile companies enforce minimum purchase amounts that vary but range from 1,000 to 3,000 yards depending on requested samples.

Sample creations: Cost depends on the fabric used, number of samples needed, and size of collection. A first set of samples can easily cost more than $50,000.

Showroom space: In major cities like New York, monthly rents can run from $2,000 to $5,000. Add costs for a receptionist, furniture, computer, and telephone system.

Insurance: This includes product liability, fire, property, etc.

Trade shows: There are a number of trade shows you can attend in the U.S. and abroad. If you plan to exhibit, factor in costs for booth design and fabrication, travel, exhibit storage, promotion, and floor space.

Forecasting services: This is subscription based. Fees vary according to each service but can run from several hundred to several thousand dollars per subscription.

Design software: Bess suggests using a product-data management program called WebPDM and pattern production software called Gerber AccuMark.

Shipping/delivery fees: Cost depends on amounts shipped and destination.

Bess recommends starting an apparel company by deciding what kinds of clothes you want to manufacture. The next step is to find a target customer for your garments. Talk with retail buyers and other fashion professionals about the marketability of your line and gauge the interest of potential customers. Bess also recommends working with trend forecasters.