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Why Knowing Your Target Costs is Crucial Before Approaching a Garment Factory

Managing accounts for a company

Are you a budding fashion entrepreneur eager to break into the industry?

Hold up – before diving into garment manufacturing!!! Read this post to avoid common pitfalls faced by many enthusiastic newcomers!

Here's the deal: crunching numbers might not be glamorous, but determining your target costs is crucial.

As a designer, you dictate the price you want to pay for your product, not the other way around. Many new fashion professionals overlook this key step, sending their designs to factories without setting and communicating target costs, which can lead to costly mistakes and frustration.

What is a Target Cost?  The amount you expect to pay to have a garment made, is the target cost.

You determine how much you want to pay for products. The target cost is the amount you aim to give the manufacturer to produce the garment. The price typically includes everything from the fabric, materials, and embellishments to trims, labels, packaging, and production. 

The less you spend on the product, the lower the quality, especially when ordering smaller quantities. Knowing your target costs will help you determine and work within your total order budget. Please note target costs vary depending on many variables, this formula can be used as a starting point.

Use the diagram below as a formula and pricing success strategy to help you estimate the target prices to give the factory.

4 steps to calculating target cost

The factory will use your target cost to develop samples and provide a quote, likely closer to your target than if you hadn’t set one. By giving the factory your target costs upfront, you avoid sky-high quotes that your target market can’t afford and the hassle of starting over. That's how you work smarter, not harder.

When contacting a factory, they’ll ask for your target costs. Be prepared to provide them. Without target costs, factories can't gauge the budget or quality standards you expect. Ensuring profitability starts with knowing your retail price and target costs. Specific information is needed for initial estimates, and realistic quotes come after sample production and fabric approval.

You control the amount you want to pay for products. The target cost encompasses fabric, materials, embellishments, trims, labels, packaging, and production.

What's the hardest part about establishing your target cost? Tell us in the comments below.

Ready to take your fashion business to the next level? Don’t let garment manufacturing complexities hold you back!

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Take control of your fashion business and work smarter, not harder!

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