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Why You Need To Know Your Target Costs Before You Approach a Factory


So you’re a fresh-faced fashion entrepreneur ready to break into the industry. Well, slow down there, young grasshopper – before you jump into garment manufacturing, you must read this blog post, otherwise, you may find yourself in the same boat as so many other bright-eyed and bushy-tailed fashion entrepreneurs have!

Here’s the deal: calculating and sorting numbers may not be the most exciting part of your job, but it’s a must, especially when it comes to your target costs. You as a designer tell the factory what you want to pay for your product. Amateurs ask how much a product will cost.

Countless newbie fashion professionals miss this crucial element and send their designs off to the factory without determining and communicating their target costs, and the repercussions can cause some serious headaches (and may even have you forking over some cash you didn’t intend).

So let’s start off with the basics: what is a target cost? Simply put, the target cost is the amount you expect to pay to have a garment manufactured. This is important to identify before you approach the factory, because it will determine several procedures related to the manufacturing process, including: Which materials they will use to make the garment; everything from fabrics and trims to labels and embellishments Where they will source the materials (without a target cost, factories will just source the closest available materials, which could be costly) Which methods are used to create the final product (this will affect the time-to-complete and quality of the garment)

Knowing this, you can see why giving the factory a target cost from the get-go is crucial. Here is how you can properly calculate your target cost:


The factory will use your target cost to develop your samples and from there you can get a quote (one that will likely be closer to your target cost than if you didn’t submit one). By giving your factory your target costs beforehand, you’re saving yourself from sky-high quotes that your target market will never be able to afford, and from the headache of starting from scratch! That’s how you can work smarter, not harder.

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When you contact the factory; point blank, they will ask- What are your target costs? So, you better be able to give them the numbers. If target costs are not given, the factory has no idea what budget or quality standard to work within. It may seem a little backward, but the only way to ensure profitability is by knowing the retail price and target costs up front. Specific information must be provided to the factory in order to get initial estimates. After samples are sewn and fabric approvals are completed, the factory is able to provide a more realistic quote.

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

What would you say is the hardest part about establishing your target cost?

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