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Fashion Business

Will my rural location affect my ability to attract customers?

Q: I am thinking of starting a clothing factory specializing in woven fabrics / outerwear. My question is, do you think there is a need for this in Canada? The factory would be in a small town outside Winnipeg MB. would that location be a problem?

Susan Langdon says:
Thank you so much for your inquiry. As with any proposed business model, before you spend any money you need to do some extensive market research to find out if there's a need for your service and if yes, if there's enough demand to ensure your business will be sustainable over the years.

As for your location, if your potential customers are located in Toronto then you'll need to find out what the cheapest and fastest way is to ship samples and production to your customer. An expensive shipping cost could negatively affect your ability to attract and sustain customers. In your business plan, I'd suggest including a travel expense as you will likely need to go on the road several times per year to find/meet with clients.

What Are 5 Top Canadian Equity Firms?

Q: I would like to know what are the top 5 biggest Canada -private equity firms which acquired retail fashion brands. If you cannot provide me with the information, I would appreciate if you could mention the site(s) where relevant data can be found.

Susan Langdon says:
I don't believe there are any Canadian equity firms that have acquired fashion retail brands in recent history. HBC acquired Lord & Taylors & Saks but HBC is owned by an American company (NRDC Equity Partners Inc.). Here is a story that appeared in the Globe & Mail bit.ly/19iYgnM

Recently Canada Goose (a wholesaler, not a retailer) was acquired by another US equity firm, Bain Capital. Here is the link bit.ly/19fwWuh

Who pays for custom pieces for a fashion show?

Q: If I've pursued another designer to collaborate creatively with them on their project i.e a fashion show which requires some custom pieces that I will have to design, my question to you is, is it still okay to ask the other designer if there is a budget in place for the show to cover those costs, or am I expected to expense that as I am the one who pursued the collaboration?

Susan Langdon says:
If you don’t ask, you’ll never know so it’s perfectly fine to ask if there is a budget in place to cover the cost for you to custom-make some pieces for the show.

Showroom charges in Taiwan

Q: Q: Is it typical for a showroom in Taiwan to charge 25% commission on the retail price? The showroom also packs and ships my goods to the stores directly.

Elena Conte says:
A: Generally commission is based on the wholesale price, as that is representative of the “Sale”. Seems a bit steep, but if the production volume goes up, the commission could be re-negotiated.

Shipping is a huge expense though. So again, depending on the volume, it may be reasonable. There should be a contract in place to re-negotiate after sales reach a certain volume.

Regardless of the final commission, it needs to be built into your costs.

Exporting: pros and cons of having a US warehouse

Q: Q: What are the pros and cons of having a warehouse in the United States for US order fulfillment, versus having all inventory in Canada and individually shipping each order?

Larry Weiner says:
A: Milgram has developed our Access USA program to address this issue and we find it very popular with clients who wish to sell imported product in the US and maintain control over quality and pricing. Our clients usually consolidate their exports so that they do not have to incur costs for shipping individual orders. The "con" against US warehousing is the additional cost and frequent errors in order-picking.

My response also applies to Canadian manufacturers. Better to consolidate the exports and ship once or twice a week. Warehousing in the US only makes sense if there is a need for time-sensitive delivery. Even then, using FedEx still allows you to ship from Canada in a timely manner.

Legal advice needed to help you

Q: I'm a fashion designer. I design a line for a manufacturing company. They provide a sample maker/pattern maker/fabric. The manufacturing company often presents some of my designs to other labels they manufacture for. How much should I charge the manufacturing company per design manufactured? Or should I charge a percentage?

Susan Langdon says:
You don't provide enough information about your employment situation in order for me to give you a proper reply. When you were hired, did you agree to be paid per design manufactured? Or per design manufactured only for a particular label?

All of the terms of how and when you get paid and why, should be disclosed in your employment agreement. If you don't have one, I highly suggest you consult with an employment lawyer as soon as possible to discuss your situation with her or him. You need to know and protect your rights.

When should I register my company name?

Q: I just started researching my own business venture. I am interested in becoming a member of TFI; should I register my company name before I become a member so that all my expenses are tied to my business, or can I still include those expenses after the fact?

Susan Langdon says:
Thank you for your interest in becoming a TFI member! Yes, it's a good idea to register your company name before you start incurring any business-related costs. This way, you can claim all of those expenses on your income tax return against any revenue your company generates. But keep in mind that in order to write off expenses, you need to generate income through your business. You can only write off as much as you earn.

Duty and tax on handbags

Q: I just got e-mailed by a store in Florida that would like to purchase some of my handbags wholesale. What taxes do I need to charge to make this a legit transaction?

Larry Weiner says:
Unless the items qualify for NAFTA treatment, duty will apply. There is no Federal sales tax. I would need a full description of the item and country of origin in order to determine duty rate.

How do I register a business in the US?

Q: I am beginning to market my e-com business in the USA . My company is registered as a Canadian Corp. I would like to register my business in the USA but continue to operate from Canada. How do I register (not trademark, or tax purposes as I'm operating in Canada)? Thanks.

Susan Langdon says:
Your best bet is to contact the U.S. government and a U.S. business lawyer to find out the legal requirements of registering a business in the United States. I'm pretty sure that you're required to have a permanent U.S. address and that you, the business owner, must have a U.S. issued social security number. This is because once you register, you will need to file a U.S. tax return and start paying income tax.

What is the best way to finance a clothing line?

Q: How much do you really need to be a successful fashion designer?

Susan Langdon says:
The best way to finance a line is through the gross profit margin (GPM) you earn with every sale. Your GPM should cover your costs plus include a minimum gross profit of at least 25% of the suggested retail price. For example, if the SRP is $200, then your minimum gross profit should be at least $50. You can increase this percentage but be careful about pricing your product above what your customers are willing to pay for it.

The KEY word however is "gross" profit. This refers to the maximum profit you generate before expenses are deducted from it. If you keep your costs low, then your profit will accumulate and build equity. If you spend like crazy and go over your budget, then you won't be left with any profit and in fact, could be looking at a loss (deficit) at the end of the year. Therefore, there is no definitive answer to how much money you need to be successful. The answer is: How low can you keep your operating and raw material costs?

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