What Is the Average Cost of Opening a Small Clothing Business?

  Reviewed by: Michelle Seidel, B.Sc., LL.B., MBA
  Written by: Liz Gold      Updated November 28, 2018
Cropped Hands Of Woman Holding Top Hanging In Store

So, you've decided to launch your own clothing store business. Style, dream and vision are all a given in this industry – but what about the cost? Determining the scope of a shop takes time and intention. Will the shop be online or will it have a brick and mortar location? The answer will define what is needed in terms of capital. Startup funds need to be a priority when turning a great idea into a sustainable reality.

Tips

  • The average small clothing business costs $100,000 to open, but there are many variables that will affect this cost.

Write a Business Plan

A business plan will chart the way forward. It doesn't have to be very formal. It can just be for internal use, to help focus ideas and stay on track. In a business plan, Profitable Venture suggests writing about the concept of your business, including a description of the company, a vision statement and mission, where this company will be located and if, online, the regions that will be included for shipping. Add product offerings, a SWOT analysis, marketing and sales strategies, pricing and profit margins, publicity and advertising strategy and an overall budget. Also list any revenue streams that will fund this new venture.

Set Up Your Company

Starting a company means legally establishing a business organization. This always will include fees and paperwork. Consider consulting an attorney during this process, but be prepared to pay anywhere from $100 to $1,000. Acquire an Employer Identification Number (EIN) for tax purposes, any required state and local licenses, a seller's permit and a certificate of occupancy for the retail space if the plan is to open a brick and mortar shop. Fees for these requirements will vary by location, but can cost a couple of thousand dollars.

Video of the Day

Brought to you by Techwalla
Brought to you by Techwalla

Know Your Profit Margin

Depending on the industry segment, retail markup typically runs between 30 to 40 percent. Not surprisingly, luxury and handmade items generally allow for higher markups. Basic and essential products may have smaller profit margins. Consider this when you are choosing your inventory.

Choose Your Inventory

Know what type of clothing the shop will be selling. Will this boutique have strictly vintage clothing? Would a buy, sell or trade model work best? Will the shop house modern clothing or items from local designers? Deciding these issues upfront helps determine how much capital will be needed to spend on inventory. Shopping at thrift stores and then reselling items at a higher price is a much different spend than buying only pieces at a couture shop.

Be Aware of All the Costs

While the bulk of inventory will be clothes and other merchandise, there will be other ancillary costs. A brick and mortar business costs more since there will be physical space to maintain. Rent in many major cities is costly. For example, according to Shopkeep, in New York City, the average price per square foot for commercial spaces in 2016 was $1,300, up 40 percent from 2012. For an average retail space of 1,000 square feet, a year’s rent could cost $1,300,000 or more in the Big Apple. And that's just for rent, which doesn't include utilities.

Other costs to keep in mind include a point of sale (POS) system that can cost up to $2,000, or a cash register. There's also logo design, website maintenance and hosting (from $30 to $200 a month), a price gun, shopping bags, display cases and shelving, marketing and advertising, clothing racks, mirrors, mannequins, mirrors and cleaning supplies, at the very least. And you may want to consider hiring an employee or two for support.

No matter what type of store you are opening, expect to have to spend some money on startup costs. On average, small retail stores can cost up to $100,000 to open. When it comes to opening a boutique, consider the necessities and priorities, and budget for those items according to Startup Jungle. The rest can come later with growth.

About the Author

Liz Gold has been published in a variety of capacities writing about everything from Kennebunkport and southern Maine municipal government, art and cultural events, to cloud technology and business transformation. Her experience extends to both corporate and freelance; she's a former Senior Editor at the B2B publication Accounting Today, writing about public accounting firms with a specialization in diversity, technology, best practices, and business development. During her tenure, she was also co-founder and editor of AccountingTomorrow, a blog focused on intergenerational workplace issues that is still thriving today. Most recently, Liz has been writing about accountants working in the cannabis industry on CPA Trendlines and reporting on cannabis trends for Southern Oregon Good Herb magazine in Oregon.

Cite this Article A tool to create a citation to reference this article Cite this Article