Workshop Feedback: Producing a Sellable Range (II)
A couple of weeks ago I blogged about the current series of workshops I'm attending organised by CTFC and the Technology Station at CPUT. Module 2 tackled basic cost accounting and garment costing.
Module 2: Garment Costing
Many of the designers attending had questions about how to cost their garments accurately - particularly in a custom design environment when you need to quote a price before you've made-up the design. Being able to accurately estimate how much it's going to cost in labour and fabric is only part of the problem though - other costs like studio rent, electricity and telephone costs must be incorporated into your price if you wish to recover all your expenses (intuitively, if you don't recover all your expenses you're not making a profit).
Basic Cost Accounting
The area of accounting that we were introduced to was cost accounting, and cost accounting falls under the discipline of management accounting. To give you an idea of the breadth of this subject, I did a 3rd-year level semester course at university on managerial and cost accounting (I vaguely remember the textbook but that's about it); a 6-hr workshop can expose you to concepts and basics but cost accounting can get quite sophisticated.
Is It Important?
I've got a couple of reasons why I think you need to establish an accurate cost for your garments:
It's important to establish product viability. Look at the price of garments that are comparable in quality, style and target marktet, as they will be an important reference in your own pricing. Then, look at how much it's going to cost to make this garment. If there is not enough margin (or none at all) one really shouldn't even go ahead with production (unless it’s a pricing strategy... which goes beyond the scope of this post...).
If one uses outsourcing, it will also be helpful to know if the cost quoted for work is fair. Overcharging and undercharging are both problematic for business, but the latter may also end up costing more in terms of time and effort (think rejects, repairs, returns from customers).
Costing and Pricing
Once one has a handle on garment costing, one can proceed to more sophisticated pricing strategies. For example, in Christian Dior's autobiography he wrote about how he had to increase the price of evening dresses to recover the costs incurred on the tailored suits because his clients were more inclined to pay for beading and sparkling - even if the suits cost more to make.
In any business in the long-run income must exceed expenses; this can only be accomplished if you all expenses are allocated to the products which will be sold (to generate income).
The module introduces some of the terminology used in cost accounting. There were lots of practical examples including doing mock pre-cost and cost exercises and cost classifications. If you've done a business plan, you'll probably be quite comfortable with garment costing but this module may give you some idea about how garment costing is approached by industry - a framework if you like. This is definitely an area that will develop and become more sophisticated as your business develops. As with all things, it's about finding that balance of relevance and accuracy that makes sense for your business.
If you can't wait until the next set of workshops, the technology station does have a 2-day course that it runs which you can enquire about . It also provides comprehensive costing services to businesses including small designer entreperneurs.
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