You will need an estimate of $750,000 to open a medium-scale clothing store in the United States of America. Note that this amount includes the salaries of all the staff for the first 3 months of operation and a business with the capacity of opening other outlets within a short time frame.
When conducting costing and economic analysis for your clothing store business, you just have to critically examine these key factors; place, product, pricing and promotion.
Clothing store owners should also know that running their own single clothing (independent clothing) is different from managing or operating a clothing store chain or franchise.
Managing or operating a clothing store chain or franchise attracts additional impediments like incentive alliance, bureaucracies, growth strategy, operational guidelines et al.
Estimated Cost Breakdown for Opening a Clothing Store
These are the key expenses you are expected to make when starting a medium scale but standard clothing store business in the United States of America;
- The total fee for registering the business in the United States of America – $750.
- Legal expenses for obtaining licenses and permits (Health department license and business license) and permits (Fire department permit, Air and water pollution control permit, Sign permit et al) as well as accounting services (CRM software, Retail software, Payroll software, P.O.S machines and other software) – $15,300.
- Marketing promotion expenses for the grand opening of the clothing store in the amount of $3,500 and as well as flyer printing (2,000 flyers at $0.04 per copy) for the total amount of $3,580.
- The cost for hiring a business consultant (including writing business plan) – $2,500.
- The cost for insurance (general liability, theft, workers’ compensation and property casualty) coverage at a total premium – $30,400.
- The cost for leasing a standard store facility in a good and centralized location – $200,000.
- The cost for remodeling the store facility and construction of shelves and racks – $100,000.
- Other start-up expenses including stationery ($500), phone and utility (gas, sewer, water and electric) deposits ($6,500).
- The operational cost for the first 3 months (salaries of employees, payments of bills et al) – $60,000.
- The cost for start-up inventory (stocking with a wide range of clothes, shoes, trousers, pants, caps, belts and other fashion accessories from both local and international fashion designers, hangers, pegs, mannequins et al) – $200,000.
- The cost for store equipment (cash register, security, ventilation, signage) – $13,750.
- The cost for the purchase of furniture and gadgets (computers, printers, telephone, fax machine, flat screen TVs, sound system, tables and chairs et al) – $14,000.
- The cost of purchase and installation of CCTVs – $5,000.
- The cost for building and hosting a website – $600.
- The cost for opening party – $8,000.
- Miscellaneous – $5,000.
Total Estimated Cost = $750,000
You will need an estimate of seven hundred and fifty thousand Dollars ($750,000) to successfully set up a medium scale but standard clothing store business in the United States of America.
Note that this amount includes the salaries of all the staff for the first 3 months of operation and a business with the capacity of opening other outlets within a short time frame.
Starting a small clothing store with a small store facility and limited stocks per time in the United States of America will cost about $50,000 to $150,000.
Note that this amount includes the salaries of all the staff for the first 3 months of operation and a clothing store operating in just one location.
When it comes to starting a standard and large scale clothing store business with several outlets in key cities in the United States of America, a clothing store business with the intention of selling franchise, then you should look towards budgeting well over two million dollars ($2 million). Please note that this amount includes the salaries of all the staff for the first 3 months of operation.
It is important to note that there are several factors that can determine the actual cost of launching this type of business. The truth is that some of the factors may not apply to you, because the business model and of course the kind of business a person wants to build would also affect the overall cost of the business.
3-Year Sales Forecast and Breakeven Analysis
Starting Capital: $750,000
Fixed Cost: Monthly expenses that remain relatively constant regardless of sales volume.
- Rent: $10,000 per month
- Salaries (including wages for staff): $20,000 per month
- Utilities and other operational costs: $5,000 per month
Total Fixed Cost per Month: $35,000
Variable Cost: Costs that vary directly with the volume of sales, primarily comprising the cost of goods sold (COGS).
COGS: Assumed to be 50% of sales.
Sales Growth: Expected sales and growth rate.
- Year 1 monthly sales starting at $50,000, growing at a rate of 5% each month.
- Year 2 and Year 3 see a 10% increase in total sales annually from the previous year.
Monthly Sales Growth for Year 1
- Monthly Sales = Initial Sales × (1+Monthly Growth Rate)
Annual Sales for Years 2 and 3
- Annual Sales = Previous Year’s Total Sales × (1+Annual Growth Rate)
Monthly and Annual Cost
- Total Fixed Cost per Year = Monthly Fixed Cost × 12
- Variable Cost per Month = Monthly Sales × COGS Rate
- Total Cost per Month = Fixed Cost + Variable Cost
Year 1
- Total Sales: $795,856.33
- Total Costs: $817,928.16
- Profit/Loss: -$22,071.84
Year 2
- Total Sales: $875,441.96
- Total Costs: $857,720.98
- Profit/Loss: $17,720.98
Year 3
- Total Sales: $962,986.15
- Total Costs: $901,493.08
- Profit/Loss: $61,493.08
Breakeven Point
Breakeven Sales per Month = Monthly Fixed Cost ÷ (1 − COGS Rate)
Breakeven Sales per Month = $70,000
Based on the analysis above, Year 1 starts with a slight loss as your clothing store establishes itself and builds its customer base.
By Year 2 and Year 3, your clothing store turns profitable as sales growth outpaces the growth in costs, helped by the stable fixed costs.
The monthly breakeven sales figure of $70,000 indicates the amount needed each month to cover all fixed and variable costs. Achieving sales above this figure will result in profitability.
Factors That Determine the Cost of Opening a Boutique
1. The Type of Clothing Boutique
A boutique is “a small store that sells stylish clothing, jewelry, magnets or other usually luxury goods.” There are different types of clothing boutiques such as brick and mortar clothing boutique, online clothing boutique, strictly female, male, unisex and children boutiques et al. It is fact that these different types of boutiques have different startup cost even though they may be similar.
2. The Choice of Location
There are business consultants or realtors who are specialized in helping people choose an ideal location for their business; a location that will guarantee them to profitability within the shortest time frame. So, you will agree that location can influence the cost of starting a business.
Renting or leasing a store facility in a location that is off the city center or off a major road will be less expensive when compared to renting or leasing a store facility in a highbrow area; a location along a major road with high vehicular and human traffic, a location in a metropolitan city with the right composition of people to buy from you.
3. The Required Licenses and Permits
In the United States of America, you cannot open a clothing boutique without first applying for licenses and permits. You would need operational license, building license, signage permits and zonal permits amongst others.
These licenses and permits cost money and it will influence the overall cost of opening a clothing boutique in the United States of America.
Please note that you may pass through several inspections before you are issued your permits and this will also cost you money.
In order to get the overall cost of licensing and permits associated with opening a new clothing boutique in the United States, we will advise that you reach out to your city government. You also need to consider state and federal requirements.
4. The Type of Facility
You have the options of renting, leasing or constructing your own facility from the scratch. With renting and leasing a store facility, you might just have to spend extra to modify the store to fit into what you have in mind, but there is a limit to how far you can go and it will be dependent on what the landlord of the facility wants.
Let us assume that you want to construct your clothing boutique facility from the scratch. It means that you will buy the land or a property, construct and equip the clothing boutique to fit into what you have in mind.
You will agree that you are going to spend way more when compared to people that rent or lease a store facility in a shopping mall.
5. Your Products and Services Offerings
The fact that there are different types of clothing boutiques means that these clothing boutiques are designed to retail different types of products and offer different types of services.
As a matter of fact, the products retailed by a strictly female boutique is different from the product retailed by a strictly male or children boutique.
So also, the service offerings offered by a brick and mortar store is different from the services offered by an online store. The cost for stocking these types of clothing boutique is going to be different.
6. The Size of the Clothing Boutique
The larger the clothing boutique, the larger the budget to get it up and running especially as it relates to stocking the store. Aside from the cost of stocking the clothing boutique, it will also cost you more to hire employees and this will translate to spending more to open the boutique.
For example, less than a handful of employees can man a clothing boutique that is in a 12 by 12 facility while it will take about a dozen employees to man a clothing boutique that is in a 24 by 24 facility.
7. The Cost of Hiring and Paying a Business Consultant and Attorney
If you want to get your business started on the right foundation, it will be a wise decision to hire the services of a competent business consultant and perhaps an attorney.
A business consultant will help with drafting a workable business plan document, a marketing plan and strategy, comprehensive SWOT analysis, and other advisory services.
So also, an attorney will help you with registering the business, drafting contract documents (especially for your suppliers and creditors) and offering you all the legal expertise that will help you start the business on the right foundation.
8. The Cost of Branding, Promotion and Marketing of the Clothing Boutique
If you need massive results as it relates to winning a fair share of the available market in your city, then you must be willing to pay for effective branding, promotion and marketing.
As a matter of fact, it is not cheap to come by an expert in branding, promotion and marketing that will help you compete with brands in your city.
9. The Cost for Furnishing and Equipping the Clothing Boutique
Aside from the basic facilities that are expected to be found in a clothing boutique, an investor may decide to spend more than expected to equip the clothing boutique to look unique.
Before you can open a clothing boutique, you should budget for items such as storage hardware (bins, rack, shelves, hangers), shopping baskets and trolleys, counter area equipment (Flat Screen TVs, sound system, mirrors, Satellite dish and decoder, furniture (table, sofas and stools), telephones, filing cabinets), store equipment (cash register, POS machines, security, CCTV, ventilation, signage), and security and fire alarms and prevention gadgets amongst others.
10. The Cost for Insurance
In the United States and in most countries of the world, you can’t operate a business without having some of the basic insurance policy cover that are required by the industry you want to operate from.
Thus, it is imperative to create a budget for insurance policy cover and perhaps consult an insurance broker to guide you in choosing the best and most appropriate insurance policies for your business.
11. The Cost for Registering the Business
Although, the cost of registering a business is affordable, but it will no doubt add to the overall cost of opening a clothing boutique in the United States of America.
12. Source of Your Supplies
Some clothing boutiques specialize in importing high-end clothes and accessories from Italy, France, Switzerland, etc. The fact that a major chunk of the clothes and fashion accessories sold in these clothing boutiques are sourced outside the United States makes the cost of opening this type of boutique more expensive than others who can get their supplies within the country. The owner of such clothing boutique will include a robust budget for importing his or her clothes and fashion accessories.
13. Cost of Recruiting and Training Your Staff
The fact that you are opening your clothing boutique as a new business means that you are expected to recruit and train your staff to conform to the kind of boutique you want to operate.
The training will help you sell the corporate culture of your organization to the new employees. It will cost you money to hire trainers.
- Staff/Manpower
When it comes to starting a standard clothing store business on a large scale, you would need the services of the following professionals;
- Chief Executive Officer (Owner)
- Store Manager
- Information Technologist
- Human Resources and Admin Manager (May also double as Franchise Manager)
- Accountant/Cashier
- Merchandize Manager
- Marketing and Sales Executive
- Cleaners
- Security Guard
14. The Cost for the Purchase and Customizing of Uniforms for Your Employees
Sales boys and girls, front desk/payment attendants and security personnel all have different uniforms and these uniforms will cost you money which is why it must be part of your budget.
15. The Cost for Grand Opening of the Clothing Boutique
You will agree that in recent times, no clothing boutique opens its door for business without first organizing an opening party to officially launch the business. You can choose to do a soft opening if you are operating on a low budget or you can choose to go for a grand opening party.
How Much Does It Cost to Buy a Clothing Store Franchise?
In the United States of America, the Average Cost of Purchasing a Clothing Store Franchise is ,000. Examples of 3 Well – Known Clothing Store Franchising Companies in the United States of America are;
- Big Frog Custom T-Shirts & More
- Apricot Lane Boutique
- Bellies to Babies Franchise
Can a Clothing Store be Bootstrapped on a Lean Budget from Home?
Clothing store business is one of many businesses that despite the fact that it can be started with a relatively lean budget, it can’t be operated from the home.
This is because you would not want people to continue to knock at your door and invade your privacy just because you want to sell clothes and other fashion accessories to them.
As a matter of fact, it is a security risk and you are likely not going to get clearance from the regulating department in your city. Although in some countries, you can successfully launch a small scale clothing store in your front yard or garage.
With that, you can indeed bootstrap your clothing store on a lean budget within your residential apartment. Just ensure that you consult the required authority in your city to be sure you secure a permit to run a business in a residential area.
Financing Your Online Clothing Boutique
If you want to start an online retail clothing store, one of the reasons why you probably would have chosen this form of business is to escape some of the cost involved in running bricks and mortar boutiques et al.
It is pretty much cheaper to run an online retail clothing line as against running a conventional boutique. So you may not have to break the bank to source for start – up capital.
No doubt when it comes to financing a business, one of the first thing and perhaps the major factors that you should consider is to write a good business plan.
If you have a good and workable business plan in place, you may not have to labor yourself before convincing your bank, investors and your friends and family members to invest in your business.
Here are some of the options you can explore when sourcing for start – up capital for your online retail clothing store business:
- Raising money from personal savings and sale of personal stocks and properties
- Raising money from investors and business partners
- Sell shares to interested investors
- Applying for Loan from your Bank / banks
- Pitching your business idea and applying for business grants and seed funding from donor organizations and angel investors
- Source for soft loans from your family members and your friends.