The clothing industry is infamous for being incredibly volatile. While many small clothing companies have found great success in just a short span of time, others struggle to stay alive.
In order to create a thriving business, you first need to calculate the average revenue you can make from every sale as that will in turn give you a clear idea about how much you can put into manufacturing, designing, and marketing.
But how much revenue can an average clothing company make? Let’s find out.
Revenue is the total amount of money you generate by selling your products.
Total revenue = Quality sold x Average Price
The average price in this case can be the average order value for all the orders placed in a specific period of time.
But it’s important to note that revenue does not always give you a clear picture of exactly how much money you are actually making from your business. To get a better idea about the profitability of your business, you need to calculate the profit margins.
Profit margin is the money that remains after debiting all the expenses, operating costs, and other associated costs. It is the percentage of the total revenue which constitutes profit.
For small-scale clothing companies, revenue margins can fall anywhere between 4 percent to 20 percent. Of course, we also need to consider markups in this case.
Profit margins are calculated as sales minus the actual cost of goods that were sold. Markups, on the other hand, are the percentage by which the cost of a product is increased in order to reach the selling price.
For example, if a shirt costs you $10 to make and you mark it up to $20, that’s a 100 percent markup. Selling the shirt at that price would mean a profit margin of 50 percent.
So, if you sell 10 of those shirts, your revenue will be $200, but the profit from it will be $100.
On average, a clothing brand can make profits of anywhere between $23,751 and $140,935, depending on its expenses, marketing efforts, company size, product types, location, and target customers.
A clothing line owner can also make over $51,000 per year.
When it comes to average revenue per user (which is the total monthly revenue you make divided by the total number of users making purchases), anything over $216 will put you in the top 20% of clothing businesses. If your ARPU is less than $46, that would put you in the bottom 20% and it means you have some serious work to do.
Clothing companies are always more susceptible to infringements and counterfeits. Many times, brand owners don’t realize that their revenue is being stolen by illegitimate sellers, whether it be counterfeiters or unauthorized sellers. By tackling these bad actors and effectively shutting them down, you can take back your missing revenue.
Decreasing your expenses is one of the easiest ways to increase profits. The expenses can typically include salaries, phone bills, utilities, office space rent, and others. Your goal should be to look carefully at the missed opportunities for reducing unnecessary expenses. You can also look at ways to cut down on excess packaging and make your inventory leaner.
If there are some products that most of your customers just don’t like, then there is no point in manufacturing them at higher costs, only to have them stay put in your inventory. You should look into the performance of every product to identify the ones with the lowest profits and highest costs.
In case you have a long inventory of products that haven’t sold well in the past year, you can also offer them at a discounted price to clear off the racks and make space for your high-performing products.
Launching new products can truly inject a new life into your business. You can meet the ever-changing customer demands and even create a more loyal customer base. More importantly, launching new products from time to time helps ensure that you aren’t just dependent on 2-3 of your most popular products to boost the revenue of your business.
In order to create a full-fledged clothing business, you will need to generate excitement among new and old customers, and that can only come by introducing new products regularly.
For clothing companies, it’s not just important to keep track of the monthly revenue they are making, but it’s just as important to look into the revenue that you might be losing.
Brand impersonation, counterfeits, piracy, and unauthorized sellers can all eat away from your business revenue.
See how you can take back your revenue and stop counterfeits with Red Points.