CASH & FUNDING: Think profit!

Think profit

Source: Gettyimages – Moment Open – Jack Berman

Hi all,

Here is another basic presented by Startup Fashion we would like to talk about: the difference between sales and profit. It sounds very simple on paper however in reality, it implies a few decisions on our behalf.

Lesson n°1: think profit. Sales are good, profits are better since it’s what it’s left of your sales once you withdraw all your costs and charges.

Lesson n°2: sometimes, you must learn to say no…some types of garments will cost you more than others. For example, suppose you are specialized in making evening gowns and you want to create a second line. You have the choice between a cheaper gown line for a younger audience and a urban line for teenagers. You choose the urban line for teenagers because you saw on a report that it’s very trendy. Since they are very technical, you outsource the pattern making plus you buy more trimmings, which ends up being more expensive than  your gowns. Plus you need to spend more time on the new line as it’s not your specialty. In the end, if you add up all the costs, you understand that the gown line for a younger audience would have been less costly.

Lesson n°3:…sometimes, you must learn to think global…sometimes you must accept to loose money on some products in order to be able to sell other products with a much higher profit. For example, if you sell a high-end dress collection, you need to consider also offering high-end accessories and leather bags. In your target customer’s mind, you may be able to price your accessories and bags higher if they see a high-end dress collection behind. With the volumes and average margins you achieve with accessories and bags, you can compensate the losses you made with the dresses.

So it really depends but in the end, you need to think further than mere sales.

Enjoy!

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