Disclaimer : I am a high schooler and I just turned 18 in September. I don’t know much about business. No one in my family knows much business. If I sound clueless and naïve it’s because I am.
So this summer I started a small clothing brand from my own pocket. I had one design manufactured at a quantity of 50 and it cost me around 1k. I’ve sold out and I turned a turned a profit but it really didn’t seem worth all the work I put in. I know that if I want to see higher returns I have to sell more than 50 shirts.
I want to have my next design made but I just don’t have the money. Is it wise to take out a loan? All I can hear is my mother berating me about what a terrible idea that is.
If I were to take out a loan it would be for less than 10k. But the idea of going into debt at 18 is horrifying. I’m sure I could make it back with time. Having that much money means so much freedom to create the brand I’ve dreamed of. Part of me just feels like I’m too young and inexperienced to chase this passion and I should just work a normal job while I’m in school. I’m just lost.
As you can tell I do not know a lot about the business world and finances. Any and all advice/information will be hugely appreciated.
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A loan comes with interest. Let’s say you took out $10k and your business somehow failed this time. Will you still be able to make payments? Can you find a side job and work 20 to 30hrs a week? If you believe in yourself i would say do it, but know everything comes with a risk. You might regret not taking the risk once you get older as well.
Before you even worry about this… no one is gonna loan you the money anyway (outside of family/friends.) You have no business plan, 1 sku that sold out 1 time in nominal quantities. I’m going to assume you are limited in assets since your 18. Go get a job and use the income to fund this if you really believe you can do it. 50 shirts, reinvest to 100 shirts… etc. Retail apparel at 18 is gonna be a bootstrap mission, let FUBU be your guide.
Thank you— What I have been doing is using income from part time jobs to invest in the business and I feel like it’s not going to take me far. You have a point that I probably wouldn’t be approved. I actually talked to my parents and I realize I need to start building a good credit score. I could maybe take out a personal loan? If not what’s your advice to actually make my brand something bigger if I’m only running it by myself?
Being unsure of your credit situation, definitely build credit as soon as possible. Get a credit card that you autopay in full every month. A personal loan seems unlikely to be approved to me, but the interest rates would crush your margins anyway. To put it in perspective- you self fund and have success grow and build credit at the same time. Grow bigger than you can handle, then start hiring and keep going. B) you somehow get approved for a personal loan at 15%. First/ second payment due before your shirts are even delivered, how are you making those payments? Your sales slow and now you are working a job to pay off debt and have boxes of shirts in your parents garage. Be patient, good businesses take time.
My experience: I’ve owned my business for 9 years, we do well over a million dollars in revenue, are profitable and still struggle to get financing for big equipment that would increase our margin.How did 50 units cost you $1000 ?
You were robbed
But also, sad that your mom isn’t more supportive
Head to YouTube, watch half a dozen videos, figure out how to minimize your costs more, network with people and find better suppliers
You can try a pre order program - get enough people to pay in advance - then go for it
Good luck
Your profits should be what increases your growth. If this is not covering your growth you need to increase your prices.
Loans should only be taken out when you have a consistent revenue coming in that can be multiplied with something bought with said loan like equipment, a new building, etc, never the basics like inventory.
Try doing pre sales instead. This way you get the money upfront to produce the product without it breaking your bank.
Thank you for your insight! I did a presale for my last product but it lead to some confusion with my customers and it kind of just felt unprofessional? And even at that price people were complaining and saying it was way too overpriced.
There are some small brands i look up to that charge a lot more so maybe i need to be confident and raise prices. I created my brand though to make a niche style more accessible to all people, but maybe that’s just not a realistic goal for me right now.
With the way my first launch went, even after I sold out, I just have no clue how clothing businesses get off the ground if they weren’t already rich to begin with.
Use a mixture of FOMO & scarcity marketing when promoting a pre-sale and make it clear on your website.
Only xxx available for presale + 20% off for the next hour only. Create an email list & whatsapp business group to send out notifications. Collab with a well known creator in your area to help with a launch & pay them a % of the presale when it sells out.
Just be upfront with your customers that you are only 18 running this business and presales are how you afford to build the brand.
This is not completely true, but it is “safe” advice. It’s all about risk/reward assessment and comparing that to your risk aversion.
Debt is like fire… it is super powerful but if your not careful you can be burned. But getting burned isn’t aways bad… for me at least.
Another question is who bought your first 50 shirts was it primarily friends and family.
How many shirts are you getting for 10k how do you plan on marketing these. Is part of the 10k for that. Some questions for you.
The other note. 10k loan is on the small side that’s more like line of cridt or cridt card area.
Selling 50 shirts is nowhere near equivalent to owning a business. When I was 14 I ran homework services in school and I made a killing (at least to a 14 year old). I mentioned this because running my own homework “business” was nothing close to actually running a business and its very likely that its the same for you. With that in mind, instead of taking a loan out, you ought to either seriously study marketing, sales and business, or find a mentor who will help/guide you, or work alongisde someone who is doing similar to what you are doing now but on a bigger scale… this way you can learn from them.
Alternatively, if you find yourself a stubborn individual who will not be resisted by anyone and are deadset on getting that loan, here is an alternative which is by far safer.
Find clothing manufactures and ask them to create X amount of product for a “testing” phase. Then tell them that if you sell X amount in Y amount of time, the manufacturer will receive all the profits for this (bar the shipping/handling). In exchange for this, they have to agree that if the tests proves succesful and the manufacturer is satisfied with the results, they will produce the next batch of product (say 1k clothes) and will only receive payment after the item is sold… This is basically how you elimante the need for loans (on a small to medium scale). One thing to note with this approach is that in the last part of the plan, the “will only receive payment after item is sold” you should give them highet profits to ensure the highest chance of them accepting this deal. So for example, say you pay 1$ for 1 piece of clothing from manufacturer. Well to make sure they accept your offer, increase their profits, say from 1$ to 1.15$ or 1.30$ or 1.5$ and so on… sure you may profit less, but at least you arent in debt and are safely running your shop, which in my opinion is by far better and more appealing… also, if you increase the profits the manufacturer receives, its highly likely that they will offer you additional benefits that may come in handy, or they will create better deals for you, or perhaps introduce you to other people who can help you, or many other things…
I have personally used this approach countless times and even once had a car gifted to me by a individual who was in a business relationship with me that started through this approach. So, yeah, this approach is valid and very effective. If you got questions let me hear them.
You could launch as a print on demand business until you build up your business to the point that you can finance creating your products yourself.
No, make the new design get sales. Tell everyone production is late and you’ll give them a free gift for waiting. Use the funds to order inventory.
“I’ve sold out and I turned a turned a profit but it really didn’t seem worth all the work I put in.”
This is good place to begin.
Hourly wage = (Total Sales Dollars - $1,000) / Total number of hours making shirts
Assume it takes two hours to make and ship a shirt and you sold them at $40 each.
($2,000 - $1,000) / 100 hours = $10 per hour
If you could get job in convenience store at $15 per hour, opportunity cost is $5.00 an hour.
Opportunity cost is the value of the next-highest-valued alternative use of a resource (i.e. time).
Your solution is to borrow money to make and sell more. However, this will also require more hours to make and sell.
So, to make it worth while, you need to increase price or figure out a way to make and sell for less cost (i.e. faster process, less expensive inputs),