# Business structure, payment methods, pricing etc



## Mikey666 (Nov 5, 2008)

Hey guys

I've been reading through this section and I'm confused about some stuff so I was wondering if anyone could make things clearer for me.

Firstly is about business structure. I've read about a lot of different business structures but I'm unsure which would be the correct one for me. Could anybody give me advise on a good structure, possibly one that they use and how it works etc.

Secondly is payment methods to shops etc. I've heard the term consignment being thrown around, which I think is where you sell your designs to the shop and they have ownership of it. I don't really want to do this because my friend and I are making our own brand and we want to be in control of it, can anybody help me out here?

Finally is pricing the t shirts. Does anybody have a system of pricing up their goods.

Example say it has cost me £5 to produce a t shirt, that includes t shirt, screens, inks, time to do it and delivery etc.

How much would I charge the shop to stock it? My friend and I are doing this out of our own pockets so we need cash to go back into the business for more inks, screens etc but we need to make our personal money back, I'm not saying this has to be first time round, but eventually.

That was quite hefty so thanks if you've read it and thanks in advance for any help.

Cheers
Mikey


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## T-BOT (Jul 24, 2006)

1. business structure

Setup a samll business according to the laws and taxes in your area. 

2. consignment 

Basically with a consignment sale, the store pays you as they sell your goods. You DO NOT lose the ownership of your designs.

3. How much to charge

The normal is, if it costs you 5 and you sell it at wholesale, add 20-40 percent. If you sell it directly to the public at retail, add 100 percent.

....in general. All of the above may vary depending on your location, product, market, laws etc...



:


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## ScreenMachine (Oct 19, 2007)

In a related question, when you do consignment sales, what types of paperwork are needed and how do you keep track of how many shirts the retail shop has moved and how much money is owed to you?

I'm in the same position as Mikey666.


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## Girlzndollz (Oct 3, 2007)

Mikey666 said:


> Hey guys
> 
> I've been reading through this section and I'm confused about some stuff so I was wondering if anyone could make things clearer for me.
> 
> Firstly is about business structure. I've read about a lot of different business structures but I'm unsure which would be the correct one for me. Could anybody give me advise on a good structure, possibly one that they use and how it works etc.


I am in the USA, my structures are different from yours. I am not sure where you are, but you use pounds, not dollars.  If you are UK based, I've seen folks from the UK discuss their set ups. Maybe for this particular question you should look in the Regional Section of the forum. 




> Secondly is payment methods to shops etc. I've heard the term consignment being thrown around, which I think is where you sell your designs to the shop and they have ownership of it.


Tradionally not. Like Lucy said, the shop pays you as they sell the product. That means, you have tons of money tied up in inventory in all the shops that carry your product, and you do not get paid until it sells.



> I don't really want to do this because my friend and I are making our own brand and we want to be in control of it


Why? As long as you control the design and quality, what is it you fear the shop will do to your clothing?




> Finally is pricing the t shirts. Does anybody have a system of pricing up their goods.


There are different formulas that folks use, but the following is the one I use, and generally, this is a widely used formula:

cost to produce = $5

Wholesale = Twice the cost = 2 x $5 = $10
Retail = Twice the wholesale = 2 x $10 = $20

There are variations, and I've read the larger the store, the lower wholesale they will want, but by the time you reach that point, you will know how to handle and negotiate all of that. 

IMO, folks underprice alot of times. You need capital to roll back into your product.

PS: Just because in the formula retail comes to $20 doesn't mean you can *only* charge $20. I look at that number as the minimum I want to sell my retail off for. Anything above that is all the better, but I know for my biz plan, my target is to do everything I can to ensure I can command the minimum of $20. 



> How much would I charge the shop to stock it?


I would suggest you take a good look at having the shop *stock* the shirt, as in the sense of consignment, in which case you still own the product. 

I personally find the business model where you *sell* the inventory to the store much better. 

If the store carries 100 of your shirts, you have invested @ 5 pounds, 500 pounds in inventory for *their* store, and NO sales.

Meanwhile, your bill for those supplies will be coming in the mail. 

On the other hand, if the store purchases from you via wholesale 100 shirts @ 10 pounds each, you have completed 1000 pounds in sales, and now have operating capital, and 100 less shirts in inventory.

Motivation to sell: IF the store purchases from you wholesale, they are *very motivated* to move your shirts out the door, as they now need to recoup their investment as well, to secure *their* operating capital. 

Imagine for a moment your clothing in the store on a rack, and the store purchased via the consignment method. There is much less movtivation to highlight your items, give them a good spot on the floor, promote them, draw attention to them or anything else. Your stuff takes up floor space at the very most, which is valuable to them, but not as valuable as the stock that takes up floor space AND is already paid for by.

If your stuff doesn't move, they will call you to come pick them back up. Hopefully Mommies and little kids with sticky hands and lollipops have not come thru the store 100 times and brushed up on *your* clothes, because you do still own them.

On the other hand, if the store purchases from you via wholesale, they *own* the clothes, and the moving them out the door is as high a priority as the other stock they carry, giving you a fair shake at getting all the marketing techniques they apply to their stock. 

Does how I am elaborating on this make sense? It's not that difficult of a concept, and I feel as tho I am making it more cumbersome than it is.

Either way, really look at both business models closely (consignment vs. wholesale). 

What *having control* will mean to the bottomline of your business is worth careful and thorough consideration. That's all I wanted to highlight.

Cheers.


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## Girlzndollz (Oct 3, 2007)

ScreenMachine said:


> In a related question, when you do consignment sales, what types of paperwork are needed and how do you keep track of how many shirts the retail shop has moved and how much money is owed to you?
> 
> I'm in the same position as Mikey666.


Hi Screen, these threads are for you:

T-Shirt Forums Search Results


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## Girlzndollz (Oct 3, 2007)

Here is a post by another member that re-iterates some of the points I was trying to make:
http://www.t-shirtforums.com/offline-retail-tradeshows/t32729.html#post189366

In it, he includes a link to a free sample of a Consignment Contract.


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## Mikey666 (Nov 5, 2008)

Thanks a lot for these detailed posts, they've cleared a great deal of things up for me.


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