How Do I Form a Business Plan Around Changing Wholesale Prices?

Fluctuating prices will always impact the profitability of a small business. There are many factors that are included in costing garments for production. Small quantity supply purchases such as fabric and trim generally cost more and will increase the wholesale price dramatically. By developing a tailor-made business plan that includes wholesale price fluctuation percentage increases, the business owner will be able to protect the profit and cover any unexpected cost increases during the 12-month business cycle.

Instructions

1. Divide the supplies needed to construct the product into separate categories. For instance, if you are selling an embroidered blouse, divide the supply categories into fabric, trims, thread and embroidery cost. Established factory production costs, such as labor and shipping, will be set and are not part of the fluctuation.

2. Increase a specific percentage to the wholesale supply category that has experienced the highest spike in cost. For example, instead of increasing your overall wholesale cost by 15%, increase the individual category with the most price fluctuation. Keep in mind that increasing prices significantly to retail customers as well as consumers will most likely result in lost sales.

3. Write a 12-month wholesale supply price calendar by placing each category in a separate column for each month. This will give you an accurate monthly reading of the wholesale increases.

4. Re-cost the garments by factoring the increased wholesale prices into the new cost. For instance, a fabric increase of 15 cents per yard will total 30 cents for a blouse requiring 2 yards. If you produce 1000 blouses monthly, you have lost $300 in profit, and, at the end of the 12-month cycle, you will have lost $3600. By increasing the price 17 to 19 cents per blouse, you will have covered your production cost in the event the cost increases again. You also will have room to offer a discount to a major client.

5. Prepare the business plan by including the 12-month price fluctuation. Detail how the company will curtail the increases. If you are seeking a loan or outside capital from a private investment corporation, this will be essential to the investor. It demonstrates that you are prepared under the anticipation of unexpected market cost increases, and you are protecting the company's investments as well as profits.

Tips & Warnings

• A company often will absorb costs to avoid loosing a valuable customer to a competitor. Keep in mind that passing costs to reliable customers will often result in a lost client. Increases must be justified, and the customer must also be able to resell the merchandise with the increase factored in as well.

References

• SBA: Write a Business Plan
• "The Fashion Designer Survival Guide: An Insider's Look at Starting and Running Your Own Business;" Mary Gehlar and Zac Posen; 2005