Fabric of success: starting an apparel business takes more than cutting-edge designs. It requires research, contacts, and a whole lot of cash.

SOME GREAT BUSINESS IDEAS ARE BORN ON THE front of cocktail napkins. Others are created in 30-page business plans. For the partners of RyanKenny, an Atlanta-based high-end clothing line for men, their company was birthed from a simple conversation during a trip to Philadelphia in 2002.

"The concept happened in a car during the NBA All-Star Weekend," remembers Kenny Burns, one-third of the RyanKenny team and former vice president of Roc-A-Fella Records. "We had just gone shopping and were talking about the clothes we had on, how we love the Guccis, Pradas, and Etros of the world, and how there are millions of consumers out there like us who can afford to shop at these stores, but from a fit standpoint, don't. Finally, we said to ourselves, 'Let's go ahead and make our own clothing line. We can do this as well as they can.'"

So the design trio--which includes Burns and music executives Byan Glover and Derek Dudley--crafted a game plan. They would start with a line of dressy, Italian-made, button-up shirts and sell them in high-end department stores and boutiques around the country. If the shirts sold well, they would launch a full menswear collection to include suits, trousers, outerwear, activewear, denim, and accessories.

The three pooled $500,000 in personal savings to cover initial costs such as fabric, sample creations, overseas production of the shirts, travel to trade shows, incorporation, insurance, and payroll. And that was with only one type of garment under their label.

These days, the RyanKenny Spring 2005 collection can be seen in Nordstrom, Saks Fifth Avenue, Marshall Field's, Bloomingdale's, Bill Harmon, Fred Segal, Blue Jeans, and Atrium. It is expected to generate $2 million in revenues this year. The 10-employee company projects another $10 million in 2006.

Glover, Burns, and Dudley have found success in fabrics, but they aren't the only ones who have designs on the apparel manufacturing business. A U.S. Census Bureau report titled Annual Bench mark Report for Wholesale Trade: January 1992 through December 2003 indicates that companies within the apparel industry generated more than $86 billion in revenues. Clearly, there's lots of money to be made in this industry, but in the apparel manufacturing business, it takes money to make money. In this installment of BLACK ENTERPRISE'S Dream Business series, we'll look at the pros and cons of launching an apparel company.

THE FIRST STITCH

For every company reaping the rewards of this large industry, there are many that don't make the cut. Cost is one of the major factors. "A lot of new ventures probably fail the first eight or nine months after inception because they can't afford all the things that make this type of business run--for instance, the fabrics, the pattern makers, the equipment, the showroom space," says Gloria Hartley, one of the founders of the Black Retail Action Group and a former buyer for Bloomingdale's.

As with any business, getting started will require an initial outlay of capital. Actual startup costs for these kinds of businesses vary greatly and depend on a number of factors including the market you enter, the quality and quantity of fabrics used, and whether you will manufacture in-house or subcontract production, but many new designers can expect to spend anywhere from $500,000 to $1 million to set up shop. Leonard Bess, chair of the Fashion Design Department at New York's Fashion Institute of Technology, says there are standard startup costs for an apparel company:

Fabric: Cost can range from $2 to $400 a yard. Textile companies enforce minimum purchase amounts that vary but range from 1,000 to 3,000 yards depending on requested samples.

Sample creations: Cost depends on the fabric used, number of samples needed, and size of collection. A first set of samples can easily cost more than $50,000.

Showroom space: In major cities like New York, monthly rents can run from $2,000 to $5,000. Add costs for a receptionist, furniture, computer, and telephone system.

Insurance: This includes product liability, fire, property, etc.

Trade shows: There are a number of trade shows you can attend in the U.S. and abroad. If you plan to exhibit, factor in costs for booth design and fabrication, travel, exhibit storage, promotion, and floor space.

Forecasting services: This is subscription based. Fees vary according to each service but can run from several hundred to several thousand dollars per subscription.

Design software: Bess suggests using a product-data management program called WebPDM and pattern production software called Gerber AccuMark.

Shipping/delivery fees: Cost depends on amounts shipped and destination.

Bess recommends starting an apparel company by deciding what kinds of clothes you want to manufacture. The next step is to find a target customer for your garments. Talk with retail buyers and other fashion professionals about the marketability of your line and gauge the interest of potential customers. Bess also recommends working with trend forecasters.

"Trend forecasters will travel to different fashion markets. They will go to Japan, London, Paris, and Australia. They may even bounce around the U.S., to see what the trends are, and give you several trend, color, and fabric directions so that you have some sense of what's going on in the market," he explains. "The designer's job then becomes to look at their target audience and decide which one of the trends actually fit in with that audience."

Whatever colors, fabrics, or styles you choose, check out the competition before making one stitch. Go to the stores. See what's selling and what's not. Find out what fabrics are being used for certain types of clothes. The owners of RyanKenny were quick to compare their idea for a couture line with the collections of their fashion counterparts. After looking at the fabric quality, craftsmanship, and style of their competitor's garments, they knew they could match it, but they also knew it was going to cost them.

Starting a clothing label seemed to be a natural progression for the RyanKenny owners. Glover, 34, is the co-CEO of a music publishing, production, and artist-management company. Burns, 32, is co-owner of Studio 43 and a former record company vice president. As for Dudley, the 33-year-old is an executive with Artistic Control Management. These longtime friends and business partners know music and, like any good music mogul panting after the next big production, starting a clothing label seemed to be the obvious choice.

The RyanKenny owners say their biggest challenge has been getting the fashion industry to take them seriously as high-end couture designers. Glover says getting recognized is an ongoing process that started with having conversations with "everybody we felt could help us move our dream along further, but we had to put the product in front of them so they fully understood the vision." Glover adds, "But at the end of the day, we're still not where we are going to be. We're not on top of the world with our flag like we conquered fashion. Every season, we will probably pick up a new fan or two who has been stuck in the old couture mindset of 'If it doesn't come from Europe and it hasn't been made for the last 50 years, it's not really high fashion.' That kind of mindset is not going to be extinguished in a season."

Getting that recognition has taken cutting-edge designs, a celebrity following, relationship building, and a lot of time, but the RyanKenny owners say it has been worth the effort to be able to create clothes they love.

Of course, no matter how great the clothes, convincing retail buyers to take a chance on three unknown designers is never easy. Luckily, through Glover's wife, Tameka, a clothing stylist, the partners established a relationship with the owner of Blue Jeans, a chic boutique in Atlanta. After showing the owner their samples, Blue Jeans placed an order for 125 shirts. The shirts, which retail between $170 and $1,000, hit the racks of Blue Jeans on a Friday in spring 2004. By the following Monday, more than half were sold.

Working their connections once more, the RyanKenny crew scheduled meetings at Fred Segal in Los Angeles and Atrium in New York, securing orders from both shops. By the end of the spring season, the partners had sold a total of 3,000 shirts. It was clear to these music-turned-fashion moguls that a full collection was now in order, but they lacked the capital. Glover says it took a few showings to get into Bloomingdale's and Saks--three with Bloomingdale's buyers and two with buyers from Saks Fifth Avenue. Nordstrom and Marshall Field's purchased the clothes after one showing. Building relationships within the industry is one of the biggest challenges in starting an apparel company, but there are others:

Financing: While not a problem for RyanKenny since they were well-compensated music executives, most businesses fail due to inadequate financing.

Understanding the industry: This is not an easy business to enter. Fortunately for RyanKenny, two of the three partners studied fashion at Parsons and Howard University. They were also knowledgeable about incorporation and payroll from their days in the music business.

Production: This involves handling quality control.

Another challenge is finding a manufacturer. Once the ByanKenny owners decided to start with a line of dressy woven shirts, they took their design ideas and headed for Italy to find examples. They went to industry shows and sampled works by Italian manufacturers. Although there are more inexpensive places to have apparel made, the partners settled on the Italians. "We wanted to make the best dress shirts possible. Based on our own tastes, the best dress shirts were made in Italy, so that's where we went," Dudley says.

Since the RyanKenny owners maintain all of their production overseas, monitoring their quality control is especially challenging. To assist them, they hired an Italian liaison who lives in Italy and speaks fluent Italian. He deals with production issues and keeps the partners abreast of the manufacturing process on a daily basis. However, Glover says things don't always run smoothly.

According to Bess, handling production is always an issue for new designers. "You have to monitor your quality control and a lot of people don't do this," he says. "I tell my students to tell their production people to stop production after the first 100 units and call them so that they can check the quality control. If they don't and they start working into thousands of units and those units end up being sewn incorrectly, then they're going to run into major problems where they have to pay for the cost to recut the goods."

Bess says it is possible to keep production in-house, but this can be more expensive than subcontracting. If you produce the garments yourself, you will need basic equipment such as cutting tables ($400 to $500 each), sewing machines ($500 to $650 each), overcast machines ($3,500 a piece), and industrial irons ($500 each). Then there's the cash for seamstresses, cutters, pattern makers, and salespeople, as well as space to house your operation.

Owners who subcontract production can forgo the cost of equipment and a manufacturing staff. The plant you hire to produce the garments will provide these essentials and negotiate a price based on the size of your line and required labor. There are still some hefty outlays that you will have to make, but for RyanKenny, those outlays are starting to pay off.

RyanKenny plans to launch a women's line, and eventually branch out into home accessories and a children's line. While it's a difficult business, Glover believes ByanKenny is going to be the black Ralph Lauren. He imparts the following advice to industry newcomers: "Study your target consumer. Study your competitors. This is a money-driven business and, in order to be successful, you have to have more of an edge than just a creative niche or great idea. You have to have money. You have to have financial backing. This is not a self-financed operation. Obviously, for some it could be. But for most, it's not."

10 STEPS TO GET YOUR FASHION HOUSE IN ORDER

Advice from fashion experts on starting an apparel company:

1. Identify a clothing concept and target audience. Determine what garments you will make and study the fabrics you will most likely use. Then conduct market research to see if there is a target audience for your clothes. Talk to owners of retail stores and textile suppliers for information about businesses that produce that kind of apparel. These contacts should also be able to tell you the buying patterns within various price points.

2. Check the fashion forecast. There are a number of fashion forecasting services that can tell you what's hot and what's not in terms of color, fabric, and style. Some of the top ones include The Doneger Group and Doneger Creative Services (www.doneger.com), WGSN (www.wgsn.com), and International Color Authority (www.internationalcolorauthority.com)

3. Cover your business basics. Choose a location for your business. Host new designers start right out of their homes. Incorporate your company. Also create a business plan, retain a corporate lawyer (particularly one familiar with the laws that govern apparel manufacturing), and start the trademark process early.

4. Form partnerships if necessary. If you have orders but lack the infrastructure to fill them, form a partnership with a company that's in your price range that has the necessary equipment and staff. Another option is to use a factor, a method of asset-based financing in which a firm purchases 70% to 80% of the money due on a company's receivables for a 4% to 5% finance charge on the total amount of the receivable.

5. Create your samples and price your garments. Depending on the size of your entire collection, you may need several sample garments. How you price your collection depends on the cost of fabric, manufacturing, and desired profit margin. Bess says designers may have anywhere from a 27% to 50% markup on a garment.

6. Check with your contacts. Having solid relationships is key to success. Consider reaching out to contacts you have in the industry that could point you to manufacturers, textile firms, buyers, and other fashion professionals.

7. Find a manufacturer. Scour the trade show floors for a few prospects. Green says you can also solicit a manufacturer by placing an ad in one of the fashion trade magazines

8. Woo the buyer. Find the buyers for your price points and call them. Ask to make a presentation. Sometimes buyers only view new collections during "Market Week," so it may be easier to schedule a meeting with a head buyer's assistant. If you do secure an order, make sure you follow through.

9. Read the trades. New designers should read everything they can get their hands on about the fashion industry. Two places to start are Women's Wear Daily (www.wwd.com) and DNR (www.dnrnews.com).

10. Edit your line. Collections are not evergreen. They must change periodically to keep pace with changing trends, so revisit and revise your clothing line often. Take stock of which colors, cuts, and sizes sell the best and make adjustments accordingly.

KNOW YOUR TRADE

There are many trade shows and organizations that can teach you about the fashion industry. Here are a few to try on for size:

Magic Marketplace (www.magiconline.com) is considered the major trade show of the fashion industry. Held every February and August in Las Vegas, this four-day event connects a global audience of buyers and sellers of men's, women's, and children's apparel and accessories. More than 3,000 manufacturers showcase over 5,000 brands and private labels.

Premiere Vision (www.premierevision.fr), held in Paris twice a year at the Parc d'Expositions de Paris-Nord Villepinte, displays textiles from around the world.

ASAP Global Sourcing Show (www.asapshow.com), also held in Las Vegas, focuses on apparel production. Recent events have showcased 350 manufacturers from more than 35 countries including South Africa, Colombia, China, and Pakistan.

Black Fashion Designers Association (www.blackfashion designers.org) provides new designers of color with a variety of services targeted to teach them the business of fashion. Some of these services include marketing, incorporation, trademarking, and design consultation. Membership is $100.

Fashion Group International (www.fgi.org) is a nonprofit association of more than 6,000 professionals in apparel, fashion, beauty, accessories, and home design. The organization has an extensive calendar of events to promote and celebrate new and existing designers.