The Best Jobs Stayed In America

This week I’m at my apparel factory in the Free Trade Zone in the village of San Pedro de Macoris, Dominican Republic coordinating and planning back to school programs. Key staff or I come here about every third week; it’s a Monday through Friday drill, from 7 AM to sometime after 7 PM. With about 100 offshore employees, key relationship building, on the spot problem solving and being a good corporate citizen keeps you busy for the week. Expenses are minimal, a hotel room is $29 a night, roundtrip airfare is below $500 and the fillet mignon I had for dinner was a whopping 285 pesos or $8.50.

It’s rewarding to be here and interact with the people who make our products, especially knowing every person here is supporting a family in a village where the unemployment rate is north of 20%. These jobs in an American factory are extremely hard to fill because first generation Americans with a cutting and sewing skill set are retiring in droves and their children have no desire to labor behind a sewing machine or a cutting knife. Many times I think it would’ve been better to keep the jobs in America that are now here in the Dominican Republic, but I come back to this very issue; the jobs I sent offshore are the jobs nobody wanted in the USA.

The high paying jobs are what stayed in America. Corky’s core group of designers, managers, sales people and customer service associates have more opportunity for advancement than at any other time in our 15 years of business. Further, the skill set that they develop everyday in technology and global commerce make them a more valuable employee to any business. The turnover in our administrative jobs is very close to zero as compared to our turnover in the warehouse which runs about 25% annually. The management jobs are stressfully challenging, but provide a sense of purpose and this is the type of job most young people aspire.

If you’re an American or Dominican you’re still a human being and neither ethnicity should feel entitled to more respect. However, opportunity is very discriminatory because some countries are further developed than others and where you’re born plays a large roll in the economic opportunities available. By providing opportunity to our employees here in the Dominican Republic, we’re helping the country develop economically and albeit in a small way we’re improving the opportunities that will be available to their children.

Let me be clear about the treatment of our employees in the Dominican Republic. Everyone is older than 16 and receives a wage significantly above the legal minimum, the legal work week is 45 hours after which overtime pay is provided, medical care is provided to all and everyone participates in a retirement program. We could drastically reduce these costs, but I want the best people to work on Corky’s products. My mandate in the Dominican is simple, a Corky coat, swimsuit or dress should be a work of art and nothing less is acceptable.

Yesterday morning I challenged my plant manager in a heated meeting as to why a five minute inspection was added to every coat coming off the production line, something we could never afford to do in the USA. In the apparel business, even in the Dominican Republic, a savings of five minutes in a garment production cycle is huge; it’s equal to $3.00 at retail (in an American factory it would be $9.00 at retail.) On the flight here I made a firm decision to countermand his action. In the end the inspection stayed because he reminded me of my mandate, “a Corky coat should be a work of art.” For an increase of three dollars at retail, every seam inside and outside of the jacket is inspected, every embellishment and button placement is measured to spec, the fabric is checked for the smallest defects, thread colors are checked and finally the coat is put on a hanger and it must pass a very subjective test of being ascetically pleasing. Senor Solano, thank you for standing your ground.

Starting An Apparel Company

Over the past few months I've had the opportunity to help six emerging entrepreneurs who are at various stages of starting or expanding their apparel businesses. These interactions made me aware of the fundamental knowledge I acquired in my start-up years by producing apparel domestically before venturing offshore.

Only after developing my experience "tool kit" was I confident enough to venture offshore. I tend to be quick to minimize the benefits of having gone through the rigors of learning product development domestically. Moving our factory from Massachusetts to the Dominican Republic was just as stressful, financially draining and ultimately as rewarding as the start-up of Corky.

For new entrepreneurs starting an apparel company I feel your pain. Fifteen years ago when we started Corky there was an incredible mix of mills, converters, trim supplies and sewing contractors in the United States. And, most importantly, the fabric produced domestically was far superior to the quality of fabric produced offshore. Today however, there are very few resources available in the United States and the quality of cloth produced offshore is now superior to that produced domestically.

From a start-up perspective I understand how overwhelming the process seems and can tell you there are no easy answers. Although you don't need to price your products below your competition, you need to price in a competitive range. My advise in the start-up phase is to find a local cut and sew contractor and develop a great relationship. When you eventually transition offshore, you'll still need the services of a local sewing contractors to make samples, repair garments and add trims that didn't arrive on time to put on offshore.


I would suggest that you work with fabric and finding suppliers that have developed offshore supply channels. When you transition offshore you can continue to work with these suppliers because they will simply ship your purchases from their offshore suppliers to where ever you advise. Be a great customer to your suppliers and they will reward you with prompt deliveries and novel products; the key to being the best in your niche.

Most successful apparel makers will sooner or later need to venture offshore, it's an easy step to take, but an extremely difficult step to master. Initially your deliveries will suffer, but you'll know when you've mastered the process because customers and employees will stop comparing current delivery performance with delivery performance when you produced domestically.

How to Find the Best Sales People Today

Great sales representatives are the lifeline for most children's apparel manufacturers and finding a talented and connected rep is pretty hard when your just starting in business.

I'd like to share how I found sales people for Corky when we were a new manufacturer in 1994. Back then there wasn't an Internet to do research, instant communication via email or jpegs that could be easily viewed by anybody. Being somewhat ANALytical, however, I set-up a data collection method and followed up with cold calls.

I collected a bunch of trade magazines like Earnshaws and Childrens Business and extracted all the sales reps listed in the manufacturers ads. Half the ads listed the sales persons name and phone number for a given territory while others only gave a phone number. I compiled this data by territory on a single sheet of paper to find out which sales person in a specific territory had the most companies advertising on their behalf. When an ad listed only a phone number, I simply matched the phone number with another ad that listed the phone number and a name.

This quickly yielded the biggest buying markets in the US as New York, Atlanta, Dallas, Chicago and Los Angeles. So now what? I called the rep with the most ads in each territory under the premise that the best rep had the most advertisements. If I was negged, I'd call the number two sales rep and so on. In the end we had five new sales reps in our second year in addition to our first rep from Boston. That year we started with a Philly rep instead of a Los Angeles rep, but that's a twist of fate that I'll save for another post.

After we'd been in business a couple of years, I found the best way to find a new rep was to have an existing rep or a good customer make an introduction for me. I never once called a manufacturer reference when provided, instead I called our best customers in a specific territory and asked how they liked working with the sales person under consideration. You'll be amazed at the tactful honesty of your customers!

When Corky started 15 years ago this is how we found our reps. Over the years we outlasted some rep's business tenure, made some changes or were sent packing from a showroom (only once.) However, 15 years old and three of the original seven sales reps are still with us!

In closing let me say thank you to our hard working, creative and loyal sales people and that I'm sorry, the omission of your names from this post wasn't accidental but intentional selfishness. I want to keep the best for myself!

Not to Much, Not to Little, Just the Right Amount of Apparel Inventory Please

Corky was a new line 15 years ago and we've learned a lot about forecasting demand for production. This post will be somewhat analytical, yes its the engineer in me, but it will be of great use to a new apparel manufacturer.

As a manufacturer you must realize in your first few seasons a retailer can't make a large category commitment to you because there is too much risk of non-delivery. I think the best measure of success during the first few seasons is the number of new accounts opened. Specialty retailers tend to be loyal and if you deliver and the product sells they should come back for the next season. If you open 50 accounts your first year consider yourself fortunate. Also, your first year order size will probably be between $500 and $1000. These two facts should help with projections in your first year of business.

The data you collect in this first year and all subsequent years of business is super critical to the accuracy of projections in future years. Overall retailers buy at certain times of the year and on aggregate we've found that the percentage of orders written each week into a buying cycle is very comparable to previous years.

So how does this work? Here's the problem, the fall buying season starts at the end of January and you need to start ordering fabrics and notions by the end of February in order to deliver product before the back to school season starts (July). But, the buying season doesn't close until the end of April. The data you collected in previous years is your life line to the answer to this problem.

Each season you should tally the dollar amount of orders written during each weekly period and organize this data in a spreadsheet. After all orders (the end of April) are written express each weekly dollar amount as a percent of the total orders written. Then next year you'll know what percent of orders you have written every week into the new buying cycle. For instance the data may say, on 2/28, 35% of the orders were written and you can use this to forecast what the total seasons sales are likely to be and also the amount of fabric and notions to order for the season.

A trick we've learned over the years is to remove large customer orders from projections when ordering raw materials. Why? Large customers with multiple stores or a catalog tend to order a select few styles and colors very deep. If you include these orders in your raw material projections you will end up with a ton of extra stock in these fabrics and styles. I've been there and you don't want to be there; suppliers want to be paid and tons of extra stock is cash not in your checking account.

Over the years we've learned to trust the data. You'll need to build a confidence level with your data, but once you have it use it! You'll be rewarded well. You will have extra fabric to capitalize on hot trends and likewise you will have little fabric for items that aren't ordered frequently.

Early Easter Leading to Strong April Sales

Yes, Easter was early and it hurt apparel sales in March because consumers weren't ready to buy summer merchandise.

In the 250 year span from 1875 to 2124 Easter was never before March 23rd and Easter occurs only twice on March 23rd, first in 1913 and then again this year 2008. Next year we return to a retail friendly Easter date of April 12.

In my post Early Easter May Lead to Retail Markdowns I guessed retailers would have a slow second half of March, followed by a strong April leading into the spring school vacation weeks. Based solely on the telephone and fax re-order volume at Corky it looks like spring apparel sales have perked up nicely!

If your a specialty retailer find comfort in that your soft March sales were due to an early Easter that impacted everyone. If you ran a spring promotional event in March and had limited success I'd suggest you try it again. Consumers, including me, are shopping now for their spring and summer clothing and we are ready to respond to creative promotional events!

Corky Warehouse Sale in Full Bloom

A big thank you to all who attended the one week Corky spring 2008 warehouse sale and to all our school partners that helped promote the event. Our employees worked two weeks straight to make the sale possible, changing the warehouse into a store, assisting customers, running the check-out area and then turning the store back into a warehouse.

The Girls Toddler Asle

We took Good Friday off for a much needed rest and then finished setting up the warehouse today. Behind the scenes and late into each evening, we continued shipping current season merchandise to our cherished retailers who are the ones that truly make the "Corky Sale" possible.

These Cowboy Hats are so Cool!

The sale kicked off on Wednesday with our VIP afternoon. We rented a carnival popcorn machine and provided drinks along with the fresh popped popcorn. We managed to keep the check-out line to less than a fifteen minute wait and the selection was tremendous for those who attended. This is really the best way to shop the Corky Sale. Here's some tips to become a VIP attendee.

The Girls 4-6X Aisle

We had a special email invitation only day on Friday that kicked off at noon. This has now become as large as our official opening day as the email list has sailed past 5,000 people. You can sign-up for the special email day at CorkySale.com. The selection was still great, but the first few hours felt like the running of the brides at the Filene's bridal gown sale. I personally apologize for the long check-out line. I had an all time high of twelve people at check-out, six people collecting money, two tallying orders, and four bagging orders. I understand there were a couple of line cutting fights and I hope all left feeling satisfied.

Kim & Lucie Checking Out and Keeping a Sense of Humor

The Dreaded Check Out Line

Jeanne, Ellie, Amanda and Diane Hustling at Check Out

We started early Saturday morning in an effort to get a jump on the check-out lines. I was truly amazed at the line waiting to come in at 9 am on a Saturday morning. There were 25,000 invitations given out between our mailing list and schools handing out postcards. Again we kept twelve people at check out and I think we were able to keep the wait to less than an hour. I just don't have more people that I can trust at check-out.

The Girl's 7-14 Aisle

I provide some warehouse sale shopping tips a few weeks ago to help during the sale and I can offer one more now. Hint: Come as team and have one person wait in line while the other shops and then trade rolls. If you get to the front we'll let you stay off to the side until your ready to check out. Husbands can make a good surrogate line holder to.

The Boys Selection was the Best Ever

By the end Saturday the best items were in short supply but we came in very early Sunday to organize and restock items discarded at check-out. The selection was still good when the doors opened at 10 am on Sunday. This was our third day of the sale and Corky was able to take five and take some pictures of the sale. I hope your enjoying the photos.

Find a Quite Corner and Try It On

The sale continued Monday and Tuesday and by the end of the day Tuesday we were getting very picked over. At 7 PM Tuesday we sent an email announcing an egg-citing sale for the last two days of the sale. As customers arrived they picked an easter egg and inside was a discount coupon for between 10% and 50% off your entire purchase. This was a lot of fun and thanks for all the return shoppers who came back to participate in the egg-citing days. Warehouse sale shoppers we love you. Please enjoy this photo gallery.

Picking through the Seconds. Must be the eBay Resellers!

The items on the third highest rail were off limits because we are still shipping those items to retailers or we're saving the inventory for our Canadian and European retailers. Please believe me NOBODY CHECKED OUT WITH ITEMS ON THE THIRD RAIL. I had no devious plan like saving that inventory for later in the week. Thanks for your understanding.

The spring sale is now closed and we won't open to the public until Columbus Day weekend. Thanks to all who attended and we hope to see you back in the fall.

How do Fashion Designers Predict the Future?

Many times I've been asked the question,"How do you know what fashions will be in style next year?" It's simple, you need innovative one of a kind designers that live in the present but know the future. This answer begs another question:

Do fashion designers start trends or do they have an ability to anticipate fashion trends?

When a new product is released there is a principle called the theory of diffusion which helps answer the question of why fashion designers are so clairvoyant.

The Theory of New Product Diffusion

• Innovators – venturesome people with an ability to process emerging information
• Early adopters – popular people (social leaders) who are first to try new products
• Early majority – people with many social contacts that quickly mainstream products
• Late majority – skeptical people that will try a product only if it is a true trend
• Laggards – people who look for the Levi tag in the pocket of a pair of corduroy pants

The best fashion designers are clearly innovators, people with an ability to process information from magazines, television, movies, songs, art, buyers, consumers and sales people, and then correlate with existing fashion to forecast color and style. It's an ability that can't be learned, you either have it or you don't. This ability, however, gets better over time and when mentored properly becomes simply extraordinary.

At Corky & Company our chief designer is one of these rare individuals. Betty Sioux, her nickname on Myspace, a gifted innovator is one of the last persons you would think would be an award winning childrenswear designer. When she comes to work I never know if her hair will be black, blue, red, purple, yellow or some combination there of, if her undergarments will be on the inside or outside of her outfit, if another body part will be pierced or inked, or if she'll be wearing flats or seven inch heeled shoes. The only sure thing is she will sport a look that is meticulously put together.

Betty, my wife Kim and Annie, our youngest designer, collectively seem to be able to predict the fashion future. But since I don't believe in tarot cards, palm reading or extra sensory perception, I know they are not part of the paranormal. So the answer to the question I posited earlier is; fashion designers don't start trends, but they have an incredible ability to anticipate trends before they start. The best fashion designers are all processing similar information from all forms of media and therefore come to similar conclusions about the direction of fashion.

So my wife, Betty and Annie don't start fashion trends, they just have a rare ability to know what you will like, a year before you know you will like something.


If you enjoyed this post, you might want to check out these other fashion related Corky Nation blog posts.

Specialty Stores on Target - As one of the nation's largest apparel sellers, Target has raised the fashion - value bar to new heights and set a standard boutique label manufacturers must exceed to remain successful.

Great Fashion Starts with Outstanding Quality - A small branded apparel manufacturer can’t afford a large quality assurance department, nor is this the proper way to insure a quality product in garment manufacturing. At Corky, we define quality in five very simple steps.

Great Fashion Starts with Outstanding Quality

At Corky & Company, like most small companies, we pride ourselves on the quality of the garments and products we make. The image of your company and ultimately its brand longevity will depend on product quality.

A small branded apparel manufacturer can’t afford a large quality assurance department, nor is this the proper way to insure a quality product in garment manufacturing. At Corky, we define quality in five very simple steps.

1. Design fresh looks which sell
2. Develop a good consistent fit
3. Produce to product specifications
4. Deliver on time
5. Analyze retailer selling data
   

These five steps may sounds simple, but to implement properly you will need the combined efforts of your entire workforce, supplier base, sales force and some very straightforward customers. This is what we call total quality management; quality of design, development, production, delivery and salability. I purposefully didn’t capitalize total quality management because that would infer a proper noun or the name of a program, but I prefer it to be a noun, management, modified by two adjectives total and quality.

Never think you’ve mastered the total quality cycle because the marketplace always throws a curve ball; employees will leave or retire, suppliers will go out of business, new suppliers will develop great products, customers will order later than expected, production will start and/or finish late, and competitors will emerge with a better product. You as the business leader must accepted the fact that total quality will be an endless effort and require a positive company culture of constant improvement and mutual problem solving.

The quality of a garment is a function of good design, basically quality is designed into a garment from the start. In addition to a “look” that will retail, design is responsible for fabric, trim and thread selection, fit and product specifications. Get anything wrong here and maintaining total quality control will be near impossible.

Sales people need to provide design with retailer and consumer input so positive trends can be emphasized and negative trends can be addressed. I’ve learned to, Treat Your Customers Like Royalty, because they truly want to tell you how to succeed. Whenever possible have your design team go to trade shows and involve your sales people in line development before cutting sample sets. The return on this investment is enormous.

A good consistent fit is imperative in building a brand! Corky coats have had the same fit for 15 years “a generous cut that runs true to size.” Sales people, retailers and consumers all know how to describe the fit of a Corky coat. Whenever we produce a coat that does not run true to size we receive an enormous amount of negative feedback that we must quickly address. Look at a consistent fit this way, if one size 3T style fits a child, every size 3T in your line should fit that same child.

Produce to specifications and deliver on time. Oh how simple this sounds. In the last three years, technology advances, lower travel costs and improved shipping options has made it relatively simple for small apparel manufacturers to source raw materials from suppliers on four continents without the need to speak English, Spanish and Mandarin. This has led to more fashion value for consumers as discussed in my post, Specialty Stores on Target.

Five years ago a small apparel manufacturer had a network of suppliers in close proximity, but today many of those suppliers have gone out of business. Now small business production managers are like orchestra leaders, coordinating the global purchase and delivery of raw materials, the offshore assembly of garments and the importation of finished items to the company’s warehouse. Unfortunately, this type of supply chain came about, not by evolution, but by revolution when the US and its trading partners repealed the Multi Fiber Act in 2004.

At Corky, we had become well known for the quality of our delivery as well as the quality of our products. However, the events of the last few years had a detrimental impact on the quality of our delivery. During these changes, I’ve insisted the quality of a Corky coat will never be sacrificed over the quality of delivery. I think this was a wise decision because now that the quality of our delivery is improving dramatically, the quality of the brand was never sacrificed.

Many business leaders have their own definition of total quality management, and this post is my attempt to explain Corky and Company’s culture of total quality management.

Treat Your Customers Like Royalty

In my office, a framed poster from Successories hangs on the most prominent wall. It reads:

It takes months to find a customer, but only seconds to lose one.

It's not a piece of art which complements the decor of my office; it's simply gold words printed on an orange background with a cheap black frame. In fact it's rather ugly, but the message is important. It's amazing how frequently my employees, suppliers and I discuss the message.

1) When prospective employees are interviewing in my office, I ask what they think of the saying. Their response to the question better be consistent with my philosophy or I quickly finish the interview and wish the person good luck.

2) When any of my employees complain about the demands of a customer request, we simply refer to the poster.

3) When I over hear a conversation or read an email that does not treat a customer with respect and dignity, we refer to the poster and the customer is called.

4) When a supplier is pumping attitude, I ask them to come visit me. We refer to the poster and they understand the reason for our demands. Many times the sales person leaves to buy one of the posters for their office.

5) We now have suppliers on four continents and its amazing how global this simply statement is understood.

With new customer acquisition being extremely expensive, the best marketing investment a business can make is one which retains existing customers. When Corky first started 15 years ago, I admit new customer acquisition took front seat over customer retention. One day nirvana hits you between the eyes and you think how much product a single customer has purchased over the years.

New customers are good for your ego, but existing customers are what keeps you in business. Treat your customers like royalty and you'll be well rewarded with loyalty.

Mill to Produce Fabric for the Domestic Market?

The Fashion Incubator wrote an interesting post today titled, The Impending Crisis. Three issues were explored 1) the state of the economy 2) the rate of exchange and 3) the price of energy and how this has affected the apparel industry based on comments from Birnbaum's Newsletter.

Just last week I wrote a post, 5 Tips to Export: America is On Sale, where I explored the effects of the rate of exchange and the price of energy on American designers and manufacturers. I concluded that a 90% increase in transportation costs were more than offset by a 40% dollar depreciation which set an unprecedented state for small manufacturers to export American designs.

Kathleen Fasanella, goes on to ask the question, "I wonder if the [production] losses in Mexico and Caribbean Basin represent opportunities to those [small manufacturers] who want to outsource but not far afield?" The answer is yes! The American apparel infrastructure has crumbled and there is just no way to bring it back. However, the apparel infrastructure and labor rates in the Caribbean Basin and Central America are competitive given that inflation in China is running at 15% annually, a trip to Central America from New York is only a four hour flight and door to door delivery of a container is one week.

Then Kathleen hit a grand slam with this comment, "Assuming I had the interest and the capital (including intellectual capital), I'd open a mill to produce fabric for the domestic market." Although it might have been written as a joke it would have a significant amount of merit if you said, "I'd open a mill in the Caribbean Basin or Central America to produce fabric for the US domestic market."

With ratification of DR-CAFTA, a free trade agreement was established between the Dominican Republic, Central America and the United States. However, to take full advantage of the duty free provisions for imported apparel, the cloth needs to be made in one of the member countries. Imagine the demand for any mill that could eliminate a 20% tariff on products entering the US. Well, if quality knit and woven mills, and dye and print shops set up in the Dominican Republic or Central America the small manufacturer would be close to cost parity with China or Sri Lanka.

I have pitched this idea to the President of all my domestic fabric suppliers. Not one has bit. I hope one sees the light and begins the painful but rewarding process of setting up shop offshore, but very close to home. Yes at first the orders would be small, but then the lost volume accounts would be sucked right back from Asia and we would once again have a vibrant local apparel industry.

Early Easter May Forecast Retail Markdowns

How early is Easter? I've done a bit of research and it doesn't get any earlier than this year!

In the 250 year span from 1875 to 2124 Easter never has been before March 23rd. In 250 years Easter occurs only twice on March 23rd, first in 1913 and then again this year 2008. For kids apparel retailers an early Easter usually shortens the full price selling season.

Consumers have come to expect markdowns on spring and summer kid clothing after Easter, but because Easter is so early this may not be the case. Mothers, the primary shopper for kids clothes, can't remember an Easter so early and this is sure to alter shopping patterns and behavior. My guess is a strong first half of March for retailers, a slow second half of March, followed by a very strong first half of April leading into the spring school vacation weeks.

The silver lining is the typical consumer buying behavior will return for the foreseeable future. Here are the Easter dates for the next four years.

2009 April 12
2010 April 4
2011 April 24
2012 April 8

My advise to childrenswear retailers is don't panic when sales drop off during the second half of March, its only due to the early Easter. Plan your strongest spring events for the beginning of April and you'll reap the rewards in the first half of April.

Million Dollar Dash

A niche branded apparel maker must walk a fine line when expanding distibution, especially when your focus will be on boutiques, specialty stores and high end department stores. There really can be too much of a good thing, but there can also be too little of a good thing.

If there is too much of your label in a concentrate region, the "specialty" merchandise label will no longer apply and your product will become a commodity. However, if you don't sell enough product you won't be able to stay in business. The key is to expand geographically with your label so you can maintain the "specialty" appeal of your product and get to an annual sales volume where you can make a profit.

So what type of sales volume do you need? My answer to this question is what I call the "million dollar dash." Once you've made a decision to build a label that will be more than a hobby, you need to get to a million dollars in sales volume within three years. If you don't want to run the race that's fine because you can focus on having a profitable hobby and not quit your day job. If however, you are going to make a living from your business you'll need to run the million dollar dash.

Why three years? Burn-out. After three years you'll get so sick of the endless hours, the steady diet of sleepless nights and the fact you aren't making any money that you'll wake up one morning and decide it ain't worth it! The solution to the endless hours and incredible stress will be to a hire a small number of people and this leads to the money part of the race.

Why one million dollars? Assume for the moment you can price your product with a 55% gross margin (I'll talk more about this in a future post) and this will allow retailers to buy it, mark it up and sell it. With close to 15 years in the business, I can say if you price at a 55% gross margin, when you add it all up at the end of the year and file your taxes you'll be lucky to end up with a 40% gross margin.

The loss 15% is what I call "ideal direct cost dilution." You need 400 yards of fabric at $7 per yard and the mill minimum is 500 yards, your true cost per yard is $8.75. Your button supplier is late what a surprise. Instead of a $50 UPS bill, you have it sent FedEx at $300. You ship a catalog or department store and the box weight exceeds 30 pounds, guess what that just cost $50 per box. After all this you're ready to ship a week past the cancel date, that's going to cost you with some of your customers. The list goes on and on, so don't be surprised when you loose 15% in gross margin.

You're going to need a full time team of 5 people to manage design, sampling, production planning, purchasing, quality, trade shows, customer service, warehouse and the finances. In addition, you'll need some temp help for the warehouse twice each year to get the product shipped by the cancel date. After you get done matching FICA, paying wages, unemployment and workers comp insurance each employee is going to cost about $40,000. The temp help will run about $10,000 each year. This totals $210,000.

Guess what independent sales people work for commissions and if you want them to work hard you should pay at least 10%; that's $100,000 of the million in sales. The two New York trade shows you'll need to exhibit, will cost about $25,000 after you pay for travel, event fees, decorations and the ten dollar bottles of water. Add in hazard & liability insurance, rent, office supplies, postage, accounting fees, etc and this will easily run another $65,000.

Why one million dollars? Just do the math.

$1,000,000 Gross revenues
-600,000 Cost of goods sold

=400,000 Gross profit

-210,000 Labor (your one of the employees)
-100,000 Sales commissions
-25,000 Trade shows/advertisement
-65,000 Other necessary expenses

$0 Net Profit

At least you made $40,000 as an employee and you now know your business' break even point!

In future posts I'll explain ways to lower your cost of goods sold and other indirect costs and also to get back some of the ideal direct cost dilution. This morning I read a great post by Jeff Cornwall about Bootstrapping your Business for Income and Wealth. Bootstrapping is extremely important for the long term success and profitability of your business.