Bonjour Fashion designers,
today’s topic will cover the first step to begin with when making your financial projections to raise investment for your business.
After you have thoroughly worked on your fashion brand identity, researched your market and defined your strategy, you are now ready to assess how much you will need for your whole concept to come alive: let’s calculate your startup costs.
The startup costs
This chart presents the overview of all the positions you will need to invest into in order to start your company. All the costs are to be presented without Value Added Tax (VAT).
Startup costs / Intangible assets
An intangible asset is an asset that is not physical in nature.
Registering fees are all the setup costs fees you had to pay to launch your company. It comprises all the registration fees paid to the public authorities to register your company but also the costs invoiced by your company lawyer for the legal advice related to your registration (to help you establish the articles of incorporation).
- Advertising startup costs are the costs you spent to advertise about the launch of the company
- Patents and copyrights include all the costs spent to protect your company name, your work or your invention, if any.
- Logo creation and website include all the costs you spent in order to design your logo and your website.
Tangible assets
A tangible asset is an asset that has a physical form.
Enter the value of the assets without VAT that your company actually owns.
- Building and lands
- For example if your company owns a sewing machine, you can register it here.
- Office furniture
- Computers
- Software installed on the computers
By adding up all this costs you obtain the gross value of the tangible assets.
In accounting, they consider that the tangible assets are used over a certain period time called useful life. For example you will probably use your computer for 3 years. Hence to calculate the profitability of the business, it is more accurate to allocate the cost impact of your computer over 3 years. The asset depreciation accounts for that. It impacts the net value of the tangible assets (net value = gross value minus depreciation) that decreases as time goes by and the net profit of the company during the asset’s useful life.
Financial assets
A financial asset is an asset that derives value because of a contractual claim. Stocks, bonds, bank deposits, and the like are all examples of financial assets.
You can also put the amount of the deposit you gave to your landlord to rent your office.
Initial inventory
Inventory is the raw materials, work-in-process goods and completely finished goods that are considered to be the portion of a business’s assets that are ready or will be ready for sale.
In order to calculate the value of your initial inventory you will need to add up the following costs:
- The cost of raw materials meaning the total cost of the fabric and trimmings you have
- The cost of incurring work-in-progress you have on hand. If for example you work on a prototype, the value of your work-in-progress amounts to the cost of the fabric and trimmings used on the work-in-progress at this stage. Another possible way to calculate the cost of the work-in-progress is to assess the percentage of achievement of each item in progress. Then you multiply the total production costs for a finished item by the percentage of achievement in order to obtain the value of the work-in-progress.
- The finished goods are valued at their total production costs (costs of raw materials used+labor costs).
So do a brief inventory take of all the goods in your atelier and present them like in the example hereafter. The designer lists up all the goods in his atelier that will contribute to make the products and generate future sales:
Startup cash
Startup cash is the amount of cash you have available on your bank account when launching your company. As a measure of caution, it is usually required to keep at least the equivalent of three months of fixed costs as startup cash.