How Many Garments Do You Need to Sell to Recoup Your Investment?
How to calculate the break-even point of a clothing production run: fixed cost, variable cost, margin per garment, and how many units you need.
Two types of cost, and everything follows from them
The costs of a production run fall into two types, and mixing them up is what makes the numbers come out wrong.
Fixed costs are paid once and do not change whether you produce 10 or 500 garments: the pattern, for example. Variable costs are paid for each garment: the fabric, the trims and notions, the sewing.
The pattern is the clearest case of a fixed cost, and that is why its weight in the final cost collapses as production goes up: $10 spread across 10 garments is one dollar per garment; across 200, five cents.
The formula
The break-even point is the number of garments you have to sell so that what you collect covers everything you spent. It is calculated like this:
Units = fixed costs ÷ (selling price − variable cost per garment)
The subtraction inside the parentheses is called the contribution margin: it is what each garment sold contributes toward covering the fixed costs. The bigger it is, the fewer units you need.
A worked example
A brand produces sweatshirts. The pattern cost $10 in PDF A4. Each sweatshirt costs $14 to produce, counting fabric, trims and notions, and sewing, and sells for $32.
The contribution margin is $32 − $14 = $18 per sweatshirt. The fixed costs are $10. The break-even point is 10 ÷ 18 = 0.55 sweatshirts: with the first sweatshirt sold, the pattern is already paid for, with money left over.
The example looks exaggerated, and that is exactly why it is useful: when the fixed cost is a digital pattern, the break-even point practically does not exist. The real profitability problem is in the variable cost, not in the pattern.
Where the real risk is
If the pattern is paid for with the first garment, what puts the production at risk is something else: fabric you bought and do not manage to sell. That is tied-up money, and a lot of it.
That is why the decisions that move the result are how many meters of fabric to buy and how many units to cut in each size, not how much was spent on patternmaking.
The math worth doing every month
Besides the break-even point for each production run, it is worth looking at the month's total margin: add up everything sold, subtract all the variable cost of what was sold, and compare the result against the business's fixed expenses. It is the calculation that tells you whether the brand supports itself or is financing itself with its inventory.
Frequently asked questions
- How do you calculate the break-even point of a clothing production run?
- By dividing the fixed costs by each garment's contribution margin, which is the selling price minus the variable cost per unit. The result is how many garments you need to sell to cover what you invested.
- How much does the pattern add to the cost of a garment?
- Very little, and less and less: it is a fixed cost that is spread across all the units produced. A $10 pattern spread across 200 garments adds five cents to each one.
- Which cost carries the most risk in a small production run?
- Fabric you bought and do not manage to sell. It is the line item that ties up the most money and the one that decides whether the production leaves you with profit or with unsold inventory.