How to start a clothing company in 10 steps

How to start a clothing company

Before we dive into the details of how to start a clothing company, it’s worth taking a step back to understand the reality of what this involves. While this can be a rewarding industry to explore, it’s also competitive, complex, and often intimidating for first-time founders.

Keep these key considerations in mind before getting started:

• The retail space is competitive: Over 100 billion pieces of clothing are produced each year.² Given the oversaturation, standing out requires more than great designs.

• Trends move quickly: Thanks to social media, fast fashion, and influencer culture, trends now come and go in a matter of weeks. To stay relevant, you’ll need to keep up not just with seasonal demands but with changing customer preferences.

• Operations are often complex: Design is only the first part of the equation. Behind every product is a maze of logistics: sourcing materials, managing inventory, fulfilling orders, handling returns, and keeping customers happy.

• Industry experience can make a huge difference: While you don’t need a fashion degree to get started, industry experience (and the connections it brings) can give you a major edge. Even if it’s working retail, interning at a showroom, or spending hours selling vintage on Depop, that experience can help you avoid expensive mistakes and navigate unspoken industry rules.

• Upfront costs are high: Even for small-batch brands, the upfront costs of sampling, manufacturing, photography, packaging, and marketing can add up quickly. Without outside funding, many founders have to bootstrap their way through the early stages.

• Manufacturing has barriers of its own: Most manufacturers have high minimum order quantities (MOQs), which can be tough for new brands without deep pockets or guaranteed sales.

• Building an audience takes time: Gaining traction in fashion often means building a community, not just selling a product. That means consistent marketing, engaging content, and investing in relationships long before the first sale.

Step 1: Conduct market research to understand your customers

Instead of jumping straight into what to sell or how to brand it, you first need to know who you’re designing for, what already exists, and where unmet needs lie.

That’s why market research is often the first step to refining your value proposition, which is the unique benefit your clothing brand offers that others don’t. Here’s how to get started:

• Research your target audience: Who is your ideal customer? Beyond age and gender, consider lifestyle, fashion preferences, shopping habits, spending patterns, and values. Do they prioritize sustainability? Are they looking for workwear, streetwear, or event-ready pieces? Tools like Instagram polls, Reddit threads, and customer surveys can provide real insight into how people shop and what they care about.

• Analyze your competitors: Study brands that target a similar audience. What are their price points? How often do they drop new collections? What’s their tone on social media? Take notes on how they photograph products, describe materials, and position themselves in the market. The goal of a competitor analysis isn’t to copy but to gauge their strengths and weaknesses.

• Explore market gaps: Look for missing pieces in the market. Are there trendy silhouettes that rarely come in extended sizes? Are sustainable basics often priced out of reach? These market gaps can be powerful starting points for a new brand with a fresh approach.

• Research fashion trends: Staying aware of trends is important even if your brand isn’t trend-driven. Follow runway shows, influencer content, resale sites, and platforms like WGSN or Pinterest.

• Find your niche: Think of your niche as the overlap between your creative point of view and your audience’s needs. It should not only differentiate you from competitors but also resonate with your target audience.

Step 2: Create a successful business plan for a clear understanding of the market

Whether you’re pitching investors, applying for funding, or just trying to stay organized, a comprehensive business plan helps transform creative ideas into a structured, scalable business. Essentially, it’s the blueprint for how your clothing brand will grow, survive, and thrive.

Unsure of how to write a business plan? It should include:

• Clear, achievable goals and objectives: Define what success looks like in the short term and long term. Maybe it's launching your first capsule collection within six months or hitting $50,000 in online sales in year one. Make sure to align them with your market research and target audience.

• Financial projections: This is where you outline anticipated revenues, expenses, and profit margins. Factor in expenses specific to fashion, like manufacturing, fabric sourcing, tech packs, shipping, returns, and warehousing. If you're running an e-commerce store, include platform fees and digital marketing costs.

• Funding requirements: How much capital do you need to get started, and how will you get it? Beyond just diving into your personal savings, consider exploring options such as:

1. Crowdfunding via platforms like Kickstarter
2. Small business loans or grants
3. Angel investors or fashion-focused VCs
4. Friends and family rounds

• Brand positioning and value proposition: What sets your brand apart? Your value proposition should be crystal clear and woven throughout your business plan.

• Marketing and sales strategy: Detail how you plan to reach and convert your audience. Will you lean on influencer collaborations, TikTok trends, or slow-growth community building on Instagram? Outline your go-to-market strategy and explain how these efforts support your sales goals.

• Operations and logistics: Even if you’re a one-person brand for now, include how your clothing will be produced, stored, and shipped. Will you work with a domestic cut-and-sew vendor or order from overseas manufacturers? What’s your plan for quality control, inventory management, and returns?

Step 3: Research the legal requirements for your own clothing business

Understanding the legal requirements for clothing businesses is fundamental. Skipping this step can lead to costly delays, penalties, or even having to shut down your operation temporarily.

Here’s what to take care of early on:

• Register your business entity: Decide whether to operate as an LLC, corporation, or sole proprietorship. Each structure has different implications for liability, taxes, and paperwork. Many small fashion brands start as LLCs for legal protection and flexibility, but it’s worth discussing your options with a professional.

• Get an employer identification number (EIN): An EIN is essentially a Social Security number for your business, required if you plan to hire employees, open a business bank account, or file business taxes. You can apply for an EIN for free through the IRS website.

• Obtain necessary business permits and licenses: Depending on your location and the scale of your business, you may need multiple business permits. A business operation license is commonly required by your city or county to legally run a business from your home, a storefront, or a warehouse. Some areas also require home occupation permits for running an online store from your residence.

• Familiarize yourself with tax obligations: Fashion entrepreneurs typically need to navigate sales tax, self-employment tax, and possibly income tax, depending on the structure and revenue of the business. Tax requirements can be complex, especially when you’re selling across multiple states or using platforms like Shopify or Etsy.

• Research and comply with specific local and state laws: 

1. Consumer protection laws may require accurate labeling of materials or country of origin.
2. Labor laws apply if you’re working with contractors or hiring employees, even part-time.
3. Environmental regulations may impact how and where you manufacture clothing, especially if you’re dealing with dyeing, waste disposal, or sustainable materials.

When in doubt, reach out. Local business support organizations, chambers of commerce, and even your local city hall can often connect you with free or low-cost guidance for startups. It’s better to ask questions now than troubleshoot problems later.

Step 4: Find reliable sourcing suppliers

One of the biggest steps in learning how to start a clothing company is understanding the different ways clothing is made.

In-house manufacturing means doing everything yourself — cutting, stitching, finishing — either solo or with a team. You get full creative control and can keep quality high, but it’s also a serious investment in time, equipment, and space. It’s great if you're going small-batch or made-to-order, but not always realistic when you're just starting out.

Outsourcing, on the other hand, involves collaborating with third parties to handle some (or all) of the production. If you’re building your brand from scratch, you’ll likely be working with clothing suppliers who can provide raw materials or custom production, so your line truly reflects your vision.

If you want to be a boutique owner or private label brand that wants speed over customization, you’ll want to find a wholesaler. With wholesale, you buy items in bulk to resell, often pre-made styles from catalogs.

While outsourcing is a faster and more scalable option, it comes with trade-offs like less control and the need to vet suppliers carefully. Look for these qualities when conducting your research:

• Consistency in quality: The last thing you want is one great batch and the next full of stitching mishaps. Suppliers should provide products that meet your quality standards consistently.

• Competitive pricing: Fashion has tight margins, so pricing matters. But don’t just chase the lowest bid. Look for suppliers who strike a balance between cost and quality.

• Flexibility and scalability: Suppliers should be able to scale up or down based on your business needs.

Once you nail down the right vendor, treat it like a relationship. Communicate clearly, set expectations, and don’t be afraid to negotiate terms that make sense for your business.

Step 5: Create branding and design for your own business

In fashion, a compelling brand identity can be everything. It’s how people recognize you, remember you, and decide whether your clothes belong in their closet.

Start by designing your clothing line with a unique aesthetic that sets you apart. What emotions or values do you want your brand to evoke? That’s your brand ethos — the guiding beliefs or mission that fuel your designs and customer experience. Are you a minimalist? Maximalist? Soft and romantic? Sporty and futuristic?

Next, your business logo should also be memorable, distinctive, and unique. Ensure it symbolizes your brand ethos and is immediately recognizable. You can either DIY your logo using tools like Canva or hire a graphic designer, especially if you want something more custom or cohesive. For the latter, look for freelancers who’ve worked with fashion brands before.

Lastly, consider how you present your products, including:

• Labels and hang tags that reflect your branding

• Packaging that delights customers (and encourages them to post an unboxing)

• Typography and colors that carry through on your website, social media, and lookbooks

Step 6: Create marketing strategies to promote your business

Even the best-designed clothing line needs visibility to succeed. That’s where marketing strategies for clothing come into play:

• Invest in your social media presence: Platforms like Instagram, Facebook, and Pinterest are tailor-made for fashion. They allow brands to showcase their aesthetic, tell stories through visuals, and build communities around style and identity. Posting a mix of outfit inspiration, behind-the-scenes peeks at your design process, and styled shoots can help make people want to follow and buy.

• Leverage email marketing: Email may feel old-school, but it consistently drives strong ROI.³ With targeted email campaigns, you’re sending curated messages to specific segments of your audience, like first-time shoppers, repeat buyers, or customers who browsed but didn’t purchase. These emails can highlight new drops, offer exclusive discounts, or share style tips that build loyalty over time.

• Launch pay-per-click (PPC) ads: PPC ads are a form of digital advertising where you only pay when someone clicks on your ad. These can appear on Google, Facebook, Instagram, and more, and can be fine-tuned to reach people based on location, interests, shopping habits, and demographics. For example, you could target people who’ve recently searched for “ethical women’s workwear” or “affordable streetwear.”

While it’s possible to manage your marketing yourself using tools like Klaviyo or Google Ads, hiring a professional social media manager or agency can save you hours and ensure you get the most out of your budget without the guesswork.

Step 7: Understand how to manage inventory

Streamlined inventory management is critical. The good news is modern inventory management systems allow you to accurately track stock levels, sales patterns, and reorder points. With a real-time view of your inventory, you can make more informed decisions when it comes to restocking or discounting.

Don’t want to worry about renting a storage facility or filling up your garage with products? Consider flexible inventory strategies like dropshipping or print-on-demand services. By outsourcing storage and fulfillment, these options can reduce upfront costs and risks associated with maintaining large inventories.

Step 8: Create a website

Even if you’re planning to sell at pop-ups, holiday markets, or through third-party marketplaces like Etsy, building your own website gives your brand a central hub. It’s the one place where your brand identity can shine and where shoppers can always find you, 24/7.

Rather than starting from scratch with a custom-built site — and dealing with the headaches of hiring developers, managing backend code, and coordinating ongoing updates — consider selling online via an e-commerce platform instead.

Popular e-commerce platforms like Shopify, WooCommerce, and BigCommerce can handle everything from product listings and inventory tracking to checkout and shipping settings, while still giving you control over your brand’s look, feel, and messaging.

When setting up your site, keep these key factors in mind:

• Customization and design freedom: Choose an e-commerce platform that lets you tailor the fonts, colors, layouts, and how your products are displayed.

• Mobile optimization: Most shoppers are browsing on their phones. Your site should load quickly, look great, and be easy to navigate on any screen size.

• Fast and intuitive user experience: Simple navigation, clear product categories, and streamlined checkout make a big difference in turning visitors into buyers.

• Secure payment methods: Ensure your platform accepts payment options like credit cards and digital wallets. Security is crucial, so incorporate SSL encryption and adhere to PCI DSS standards to help protect customer data.

• Scalability and integrations: As your brand grows, consider adding features like email marketing tools, inventory management, or shipping integrations. Pick a platform that can grow with you.

Learn more about PayPal’s comprehensive payment solutions.

Step 9: Set your prices

Choosing the right pricing strategy is about striking a balance between staying competitive and ensuring profitability. After all, you want to cover your costs and, ideally, leave room for you to actually pay yourself. But charge too much, and you risk alienating potential customers comparing your prices to other sellers in the same space.

At the same time, pricing also signals how your brand is perceived. A higher price point can convey premium quality, craftsmanship, or exclusivity. A lower price might attract bargain hunters but could also undervalue the time and care that went into making your product.

That’s a lot to juggle, especially when starting out. Follow these steps to develop a pricing strategy that make sense for your business:

• Start by calculating your overhead costs: This includes everything that goes into producing and selling your product: materials (e.g., fabric, trims, zippers), labor, packaging, shipping, operational expenses (e.g., website fees, marketing), and even your time.

• Add a markup that reflects your brand and profit goals: A basic pricing formula is: cost of goods x markup = retail price. Most fashion brands use a 2.2x to 3x markup (or more for luxury labels).

• Research competitor pricing: What are similar brands charging for comparable products? If your quality is higher or your niche is more specific, a higher price may be justified. If you're entering a crowded space, pricing competitively might help you gain traction early on.

• Consider perceived value: A $25 tee and a $65 tee might have similar materials, but branding, storytelling, and packaging can shift how customers feel about the value. Your pricing should reinforce the quality, uniqueness, and vibe of your brand.

• Plan for promotions and wholesale: If you plan to run sales or eventually sell wholesale, build that flexibility into your pricing strategy from the start. For example, if a retailer wants to buy your item at 50% off retail, will you still make a profit?

• Monitor and adjust over time: Prices don’t need to be set in stone. Regularly review your costs, track which items sell best, and stay aware of seasonal trends or inflation that could impact your margins.

Step 10: Customer service strategies for success

We can’t overstate the importance of customer service enough. But while customer service is often what turns a one-time buyer into a loyal fan, this involves more than just answering customer questions; it means creating a memorable, positive experience for each shopper.

Keep these tips in mind when creating a customer service strategy:

• Design an efficient returns and exchanges system: Clothing can be tricky — sizing varies, colors look different on-screen, and preferences change. A clear, generous return policy builds confidence in your brand and could make shoppers more likely to click “buy.” Automating this process through your ecommerce platform can make it even smoother.

• Use loyalty programs to reward repeat shoppers: A well-designed loyalty program can keep your brand top of mind and give people a reason to come back. Offer points for purchases, early access to new collections, or exclusive discounts.

• Add small personal touches wherever possible: This could be a handwritten “thank you” note in orders, special packaging, or even a quick follow-up email post-purchase to make a customer feel seen and appreciated. It’s a great way to differentiate your brand from larger, impersonal retailers.

• Offer personalized recommendations: Personalization goes a long way. Use shopping behavior, purchase history, or simple style quizzes to send recommendations that feel relevant rather than spammy. This creates a more curated, boutique-like experience.

• Be responsive and proactive: Use FAQs, chatbots, or contact forms to make it easy for shoppers to find answers. If there’s a delay or inventory issue, let customers know early and offer alternatives.

Start your clothing business with PayPal

Ready to follow these steps on how to start a clothing company and see shoppers sport your unique designs? Before you order fabric samples or sketch your first collection, take the time to build a solid foundation by creating a business plan, ensuring legal compliance, and conducting thorough research.

Find out how PayPal’s business tools and solutions can help you streamline operations and get paid securely.