by Zakiyyah Bhamjee
Back in the day, not so long ago, I was a bean counter (auditor) at one of the Big 4 firms and it was during this time that I quickly learnt that to obtain a true understanding of a business/organisation one needs to spend time in the kitchen, i.e the place where the operations occur, product is made, etc. Fast forward to 2018 and this auditor now finds herself as an entrepreneur applying these practices taught to her through bean counting.
It was during client interactions at our retail store Curtain Dream that I realized that a large contingent of fashion entrepreneurs experience great difficulty in pricing their garments ‘correctly’ or rather ‘fairly’, at a price that is affordable to the consumer, as well as sufficient to ensure that the entrepreneur makes ends meet!
A basic rule (purely from experience and not from any literature per se) is to ensure that the price covers the costs expended by you in producing the product. Do remember that these costs extend beyond the obvious being fabric, thread, buttons etc (or as the textbook would say, ‘direct costs’.) Have you considered the travelling costs to and from your suppliers and/or client? How about the costs of telephone calls and text messages? Rental costs incurred by yourself? Consideration of the aforementioned would in all likelihood lead to the ends meeting. However, we are women and our business needs to yield a little bit more than breaking even, if we intend on ensuring we can cover our costs and pay ourselves a salary in order to buy those shoes that we have been doting on for the longest time!
That being said (and keeping our eyes on the shoes) one needs to consider a mark up/ profit percentage and this is where I find the challenge lies for many. At this point in our entrepreneurship journey I am pretty sure that most of us have realized that there is no universally accepted definition for a “fair mark up.” This depends on hundreds of variables. Most retailers use a fifty percent mark up known in the retail sector as the keystone. Although it is true that higher volumes will make up for lower prices to some extent, unless you can sell as much as a major high-street retailer, you absolutely need at least a 50 percent markup (keystone) to survive in a small retail store. Although doubling the price may sound outrageous, it does not result in excessive profits when you consider the associated expenses such as rent, taxes, insurance, suppliers and labour costs that you as the entrepreneur must meet.
This being said, I hope to have shared a little food for thought with you and am always willing to help you with those ends going over and not just meeting.
Zakiyyah Bhamjee CA(SA) is an Entrepreneur and the group financial manager of the Bhamjee Group of Companies and the Entrepreneurship Portfolio Head of the Tariro foundation. She is passionate about Africa and is making progress towards defining her role in the growth story that South Africa has to share with the world. She graduated at the University of Pretoria having completed Bcom (Hons) with Specialization in Accounting Sciences in November 2011, successfully passing the SAICA (South African Institute of Chartered Accountants) Qualifying Exam in January 2012 as well as the IRBA (Independent Regulatory Board for Auditors) Public Practice Examination in November 2013. She completed articles at PricewaterhouseCoopers, South Africa and qualified as a Chartered Accountant CA(SA) and Registered Public Accountant - RA in December 2014. She is involved in various PBOs and aid projects. Zakiyyah can be reached on email@example.com
Read more articles by Zakiyyah....