Table of Content

    Do you want to start embroidery business?

    Are you planning on how to start an embroidery business? The art of embroidery has been there for ages and new designs and trends have kept transforming the industry across time. We all love custom apparels as they’re used for fashion, accessories and as gift items. As an industry which has been there for centuries, it has deep roots not only in the United States but across the globe.

    Embroidered items are known to stand out for their catchy and unique look and so everyone wants to be part of this exciting culture. Professionalism and innovation are key qualities to succeed in this business that is considered an A-list business which continues to have an immense impact on the fashion industry.

    How do I start an embroidery business can only be successful with a well-laid out business plan to guide you every step of the way. With the demand for embroidery products increasing, this business venture knows no creativity boundaries so you can try to be as unique as possible to stand out. As a mainstream industry, the revenue margins as promising so long as the right strategies are put in place.

    Executive Summary

    2.1 The Business

    The embroidery business will be registered under the name Randora Designers and will be situated in Phoenix, Arizona. The business will be owned by Jane Cookie who is an experienced fashion designer by profession. This business plan acts as a guideline on starting an embroidery business and what should be done to ensure a successful set-up and operation. During registration, it is imperative to ensure you have acquired all the licenses that you need to operate.

    2.2 Management Team

    Before starting a small embroidery business, Jane Cookie worked as a professional fashion designer and has over 20 years of experience under her belt. During the course of her career, she worked in various capacities for various top fashion design brands across the United States.

    2.3 Customer Focus

    Jane has been in the fashion industry for over two decades and has witnessed firsthand the changing face of the industry and trends. Given her extensive experience, she has worked with various customer segments and therefore, has an in-depth understanding of which markets would benefit greatly from her embroidery business. Anyone who is keen on unique and transformational fashion is a potential customer of Randora Designers.

    2.4 Business Target

    Jane Cookie knows where to focus her marketing efforts and the strategies she intends to put in place in order to ensure she effectively reaches out to the market and generates sufficient revenue for her embroidery business.

    Her intention is to be the most reputable embroidery business in Phoenix, Arizona and the surrounding locations. Her insider knowledge of the industry is expected to be a great asset that will help Randora Designers attain its business targets.

    Embroidery Business Plan - 3 Years Profit Forecast

    Company Summary

    3.1 Company Owners

    Jane Cookie is an experienced fashion designer with extensive skills in the fashion industry. Before contemplating how to start embroidery business, she worked for top fashion and design houses across the United States and abroad. In her various capacities, Jane worked on numerous large scale design projects based on unique and innovative embroidery designs.

    Her works have been recognized across the board and she’s a respectable personality in the fashion industry. Her embroidery business ideas have been transformed into wow designs that continue to be a trendsetter in the fashion industry.

    3.2 Aim of Starting the Business

    Even though embroidery has been around for centuries, the industry is now more popular than ever. The rising demand for embroidered products from different market segments is the main decision that influenced Jane Cookie to start an embroidery business.

    Having been in the fashion industry and witnessed its up and downs, Jane believes she stands a good chance to succeed as an embroidery entrepreneur. As the modern society continues to appreciate the value of embroidered designs, it is only expected that the demand will only continue to soar.

    3.3 How the Business will be Started

    Randora Designers is expected to begin operations after carrying out a detailed market research which shall be carried out by seasoned experts. In order to make the business successful, Jane knows her experience and knowledge is the greatest asset the business requires as she is in an advantaged position to make good decisions that will spur business growth. Additionally, she has worked with a team of financial experts to come up with a comprehensive financial analysis for the business.

    Embroidery Business Plan - Startup Cost

    Start-up Expenses  
    Legal $4,000
    Consultants $3,000
    Insurance $10,000
    Rent $15,000
    Research and Development $8,000
    Expensed Equipment $10,000
    Signs $3,000
    TOTAL START-UP EXPENSES $52,000
    Start-up Assets $0
    Cash Required $80,000
    Start-up Inventory $25,000
    Other Current Assets $30,000
    Long-term Assets $8,000
    TOTAL ASSETS $25,000
    Total Requirements $20,000
    START-UP FUNDING $0
    START-UP FUNDING $100,000
    Start-up Expenses to Fund $30,000
    Start-up Assets to Fund $32,000
    TOTAL FUNDING REQUIRED $0
    Assets $20,000
    Non-cash Assets from Start-up $15,000
    Cash Requirements from Start-up $0
    Additional Cash Raised $60,000
    Cash Balance on Starting Date $20,000
    TOTAL ASSETS $0
    Liabilities and Capital $0
    Liabilities $0
    Current Borrowing $0
    Long-term Liabilities $0
    Accounts Payable (Outstanding Bills) $0
    Other Current Liabilities (interest-free) $0
    TOTAL LIABILITIES $0
    Capital $0
    Planned Investment $0
    Investor 1 $20,000
    Investor 2 $15,000
    Other $0
    Additional Investment Requirement $0
    TOTAL PLANNED INVESTMENT $70,000
    Loss at Start-up (Start-up Expenses) $45,000
    TOTAL CAPITAL $35,000
    TOTAL CAPITAL AND LIABILITIES $40,000
    Total Funding $90,000

    Services for Customers

    Randora Designers intends to offer a wide variety of products and services in order to boost its reputation and be more competitive in the industry. Jane knows too well the secret to success is based on the level of innovation and creativity that will reflect in the products and services offered by the business.

    After a comprehensive study of the industry, she intends to start embroidery business on a highly creative pitch that will see an introduction of stand-out products that will be easily recognizable by clients. Selling the embroidery label is one of the biggest challenges Jane Cookie knows she has to deal with.

    However, her experience and top skillset puts her in an idea position of starting embroidery business whose products and service will effectively meet the needs of the market. In this regard, the following products and services will be offered by Randora Designers.

    • Standard embroidery on a diverse range of apparel such as jackets, hats, sweatshirts, shirts and sports apparel
    • 3D embroidery services
    • Applique embroidery services
    • Chenille embroidery services

    Marketing Analysis of Embroidery Business

    Embroidery is an old art that has been in existence for centuries. However, this hasn’t stopped the popularity of embroidery as the modern fashion industry has fully embraced the concept which continues to dominate high profile catwalks and stages around the globe.

    There is definitely good potential for this business as plenty of creativity is the key to identifying and harnessing various marketing opportunities. In this embroidery business plan, Randora Designers has carried out an extensive market analysis and identified gaps in the market the business can explore in order to grow revenue.

    5.1 Market Segment

    For Randora Designers to realize its dreams, the embroidery business has identified the best markets that are in need of various products and services. Phoenix is a large city with many untapped opportunities which gives Randora Designers the leeway to penetrate the market.

    Embroidery Business Plan - Market Segmentation

    In this embroidery business plan template, potential customers have been identified alongside plans and strategies the business intends to put in place to win a larger market share.

    5.1.1 Fashion Designers

    Embroidery is a common concept that many businesses have adopted in the fashion business. Major clothing lines and fashion houses have all shifted their interest to dated prints that are accompanied with captivating embroidered details. Personalization of embroidered designs is a big hit as many clients love unique and eye-catching products that stand out from the crowd.

    Originality and personality are two important qualities which are appreciated by clients looking for embroidered products. The fashion design industry is a billion dollar industry and having clients from this lucrative industry is a big plus for Randora Designers. In this embroidery business plan sample, the business has clearly outlined measures it intends to use to approach and capture the fashion design industry whose popularity is spreading fast across the globe.

    5.1.2 Households

    Many embroidery products find their way to many households across the city and Randora Designers has an excellent opportunity to make use of this golden opportunity to improve revenue. There are many types of household products such as cushions, bedsheets and curtains among others.

    Phoenix is large city which presents a good opportunity for Randora designers to advertise to wide target market that is constantly keen on having good quality embroidery products. However, this is a very competitive segment as many similar businesses also have their eyes on customers who purchase embroidery products for use in their homes.

    5.1.3 Interior Designers

    Interior designers are in constant need of unique and original embroidery work to spruce up various spaces. In this sample embroidery business plan, the business understands how important it is to penetrate in the interior design industry which a fast growing industry as clients seek to accentuate their spaces with unique and exquisite decoration.

    5.1.4 Art Enthusiasts

    Art lovers are always looking for something original, inspirational and creative to entertain and please their imaginations. How to market an embroidery business must incorporate plenty of originality which is greatly appreciate by lovers of art who love to collect various items.

    5.1.5. Gift Shops

    Gift shops stock plenty of embroidered items which are common with shoppers looking to purchase items as gifts. Randora Designers is in the right industry and can think of using embroidery to make nice gift items that are appealing to the tastes of shoppers.

    Market Analysis
    Potential Customers Growth YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 CAGR
    Fashion designers 25% 10,000 11,000 12,000 13,000 14,000 10.00%
    Households 23% 9,000 10,000 11,000 12,000 13,000 8.00%
    Gift shops 20% 8,000 9,000 10,000 11,000 12,000 9.00%
    Interior designers 18% 6,000 7,000 8,000 9,000 10,000 12.00%
    Art ethusiasts 14% 4,000 5,000 6,000 7,000 8,000 11.00%
    Total 100% 37,000 42000                 47,000 52,000 57,000 13.00%

    5.2 Business Target

    Randora Designers plans to establish itself as a well-known embroidery brand especially in Phoenix which is a large city with numerous opportunities. When you start your own embroidery business, you should have a good idea of the anticipated revenue and growth patterns. In this case, Randora Designers is looking to achieve an annual sales growth of between 15%-20% in the first three years of operation.

    5.3 Product Pricing

    How much does it cost to start an embroidery business should always incorporate investing in a good price strategy that will help sell business products to customers.

    Strategy

    Randora Designers plans to come up with a sustainable marketing strategy to help the embroidery business cover all the intended target market areas. If you’re planning on how to start a embroidery business, you need to put in place a practical marketing strategy that will net in as many clients as possible and create suitable environment for business growth.

    6.1 Competitive Analysis

    Randora Designers has carried out an in-depth market research before starting a embroidery business in order to identify the most effective marketing strategies that will help the business to grow its market share, compete favorable and attain its revenue targets.

    6.2 Sales Strategy

    For Randora Designers to effectively reach the intended markets, this embroidery business intends to implement the below described strategies to better advertise its products and services.

    • Issue brochures, flyers and introduction letters to stakeholders to create awareness about the embroidery business
    • Have an opening party with the guest list having people drawn from the key target market areas. For instance, interior designers, fashion designers and gift store business owners or representatives should be invited. During the party, offer clients small gifts and samples to clients to help them understand the originality and creativity of concepts
    • Participate in industry related events which provide an excellent opportunity for the embroidery business to make connections not only with customers but key industry stakeholders
    • Advertise the business on social media platforms such as Facebook, Instagram and Twitter. Local Google Ads is a great online marketing strategy
    • Advertise Randora Designers on local directory listings such as the Yellow Pages
    • Design a simple search engine optimized website to ensure better search engine rankings
    • Use broadcast and print media advertising i.e. television and radio as well as newspapers, magazines and business journals

    6.3 Sales Forecast

    Before launching business operations, a detailed sales forecast has been created to guide the business on what to anticipate in terms of sales volumes.

    Embroidery Business Plan - Unit Sales

    Sales Forecast      
    Unit Sales Year 1 Year 2 Year 3
    Standard embroidery services 90,000 100,000 110,000
    3D embroidery services 70,000 80,000 90,000
    Applique embroidery services 50,000 60,000 70,000
    Chenille embroidery services 30,000 40,000 50,000
    TOTAL UNIT SALES 240,000 280,000 320,000
    Unit Prices Year 1 Year 2 Year 3
    Standard embroidery services $100.00 $110.00 $120.00
    3D embroidery services $80.00 $90.00 $100.00
    Applique embroidery services $60.00 $70.00 $80.00
    Chenille embroidery services $40.00 $50.00 $60.00
    Sales
    Standard embroidery services $110,000 $120,000 $130,000
    3D embroidery services $100,000 $110,000 $120,000
    Applique embroidery services $90,000 $100,000 $110,000
    Chenille embroidery services $80,000 $90,000 $100,000
    TOTAL SALES
    Direct Unit Costs Year 1 Year 2 Year 3
    Standard embroidery services $5.00 $6.00 $7.00
    3D embroidery services $4.00 $5.00 $6.00
    Applique embroidery services $3.00 $4.00 $5.00
    Chenille embroidery services $2.00 $3.00 $4.00
    Direct Cost of Sales
    Standard embroidery services $130,000 $140,000 $150,000
    3D embroidery services $140,000 $150,000 $160,000
    Applique embroidery services $150,000 $160,000 $170,000
    Chenille embroidery services $160,000 $170,000 $180,000
    Subtotal Direct Cost of Sales $370,000 $380,000 $390,000

    Personnel Plan

    When planning on how to start your own embroidery business, it is critical to identify the right team of staff that will run business operations and strategically position the business for success. The secret to a successful business is to hire a competent team of staff with an excellent track record and capable of delivering exceptional results.

    The business will have several departments each with staff working together towards a common goal. Jane Cookie plans to hire a well-trained team of staff and therefore, a personnel plan is part of this starting an embroidery business guide.

    7.1 Personnel Plan

    To help the embroidery business attain its goals, the following team of staff will be employed to work in Randora Designers. Jane Cookie who is an experienced professional fashion designer is the owner of the business and will be the Chief Executive Officer. She will be assisted by the following team of staff.

    • Administration and Marketing Manager
    • 3 Fabric Designers
    • 1 Accountant
    • 2 Marketing Executives
    • 1 Customer Service Executive
    • 2 Deliverers
    • 1 Cleaner

    Successful applicants upon hiring, will be trained on key business operation procedures a fortnight before the business opens its doors to the public.

    7.2 Average Salaries

    Randora Designers intends to pay its members of staff the following salaries within the first three years of operation.

     Personnel Plan      
    Year 1 Year 2 Year 3
    3 Fabric designers $90,000 $92,000 $94,000
    1 Accountant $30,000 $32,000 $34,000
    2 Marketing executives $40,000 $42,000 $44,000
    1 customer service $20,000 $22,000 $24,000
    2 deliverers $40,000 $42,000 $44,000
    1 cleaner $20,000 $22,000 $24,000
    Total Salaries $240,000 $252,000 $264,000

    Financial Plan

    Randora Designers has come up with a comprehensive financial plan which is required to answer the question, is embroidery business profitable? In any case, we all venture into business with an aim of making profits. To ensure embroidery business profit margin is impressive, various key parameters need to be determined, calculated and analyzed before opening the business.

    Starting a home embroidery business is fairly straightforward especially for those venturing into this industry and wish to keep their startup and operational costs low. Jane Cookie plans to raise money for the embroidery business from her personal savings. In addition, she has two investors and will borrow a small bank loan for business plan to cater for the remaining budget deficit.

    Below is a comprehensive financial analysis for Randora Designers.

    8.1 Important Assumptions

    The financial forecast for Randora Designers is based on the assumptions below.

     General Assumptions      
    Year 1 Year 2 Year 3
    Plan Month 1 2 3
    Current Interest Rate 10.00% 12.00% 14.00%
    Long-term Interest Rate 5.00% 5.00% 5.00%
    Tax Rate 12.00% 14.00% 16.00%
    Other 0 0 0

    8.2 Brake-even Analysis

    Randora Designers brake-even analysis is shown in the graph below.

    Embroidery Business Plan - Brake-even Analysis

     Brake-Even Analysis  
    Monthly Units Break-even 7000
    Monthly Revenue Break-even $80,000
    Assumptions:
    Average Per-Unit Revenue $70.00
    Average Per-Unit Variable Cost $1.00
    Estimated Monthly Fixed Cost $130,000

    8.3 Projected Profit and Loss

    Profit and loss information for Randora Designers as calculated on a monthly and annual basis is indicated below.

     Pro Forma Profit And Loss      
    Year 1 Year 2 Year 3
    Sales $700,000 $730,000 $760,000
    Direct Cost of Sales $40,000 $60,000 $80,000
    Other $0 $0 $0
    TOTAL COST OF SALES $40,000 $60,000 $80,000
    Gross Margin $420,000 $460,000 $500,000
    Gross Margin % 75.00% 80.00% 85.00%
    Expenses
    Payroll $300,000 $320,000 $340,000
    Sales and Marketing and Other Expenses $5,000 $7,000 $9,000
    Depreciation $4,000 $6,000 $8,000
    Leased Equipment $0 $0 $0
    Utilities $6,000 $8,000 $10,000
    Insurance $2,000 $3,000 $4,000
    Rent $12,000 $14,000 $16,000
    Payroll Taxes $32,000 $36,000 $40,000
    Other $0 $0 $0
    Total Operating Expenses $230,000 $260,000 $290,000
    Profit Before Interest and Taxes $55,000 $65,000 $80,000
    EBITDA $10,000 $15,000 $20,000
    Interest Expense $0 $0 $0
    Taxes Incurred $15,000 $20,000 $25,000
    Net Profit $120,000 $130,000 $140,000
    Net Profit/Sales 20.00% 35.00% 50.00%

    8.3.1 Monthly Profit

    Embroidery Business Plan - Profit Monthly

    8.3.2 Yearly Profit

    Embroidery Business Plan - Profit Yearly

    8.3.3 Monthly Gross Margin

    Embroidery Business Plan - Gross margin Monthly

    8.3.4 Yearly Gross Margin

    Profit and Loss Analysis for Randora Designers is illustrated below.

    Embroidery Business Plan - Gross Margin Yearly

    8.4 Projected Cash Flow

    Below is a summary of Randora Designers Pro forma cash flow, subtotal cash received, subtotal cash spent, subtotal cash from operations and subtotal cash spent on operations.

    Embroidery Business Plan - Projected Cash Flow

     Pro Forma Cash Flow      
    Cash Received Year 1 Year 2 Year 3
    Cash from Operations
    Cash Sales $20,000 $23,000 $26,000
    Cash from Receivables $8,000 $10,000 $11,000
    SUBTOTAL CASH FROM OPERATIONS $28,000 $33,000 $37,000
    Additional Cash Received
    Sales Tax, VAT, HST/GST Received $0 $0 $0
    New Current Borrowing $0 $0 $0
    New Other Liabilities (interest-free) $0 $0 $0
    New Long-term Liabilities $0 $0 $0
    Sales of Other Current Assets $0 $0 $0
    Sales of Long-term Assets $0 $0 $0
    New Investment Received $0 $0 $0
    SUBTOTAL CASH RECEIVED $28,000 $33,000 $37,000
    Expenditures Year 1 Year 2 Year 3
    Expenditures from Operations
    Cash Spending $20,000 $22,000 $24,000
    Bill Payments $10,000 $14,000 $16,000
    SUBTOTAL SPENT ON OPERATIONS $30,000 $36,000 $40,000
    Additional Cash Spent
    Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
    Principal Repayment of Current Borrowing $0 $0 $0
    Other Liabilities Principal Repayment $0 $0 $0
    Long-term Liabilities Principal Repayment $0 $0 $0
    Purchase Other Current Assets $0 $0 $0
    Purchase Long-term Assets $0 $0 $0
    Dividends $0 $0 $0
    SUBTOTAL CASH SPENT $30,000 $36,000 $40,000
    Net Cash Flow $8,000 $10,000 $12,000
    Cash Balance $15,000 $18,000 $21,000

    8.5 Projected Balance Sheet

    Below is a Projected Balance Sheet for Randora Designers that shows assets, liabilities, capital, long term assets and current liabilities.

     Pro Forma Balance Sheet      
    Assets Year 1 Year 2 Year 3
    Current Assets
    Cash $100,000 $110,000 $120,000
    Accounts Receivable $20,000 $22,000 $25,000
    Inventory $5,000 $8,000 $11,000
    Other Current Assets $4,000 $8,000 $12,000
    TOTAL CURRENT ASSETS $129,000 $148,000 $168,000
    Long-term Assets
    Long-term Assets $8,000 $11,000 $14,000
    Accumulated Depreciation $12,000 $15,000 $18,000
    TOTAL LONG-TERM ASSETS $5,000 $3,000 $1,000
    TOTAL ASSETS $154,000 $177,000 $201,000
    Liabilities and Capital Year 1 Year 2 Year 3
    Current Liabilities
    Accounts Payable $10,000 $12,000 $14,000
    Current Borrowing $0 $0 $0
    Other Current Liabilities $0 $0 $0
    SUBTOTAL CURRENT LIABILITIES $10,000 $12,000 $14,000
    Long-term Liabilities $0 $0 $0
    TOTAL LIABILITIES $12,000 $14,000 $16,000
    Paid-in Capital $30,000 $30,000 $30,000
    Retained Earnings $50,000 $55,000 $60,000
    Earnings $120,000 $130,000 $140,000
    TOTAL CAPITAL $140,000 $150,000 $160,000
    TOTAL LIABILITIES AND CAPITAL $150,000 $160,000 $170,000
    Net Worth $180,000 $200,000 $210,000

    8.6 Business Ratios

    The following is the Ratio Analysis, Business Ratios and Business Net Worth for Randora Designers.

     Ratio Analysis        
    Year 1 Year 2 Year 3 INDUSTRY PROFILE
    Sales Growth 10.00% 24.00% 60.00% 6.00%
    Percent of Total Assets
    Accounts Receivable 8.00% 6.00% 3.00% 14.00%
    Inventory 6.00% 4.10% 2.30% 15.00%
    Other Current Assets 5.00% 3.50% 2.00% 35.00%
    Total Current Assets 95.00% 105.00% 130.00% 60.00%
    Long-term Assets -6.00% -12.00% -18.00% 35.50%
    TOTAL ASSETS 100.00% 100.00% 100.00% 100.00%
    Current Liabilities 7.00% 5.00% 3.00% 30.00%
    Long-term Liabilities 0.00% 0.00% 0.00% 25.00%
    Total Liabilities 7.20% 3.00% 4.40% 40.00%
    NET WORTH 90.00% 85.00% 120.00% 30.00%
    Percent of Sales
    Sales 100.00% 100.00% 100.00% 100.00%
    Gross Margin 70.00% 72.00% 74.00% 0.00%
    Selling, General & Administrative Expenses 60.00% 75.00% 62.00% 50.00%
    Advertising Expenses 3.00% 2.00% 0.50% 5.00%
    Profit Before Interest and Taxes 22.00% 25.00% 28.40% 3.00%
    Main Ratios
    Current 16 20 24 2.6
    Quick 30 33 36 5.5
    Total Debt to Total Assets 6.00% 3.00% 2.40% 45.00%
    Pre-tax Return on Net Worth 90.00% 95.00% 100.00% 3.40%
    Pre-tax Return on Assets 45.00% 65.00% 55.00% 9.00%
    Additional Ratios Year 1 Year 2 Year 3
    Net Profit Margin 12.00% 17.00% 22.00% N.A.
    Return on Equity 60.00% 64.00% 68.00% N.A.
    Activity Ratios
    Accounts Receivable Turnover 6 8 10 N.A.
    Collection Days 100 110 120 N.A.
    Inventory Turnover 20 23 25 N.A.
    Accounts Payable Turnover 15 18 21 N.A.
    Payment Days 23 23 23 N.A.
    Total Asset Turnover 3.4 2.4 1.2 N.A.
    Debt Ratios
    Debt to Net Worth 0 -0.08 -0.06 N.A.
    Current Liab. to Liab. 0 0 0 N.A.
    Liquidity Ratios
    Net Working Capital $300,000 $320,000 $340,000 N.A.
    Interest Coverage 0 0 0 N.A.
    Additional Ratios
    Assets to Sales 2.45 1.48 0.65 N.A.
    Current Debt/Total Assets 8% 6% 4% N.A.
    Acid Test 32 35 38 N.A.
    Sales/Net Worth 3.4 2.6 1.8 N.A.
    Dividend Payout 0 0 0 N.A.

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