Today I will be looking at a business that is riding the natural hair trend: satin products aimed at hair. This business manufactures, wholesales or retails satin bonnets, pillowcases, scarves, scrunchies and car headrest covers basically anything that comes into contact with hair.
All you need to start this business is a sewing machine and a supplier of satin (of which there are a dime a dozen in SA). You can also buy wholesale from a manufacturer and resell.
What does satin do to hair?
Satin (or even silk, but satin is cheaper), prevents split ends, “protects your hair from the dryness caused by friction between your hair and moisture-absorbing materials such as cotton. This also helps to greatly reduce breakage, tangles and thinning.”
People sell these products at a premium, which is essentially satin sewn into very simple products. Let me give you an example. A satin pillowcase cost around R80. A pillowcase that can be made with a R20 piece of material. It will take around ten minutes to make a pillowcase. Less if you experienced, more if you are not so experienced.
Look at a scrunchie. How much material is in there? You can probably use offcuts from a factory floor to make it.
This is an excellent example of a one-person business that you can start using consumer-level equipment. A R1500 sewing machine will get the job done with skills that can be learnt from YouTube. This pillowcase was made on the first attempt after only having a sewing machine for a few weeks:
And even for manufacturers the maths is straightforward: {material cost} + {time/labour}. Let’s look at the pillowcase example. R20 worth of material + 10 minutes. Let’s say you can make 5 per hour.
Wait, no, let’s take a different route, instead of assuming how much someone can make in an hour (capacity) let’s work on a variable number. If we look at a simple supply chain: Supply of raw materials (satin or silk in this case) this will be the fabric store in this example, Manufacturer (the person sewing with the sewing machine), Wholesaler > Retailer > Consumer.
The “traditional” manufacturer role is to manufacture and then either sell in bulk to a distributor or a wholesaler. So they will sell 10 / 100 / 1000 in a case/crate/box to people who will then sell it to the retailer who will, in turn, sell it in single units to the consumer.
If you are a small business that manufactures anything before you determine your target market whether wholesale (B2B) or selling directly (retail) to consumer (B2C) you have to first determine your capacity. A large business can afford to sell in wholesale because they have economies of scale. And if you can manufacture 5 per hour then maybe you can also sell to wholesale buyers, but what if it takes you 30 minutes (only two per hour) to make a pillowcase. What them? Then you would be better off selling directly to the consumer. Let’s do the maths based on a material cost of R20 per pillowcase (which can be more or less).
A quick note:
I am using (raw) material cost in my calculations below. This excludes time/labour and utilities (how much electricity you used to make your products). With the exception of time/labour, you will have few other costs, I can’t think of any indirect materials right now (unless you wash the satin before use which will need soap powder), the sewing thread is cheap and sewing machines do not have a high power consumption. So even if you were to calculate the cost of sales and factor in all of these costs I think they will be negligible with the exception of your labour which I cover on its own.
Manufacturer selling wholesale to a retailer (manufacturer and retailer share profit 50/50).
Sales: R80. Material cost: R20. Profit: R60. Manufacturer profit R30. Retailer profit: R30.
This means that the manufacturer has sales of R50 and material cost of R20 and makes a R30 profit per pillowcase. The profit margin, in this case, is 60% and the markup is 150%.
This manufacturer can make 5 pillowcases per hour. Profit per hour: R150. R150 x 8 hours is R1200. Not bad at all.
In the above scenario, the wholesale buyer has a cost of R50 per pillowcase and sales of R80 per pillowcase. Meaning a profit of R30 per pillowcase (37.5% margin or 60% markup). But let’s say your wholesale buyer wants more meat on the bone. They want 50% margin and 100% markup (buy for R40 sell for R80).
This means the manufacturer has to sell at R40 a pillowcase and only make R20 profit per pillowcase. If they can make 5 pillowcases an hour (R100) for 8 hours a day (R800 profit), that is still fine, it’s still more than what experienced machinists earn in SA’s textile industry.
But now it comes to why I said, let’s take a different route, a route that is based on the capacity of the manufacturer because not everyone can make 5 pillowcases per hour. Let’s say you can only make 2 pillowcases an hour, can you sell wholesale to a buyer that wants to make a 100% markup? No, it’s not really worthwhile because then you are only making R40 an hour (R20x2) or R320 a day (R40x8 hours). I don’t know how many people want to sit in front of a sewing machine for 8 hours a day and only make R320. I personally would if it’s all I had and as a means to an end.
But if you can only manufacture two an hour and sell it directly (retail) to the consumer for R80 a pillowcase. You are making R60 profit per pillowcase and R120 profit an hour. Providing you can find buyers of course. In this scenario, you are better off selling directly to the consumer because in order to make R320 profit a day you only need to work 5.33 hours, which is around 5 hours and 20 minutes. Still exhausting work if you not very experienced. But that is only for pillowcases maybe the other products will be less work have even better margins.
Labour: Time is money
Assuming the business owner is the manufacturer it is very important you factor in your time/labour fees. The margins look really good but sewing is time-consuming and you can only make so many items in a day. I did not include it in the calculations above as everybody’s time is worth something different.
I also did not include time/labour in calculations for the simple fact that you can outsource the labour, you can take the material to an experienced machinist and she can probably sew it together in five minutes. And then you pay for each pillowcase she sews for you. Even if you pay her R10 each there is still enough for you as your cost will be R30. In a place like the Cape Flats where most machinists are either unemployed or working minimum wage (due to Chinese imports) R10 a pillowcase is a lot of money for a few minutes work. If you can find a machinist that already works with satin and has some offcut pieces you can then still pay R20 a pillow and both win.
Where to sell
In a product business, regardless of the target market, you need both a place to sell your product (sales channel) and a way to let people know about your product (marketing/advertising).
In business, and in your business plan you will have both a sales channel(s) and a marketing (which includes advertising) plan.
A sales channel is where you sell your goods, and a marketing plan is how you will let’s say publicise your product. I will just use some simple examples:
To use a few examples:
Online model. Sales channel: website. Marketing/advertising (how to get people to your sales channel) PPC Google Ads. Here the goal is to capture intent, you set your ads to show when someone types “satin pillowcase” in Google sending them directly to your sales channel where they can buy the pillowcase.
Home model. Sales channel: house. Marketing/advertising: Gumtree, Facebook Marketplace. This is a local cottage industry advertising model if you don’t have an advertising budget.
B2B Model (to get wholesale buyers). Here you adopt a more exposure oriented marketing plan such as paying or sponsoring social media influencers. Link to your social media accounts with “agents wanted”. The goal is to get a wholesale buyer to enquire about buying your satin pillowcases wholesale so they can then resell it at a profit.
Bringing it all together
Let me just say that projections are bullshit and that there is no way to predict the future especially in a startup with zero trading history. But that does not mean that you should not use them for goal purposes, the same way a larger business will use KPI’s. If you need to make R10k a month just to keep the wolf from the door, you have to look at your ability/capacity then you look at your sales channels and marketing plan and ask yourself: can my business plan: model, target market, sales channels and marketing plan achieve that R10k per month goal. So if you working weekdays, you need to make R2500 a week, R500 a day, R62.50 an hour if you working 8 hours a day. With your goal in mind, you can adapt accordingly: you can work more hours a day in fewer days or more days with fewer hours a day and still reach your goal. Or you can work more hours and more days and make more money not just to survive but thrive.
We’ve almost covered an entire lean business plan in 1700 words.
- You know what this business does
- You know what problem it solves
- You know how to solve the problem
- You still need to know your competition, who they are and what they doing (what they are charging, where they are advertising and selling)
If you’ve read between the lines you would have picked up a tip to differentiate yourself from the competition by adopting a premium strategy and sell a natural fibre (silk) rather than “cheap” synthetic weave (satin). - You know who your target market is
- You know the financials (cost of sales), and what to factor in
- You know operations: what you need (skills, materials and equipment). You should know how to start, run and grow this business, as I have mentioned various different products to diversify into.
- You know you need a place to sell
- You know a way to market and advertise
- You know more or less how much you need to start.
