Textile Business Profit Margin | Guide for Startups
Textile Business Profit Margin:2–4 percent.
However, it depends on some variable factors like raw material costs.
The profit margin in textile business depends entirely on the following:
- Business Model
- Supply chain
- Target Market
Overview of Textile Business in India
- Investment: Rs. 25 Lacs (minimum)
- Area Required: 1000 sq. ft. to 3000 sq. ft. (minimum)
- Human Resource: 15–35 skilled people (initially)
- Textile Business Profit Margin: 2% — 3% (manufacturing) and more than 50% in Retail and Export.
- Estimated Earnings: Rs. 10 Lacs to Rs. 15 Lacs* per 25 Lac Invested
Earnings totally depend on your business model, market, strategy and product-market fit.
Types of Textile Products and their Profit Margin
- Apparel
Profit Margin: 40% — 50%
The domestic apparel industry in India contributes 2% to the country’s GDP and 7% to the industry output.
Moreover, the market value that the apparel industry holds is 80 billion US Dollars in 2021. That is expected to double by 2026.
For starting a textile business, you must have good knowledge of fashion and fast-changing global trends.
- Home Textiles
Profit Margin: 10% — 50%
The margin in the home textile industry majorly depends on where you are selling your finished goods and your production cost.
For example, if you are selling your products to a retail store, you will probably get a lesser profit than exporting them.
Also, you will have to spend a good amount on preparing the samples as well.
Because if the samples are not of good quality, you will rarely get any orders.
Home textile basically includes bedding, curtains, sleeping bags, home furnishing fabrics, blankets, pillows and pillow covers, cushion and cushion covers, carpets, rugs etc.
- Automotive Textile
Profit Margin: 4% — 5%
Automotive textile products basically include fibres or any fabric used in the production of automobiles. Such as, seat covers, carpets, door and roof liners.
Apart from these, the textile industry is very vast and has a variety of options for you to choose from.
Suppose, you have a good financial backup in crores, go for large-scale manufacturing.
On the other hand, if you are entering the industry with Rs. 50 Lacs minimum, choose the apparel industry.
But, if you are skilled at marketing, start your own brand.
The main Textile hubs in India are Gujarat, Rajasthan etc. Here’s an illustration of the textile market of India.
Expected Gross Profit in Textile Business
The expected gross profit in the textile business is around 35%.
However, after deducting the land cost, labour, electricity, machines, maintenance, inventory and taxes, the net profit remains at 15%.
The actual profit will depend on several factors, such as:
- Investment
- Expenses
- Operational Cost
- Salaries and Wages
- Logistics Cost
- Sales
- Unforeseen Factors
Generally, the most profit you will earn is from exporting the textile globally. For this purpose, you will also have to apply for IEC Code.
You can apply for IEC registration if you are any of the following:
- Private Limited Company Registration Online
- One Person Company
- LLP
- Sole Proprietor
- Partnership
Investment
The one thing that determines your investment will be the scale of production.
A large-scale textile factory would need larger machines and require more labour, raw materials, power and other inputs.
The minimum investment on the basis of scale is as follows:
- Rs. 25 Lacs (for Small Scale Business)
- Rs. 50 Lacs to 5 Crores (for Medium Scale Business)
- Rs. 5 Crores to Rs. 10 Crores (for Large Scale Business)
Here’s a tip: when you decide on the scale and choose the minimum investment amount, do not forget to secure some extra funds.
For example, you go with a minimum investment of Rs. 25 Lacs to start a textile business on a small scale. In this case, secure some extra funding of around Rs. 10–15 Lacs and keep them as emergency funding.
In case you do not do well in the first years as expected, you need to make sure to stay in business for at least 1000 days.
“No business blooms on its first day”.
When we are talking about investment, you might also be thinking about where you can get the investment from.
For this purpose, here are some sources of funds you can go for when starting a textile business in India:
- Bank Loan
- Venture Capital
- Angel Investors
- Partnership Funding
- Borrowing from friends or family
- Self-Funding
- Loan on Property
- Government Funding (The Indian Government also supports the textile industry with various funding schemes)
Area
The minimum area required to start a textile business in India on a small scale is a minimum of 1000 sq. ft.
However, for a retail textile business, the area required is around 700–800 sq. ft in a prime location.
You can either go for renting or buying the place. The choice will depend on your budget and your future planning.
However, as a retail store, it is beneficial if you for renting a place initially.
The reason is you can easily analyse if you are getting expected footfall in your current location.
If it does not happen, you can easily switch your store location.
You can find the properties with the help of your local broker or on 99acres.
Human Resource
For setting up a textile manufacturing unit, you will initially require at least 10–20 people, such as:
- Accountant
- Marketing Agent
- Cloth Inspector
- Colourist
- Designer
- Machine Operators
- Technicians
- Market Analyst
- Purchasing Agent
- Quality Inspector
- Warehouse Workers
- Purchasing Specialists
- Stylists
- Logistics Coordinator
- Security Guards
- Sales Representative and Manager etc.
On the other hand, in a retail store, you will require the following people:
- Merchandise Manager
- Store Manager
- Sales Representative
- Security
- Checkout Manager
You will need to invest around 3–4 Lacs per month on human resources in the manufacturing unit.
However, the expense on human resources in a retail store will be around Rs. 1 Lac per month.
