In the first post of this series, we identified the three categories every fashion business spends money on: direct materials, direct labor, and overhead. In the second post, we used those categories to calculate the cost of production for a single outfit. We used a simple method for overhead: total monthly overhead divided by total outfits per month.
That method works as a starting point. But if you make different types of outfits, some simple and some complex, dividing overhead equally across all of them does not tell the full story. A quick alteration and a fully beaded aso-oke outfit do not use the same amount of time, electricity, or machine wear. Treating them the same means one is subsidizing the other.
This post goes deeper. We will cover how to identify every overhead cost in your business, how to total them accurately, and how to allocate them to each outfit in a way that reflects the real resources that outfit consumed.
What Overhead Actually Means
Overhead is every cost you pay to keep your business running that you cannot tie directly to one specific outfit or order. You pay these costs whether you complete five outfits this month or fifty.
If you buy three yards of ankara for a customer's dress, that cost belongs to that dress. It is a direct material cost. But the electricity that powers your sewing machine, the rent for your shop, the cost of maintaining your pressing iron — those serve your whole business. They are overhead.
The challenge is not understanding what overhead is. Most tailors and fashion designers already know they pay rent and electricity. The challenge is making sure every outfit carries its fair share of those costs. If your overhead is not factored into your prices, your profit shrinks on every order, even the ones that seem profitable.
Step 1: List Every Overhead Cost in Your Business
Before you can allocate overhead, you need a complete picture of what you are actually spending. Go through your expenses over the past three months and pull out every cost that is not a direct material or direct labor cost for a specific outfit.
Here are the most common overhead costs in a tailoring or fashion business:
Rent or workspace costs. Whether you have a dedicated shop, share a space, or work from home, there is a cost associated with the space you use for production. If you work from home, estimate the portion of your rent or mortgage that your workspace occupies.
Electricity and utilities. This covers power for your machines, lighting, fans or air conditioning, and any other utility you pay for. If you use a generator, include the cost of fuel and maintenance.
Equipment depreciation. Your sewing machines, overlock machines, pressing irons, cutting tables, and embroidery machines lose value over time. Even if you paid for them outright, you should account for their replacement cost. A simple approach: take the purchase price, divide it by the number of years you expect to use it, then divide by 12 to get a monthly cost.
Machine maintenance and repairs. Servicing your machines, replacing needles and bobbins, fixing breakdowns. These costs are irregular, so average them over several months.
General workshop supplies. Chalk, pins, pattern paper, tape measures, scissors sharpening, and other small items that serve your whole production, not just one outfit.
Transport and delivery. If you spend money on transport for fabric sourcing runs, fittings, or deliveries and those costs are not billed to specific clients, they are overhead.
Phone, data, and communication. Calls and data you use to communicate with clients, suppliers, and apprentices about business matters.
Software and subscriptions. Any business tools you pay for monthly, including design software, business management apps, or accounting tools.
Insurance. If you carry any form of business insurance, include it.
Cleaning and upkeep. Keeping your workspace clean and presentable is a running cost that benefits your entire operation.
Take your time with this list. Most businesses undercount their overhead because some of these costs feel small or get paid in cash without being recorded. The total is almost always higher than you expect.
Step 2: Calculate Your Total Monthly Overhead
Once you have your list, assign a monthly amount to each item. For costs you pay quarterly or annually, divide them down to a monthly figure. For irregular costs like repairs, take an average over the past three to six months.
Here is what this might look like for a small bespoke tailoring business:
Rent: ₦80,000
Electricity and generator fuel: ₦35,000
Equipment depreciation: ₦12,000
Maintenance and repairs: ₦8,000
Workshop supplies: ₦5,000
Transport: ₦10,000
Phone and data: ₦5,000
Software subscriptions: ₦3,000
Cleaning: ₦2,000
Total monthly overhead: ₦160,000
This number is your overhead pool. Every outfit you produce this month needs to absorb a portion of it.
Step 3: Choose an Allocation Method
This is where most fashion businesses stop. They either skip overhead entirely or split it evenly. Both approaches leave money on the table or quietly eat into profit on your most complex work.
There are three practical allocation methods. The right one depends on how varied your work is.
Method 1: Per-Outfit (Equal Split)
Total monthly overhead ÷ number of outfits completed per month.
Using our example: ₦160,000 ÷ 15 outfits = ₦10,667 per outfit.
When to use it: When most of your outfits take roughly the same time and effort. For example, if you mostly produce similar ready-to-wear pieces or your bespoke orders are consistently similar in complexity.
Limitation: If you mix simple alterations with heavily detailed outfits, the simple ones end up carrying the same overhead as the complex ones. That overprices your easy work and underprices your hard work.
Method 2: Labor-Hour Based
Total monthly overhead ÷ total labor hours worked per month = overhead rate per hour. Then multiply that rate by the number of hours each outfit takes.
Example: Your total labor hours this month are 200. Your overhead is ₦160,000.
Overhead rate = ₦160,000 ÷ 200 hours = ₦800 per hour.
A simple outfit that takes 4 hours gets ₦3,200 in overhead. A complex outfit that takes 20 hours gets ₦16,000 in overhead. Each outfit pays for what it actually uses.
When to use it: When your outfits vary significantly in complexity and time. This is the most practical method for bespoke tailors who handle everything from basic styles to heavily detailed ceremonial outfits.
What it requires: You need to track how many hours each outfit takes, at least approximately. If you are not doing this yet, start by estimating for the types of outfits you make most often. You will get more accurate over time.
Method 3: Complexity Tiers
If tracking individual hours feels like too much, you can group your outfits into tiers based on how much work they typically require, then assign overhead weights to each tier.
For example, you might define three tiers:
Simple (basic styles, minimal detailing, under 5 hours) — weight: 1
Standard (moderate complexity, some handwork, 5–12 hours) — weight: 2
Premium (highly detailed, beading, embroidery, multiple fittings, 12+ hours) — weight: 4
Say you complete 8 Simple outfits, 5 Standard outfits, and 2 Premium outfits in a month.
Total weighted units: (8 × 1) + (5 × 2) + (2 × 4) = 8 + 10 + 8 = 26 units.
Overhead per unit: ₦160,000 ÷ 26 = ₦6,154 per unit.
Each Simple outfit absorbs ₦6,154. Each Standard outfit absorbs ₦12,308. Each Premium outfit absorbs ₦24,616.
When to use it: When you want more accuracy than a flat split but do not want to track hours per outfit. This is a good middle ground, especially if you can clearly group your work into two or three levels of complexity.
Worked Example: Bespoke Tailor with Mixed Orders
Let us walk through a realistic scenario using the labor-hour method.
Aisha runs a bespoke tailoring business from a rented shop. She has one assistant. Her monthly overhead totals ₦160,000. She and her assistant together work about 200 production hours per month.
Her overhead rate: ₦160,000 ÷ 200 = ₦800 per hour.
This month she has three orders:
Order A: Simple kaftan. Takes about 5 hours. Overhead allocation: 5 × ₦800 = ₦4,000.
Order B: Two-piece senator suit with embroidery. Takes about 14 hours. Overhead allocation: 14 × ₦800 = ₦11,200.
Order C: Fully beaded bridal aso-oke set. Takes about 30 hours. Overhead allocation: 30 × ₦800 = ₦24,000.
If Aisha had used the flat per-outfit method instead, each order would carry ₦10,667 in overhead. The kaftan would be overcharged by about ₦6,600. The bridal set would be undercharged by about ₦13,300. Over months, that kind of gap adds up.
Common Mistakes with Overhead
Ignoring overhead entirely. Some businesses calculate material costs and labor, then treat overhead as something that "just gets covered" by the markup. It often does not. When your markup is not based on real overhead numbers, you are relying on luck.
Forgetting irregular costs. Machine repairs, annual subscriptions, and seasonal changes in electricity bills are easy to miss. Average them over several months so your overhead number stays stable.
Not updating your numbers. If your rent goes up or you add a new machine, your overhead changes. Review your overhead total at least once a quarter to keep your pricing accurate.
Using one method for a business that needs another. If you produce only one type of outfit, the flat split works fine. If your work varies widely, the flat split hides the real cost differences. Be honest about what kind of business you run and choose accordingly.
How to Put This into Practice
You do not need to get this perfect on day one. Start with these steps:
1. Write down every overhead cost you pay. Use the list in this post as your checklist. Go through bank transfers, cash payments, and receipts. Be thorough.
2. Total them into a monthly number. Convert everything to a monthly amount. This is your overhead pool.
3. Pick the allocation method that fits your business. If your work is fairly uniform, use the per-outfit method. If complexity varies, use labor hours or complexity tiers.
4. Apply the overhead figure to your next pricing decision. When you calculate the cost of production for your next order, include the overhead allocation. Then set your price from there. You will immediately see whether your current prices are covering your real costs.
5. Review quarterly. Overhead is not static. Rent increases, a new machine, seasonal electricity changes — these all shift your numbers. A quick quarterly check keeps your pricing grounded in reality.
What Comes Next in This Series
With this post, you now have a complete foundation for understanding your costs: what your cost elements are, how to calculate your cost of production, and how to determine and allocate your overhead.
The next step is pricing. Knowing your costs tells you the floor — the minimum you need to charge to avoid losing money. But pricing is about more than covering costs. In the next cluster of posts, we will cover how to set prices for bespoke and ready-to-wear work, the most common pricing methods, and how to choose the right approach for your business.
Track Your Costs and Expenses in One Place
Knowing your overhead starts with recording your expenses consistently. If your costs are scattered across receipts, bank alerts, and memory, it is hard to total anything with confidence.
Seampal helps you track expenses, payments, and orders in one place so you always know what your business is spending and where the money is going. When it is time to calculate your overhead, the numbers are already there.