Authored by Áslaug Magnúsdóttir and can also be found here: http://is.gd/rPSJ1G
This is the sixth in a series of articles on the Business of Fashion basics, and is taken from the business of fashion website. Originally published in 2007, this series is used to educate those interested in going into the business of the fashion industry. NosaFashions claims no copyright to this material and is used strictly for educational purposes.
The Basics is BoF’s recurring series on how to set up a fashion business from scratch, developed in partnership with Ari Bloom, a NYC-based strategic advisor to growth brands. Thus far, we have examined how to develop a successful brand and product offering. Today, we dig into the critical prospect of selling your proposition to the market.
LONDON, United Kingdom -- In recent years, the sales landscape has changed dramatically. No longer are brands limited to wholesale and bricks-and-mortar retail channels. Today, brands sell across multiple channels, including online retailers and their own e-commerce. Each channel has its pluses and minuses, of course. And each requires different toolsets to succeed. Here, we focus on how to navigate the wholesale and direct-to-consumer sales channels.
NAVIGATING THE WHOLESALE CHANNEL
For emerging fashion brands with limited resources, the wholesale channel is usually a logical starting point, as it requires less upfront investment in infrastructure and greatly reduces the financial risk associated with production and manufacturing costs. It’s also a good way to test response to a product or collection. And with purchase orders from retailers in hand, fashion businesses can more easily gain access to capital (whether debt or equity) that can help to finance the production of goods which may not return cash to the business for months to come.
Given that most small brands have limited industry awareness and contacts, building a wholesale business often involves hiring an experienced in-house salesperson or working with an external showroom. This person, or agency, will generally leverage their networks and relationships to make sure you get appointments with the right buyers, present your product effectively and, ultimately, secure orders.
No matter what you decide, make sure you do your research and get lots of referrals. Don’t be afraid to talk to existing clients. Your wholesale representative, whether in-house or outsourced, will ultimately be speaking for your brand, so make sure the fit is right. And even if you are not driving sales yourself, stay close to the wholesale process as it’s key to understanding how your collections are received and what can be done to improve them.
Avoid consignment at all cost. While most sales are just that — meaning the account actually buys the product from you — some accounts will only consign the merchandise. This means you still own the goods until they are sold, at which point you will split the revenues with your host. If the product doesn’t sell, you carry the entire burden of the upfront costs. Beware, consignment deals can put an emerging brand at great financial risk.
GENERATING DEMAND VIA FASHION SHOWS & TRADE EVENTS
With a sales team in place, you will be able to take part in the various markets and sales-related events that occur on a regular basis around the world. While they can make a big, short-term splash, fashion shows and presentations can be a big expense for emerging designers and are sometimes hard to justify, given the limited resulting sales uplift. Remember, aside from venue fees, there are additional costs to consider, such as stylists, models, hair and makeup artists and production. Taken together, these costs can often reach well into six figures, even for seemingly small productions.
Before you decide to invest in a show, consider the audience you are trying to reach and what you will reasonably gain in press, credibility, and, ultimately, sales. Don’t be afraid to seek out low cost or subsidised venues and other options. Endorsements and sponsorships can also be an effective way to offset these costs. And remember, not every designer needs to stage a fashion show. Wait until you have a clear message you want to send.
There is nothing wrong with selling your collection from a clothes rail. In fact, it can be the most personal way to introduce your brand to potential buyers. Trade shows can be a great way to get in front of multiple retail accounts and really focus on selling. There are many options, so it’s important to study the attendees, as each show attracts a different crowd. Remember, all show booths are not created equal. Make sure you fight for a good location, as being stuck in an untrafficked corner can have a material impact on sales. If you are a show regular, keeping a consistent location can also be very helpful, as your accounts may more easily find you, especially at the larger shows. In any venue, lookbooks and line sheets are a nice selling and marketing tool. But these can be extremely expensive to produce. So, think creatively, consider putting the file on a branded flashdrive or referring buyers to your website.
An alternative to wholesale is the direct-to-consumer channel, including physical retail, e-commerce, pop-up stores and trunk shows. From both a financial and branding perspective, there are many benefits to this channel. First, the economics can be great. As you are selling directly to end consumers, presumably at the same retail pricing as your wholesale accounts, your gross margin (or profit on each product) is generally much higher than what you would achieve through wholesale where you share the retail margin with your partner. For example, if you produce an item for $20, you might wholesale it for $40, for a profit of $20. However, that same item is probably going to be sold to a consumer at a price that starts somewhere around $100, capturing an additional $60 in profit. When you sell direct-to-consumer, you have the opportunity to own the entire profit potential, or $80 in this case. A clear benefit.
Operating a physical storefront or online store also allows you to control the entire shopping experience, interact directly with your customer and communicate the very purest form of your brand. Of course, retail businesses, whether online or brick-and-mortar, require significant upfront investments and human resources. What’s more, the entire inventory risk rests with you. If the product doesn’t sell, you’re the one holding it come the end of the season and will have to find a way of liquidating it, which is not good for either your business or your brand.
Nevertheless, at a certain point, most fashion labels will need to invest in retail or e-commerce in order to grow commercially and showcase their entire product offering, which wholesalers will never be able to do as well. A successful retail or e-commerce venture can sometimes return the capital invested in its setup in as little as one year and provide a robust profit centre for years to come.
What’s more, a great retail presence can also be the strongest selling tool for driving wholesale, or serve as a prototype model for shop-in-shops and international licensing. (We will delve deeper into retail and e-commerce in a future installment of this series.)
THE IMPORTANCE OF SALES DATA AND ANALYTICS
Whichever channel you choose to focus on first, make sure you have access to quality data so you can track your progress. Sales results are the most important form of feedback, so understanding what has (and hasn’t) worked will be critical to your ability to adapt your offering to meet market needs.
You should generate wholesale recaps on a seasonal basis. Together, you and your sales team must be clear on what your accounts are looking for, how much product you need to produce, target price points and what competitor brands you may sit next to.
As for direct-to-consumer, having visibility of daily sales results, and especially insight into the styles and products that are selling well, will enable you to replenish winning styles and adapt them for future seasons.
Sales are the core of any fashion business. You can have great product and excellent visibility, but without underlying sales your business can never work. As painful and painstaking as it can be, a successful sales strategy requires your close attention, so don’t leave it entirely to someone else.
Next Time: Sales
Ari Bloom has worked with numerous fashion brands as a consultant and as a mentor to the CFDA fashion incubator program. He collaborated with Imran Amed to continue The Business of Fashion Basics series.
Authored by Áslaug Magnúsdóttir and can also be found here: http://is.gd/BC6CPD
This is the fifth in a series of articles on the Business of Fashion basics, and is taken from the business of fashion website. Originally published in 2007, this series is used to educate those interested in going into the business of the fashion industry. NosaFashions claims no copyright to this material and is used strictly for educational purposes.
Today, BoF resumes its longstanding ‘Basics’ series on how to set up a fashion business from scratch, collaborating with Ari Bloom, a NYC based strategic advisor to growth brands. In this instalment, we examine how an informed design and development process can further your chances of commercial success.
LONDON, United Kingdom -- It’s no secret that the fashion industry is driven by design. Creating beautiful, unique products is not just an important component of fashion, it’s the very lifeblood of the sector.
But when we think of design, we often focus on the creative side alone. This is no doubt important. But it’s also critical to consider market feedback that may influence how you present your product. Everything you create produces a reaction, positive or negative. And the most successful business people tirelessly look for these signals, embrace their genuine meaning, and then react. Structured cost analysis, collection planning and smart presentation are also essential.
Here are six things you can do to make your design process more effective — and profitable..
1. Pore over your sales results each season
If you are already selling product, you should have excellent access to very valuable sales data. Use it. Read the reports generated by your store or website and ask your stockists for sales summaries. The information is generally available, you just have to ask for it.
Important metrics to focus on are: unit sales, total volume, sell through percent, net gross margin, net average retail price and returns. A quick note on the all-important sell-through, however. Sell-through is only a function of the success a product achieves related to how you or your buyers purchased it. So, while this is an important measure, it can exclude some important contextual information that should always be considered, as well. A good buy from the same collection can significantly lift sell-throughs.
You should also spend time with your buyers and retail partners to add qualitative colour to the quantitative data you get from the reports. Ask them about specific styles. Why did they or didn’t they work? What might they do differently? What did you miss in your offering?
2. Talk to floor associates and check out the competition
Fashion is not a desk job. Get out there and see the state of the world for yourself. While buyers and company executives will give you good intelligence, the sales associates who work on the front lines can also be valuable in painting a vivid picture of how your product performs on the shop floor.
Initiate these relationships as often as possible and encourage the associates to speak candidly about what is and isn’t working, and what’s missing. As an added bonus, you may be pleasantly surprised by the attention your product gets on the floor once an associate is better acquainted with you.
You should also spend some time observing your peers (also known as competitors). Most customers have a finite amount of money to spend on fashion and it’s important to understand what other brands competing for that same share of wallet are doing and, in particular, which types of products seem to be performing the best.
3. Gather first-hand customer feedback
There is nothing quite as valuable as a direct interaction with your customer. Reports may tell you what consumers bought, but spending quality time with them or at least watching them shop will help you to understand how and why they make purchase decisions.
You’ll also get a better handle on what they chose not to buy. This is a particularly good way to identify styling issues, in addition to fit and quality problems. The most tragic failures occur when a designer creates a beautiful product that’s poorly executed in terms of fit or quality. Without these elements, your hard work will be for naught.
So, if you are lucky enough to be selling product out of your own store, spend as much time as possible on the floor interacting with your customers. And if possible, when visiting your accounts, observe (or work!) the sales floor. Trunk shows are another great way to meet customers directly.
If you have a mailing list, you can consider reaching out directly to you customers for feedback. Posting a feedback link on your website or via social media is another quick and easy way to get more structured thoughts from your customers. You may be surprised how happy your fans will be to help you out. Sending a personal thank you note or offering a discount on the next purchase are both nice touches and good incentives for your customers to make future purchases.
4. Consider costs carefully
Make sure that you are designing and developing a product that can reasonably be produced. While that may sound like an obvious point, many talented designers create beautiful concepts that prove to be too expensive or complicated to produce at scale.
Be sure that every detail of the product is truly creating value for a customer. With a retail markup, on average, of 6 times production cost, every dollar you are adding to the cost of producing a garment will add around $6 to the final retail price.
Your products should have clear cost targets, derived from working backward from final retail pricing. Make sure to build in a realistic margin for yourself that considers not only the pure costs of production, but also other monies that you will have to spend in order to get the product into a selling environment. This includes things like duties, freight, fees, commissions, warehousing, sampling and development costs.
Keep in mind that samples are often one of the single biggest line items in the design process and can swing a seemingly profitable collection into the red.
5. Develop a collection plan
As you think about the overall size and breadth of your collection, you should identify the number of items required to fulfil your vision, but cross reference that with a reasonable assessment of what can fit in a store, on a website or into a retail account’s buy.
There are three fundamental elements to planning a balanced collection and it’s essential to keep these in mind, over the long-term development of your product assortment, as well as in each and every collection you produce. We often think about these as a collection pyramid.
The Base: Every successful fashion company rests upon the success of one or two items which form the foundation of the overall product assortment and a more predictable stream of revenue around which a real business can be built. These products don’t change dramatically from season to season and they become the staples of your product offering. Tory Burch has her Reva ballerina flats, Louis Vuitton has its leather goods and Acne has its denim. Without this kind of solid foundation, it’s difficult to build a successful business.
The Middle: In the middle are the products that you adapt and refresh each season with new colours, fabrics or prints, but the basic silhouettes remain the same. Over time, you may choose to slowly adapt these products and perfect them, but in general you are using tried and tested shapes which have already been proven in the market.
The Top: At the top of your collection are the purely seasonal elements which are more about driving interest and bringing new energy to your product mix. This may be the pieces you show on the runway and which are featured in editorial. From time to time, you may have a huge commercial hit at the top part of your collection, but as it’s generally hard to predict exactly what will strike a chord (or which product your favourite A-list celebrity decides to wear), it can sometimes be hard for a small fashion business to capitalise on the short-term buzz generated by these types of products.
6. Use a stylist – smartly!
Many designers choose to employ the services of a stylist. These can be hired professionals, in-house team members or even a friend or colleague with a good eye. The most important outcome here is that you receive a second opinion on how the collection sits together best and how to present it to buyers or customers. Don’t underestimate the importance of this step, as it can greatly impact your eventual sales.
Ari Bloom has worked with numerous fashion brands as a consultant and as a mentor to the CFDA fashion incubator program. He collaborated with Imran Amed to continue The Business of Fashion Basics series.
Authored by Imran Amed and can also be found here: http://is.gd/XRNnTX
This is the fourth in a series of articles on the Business of Fashion basics, and is taken from the business of fashion website. Originally published in 2007, this series is used to educate those interested in going into the business of the fashion industry. NosaFashions claims no copyright to this material and is used strictly for educational purposes.
So you’ve done it. You’ve cobbled together some financing from family and friends or squeezed a loan out of your bank manager. If you’re a little farther along, perhaps you have managed to raise an injection of capital that will help take your business to the next level. The question is, now what to do with your funding? And, how do you make it last?
It’s likely that you will have had to agree fund allocation to some extent with your investors prior to securing the funds, but it will be important to re-visit and re-confirm this now that you are past the negotiation stage. In reality, you will make spending decisions every single day, how ever small. The fourth part of the BoF Basics discusses the allocation of your capital, or more simply, how and where to spend your money.
The easiest way to think about allocating capital is by using a series of principles. Allocating money is about tradeoffs, and making those tradeoffs means choosing between spending on things that might seem equally important, on the surface. For example, every fashion business will have to choose how much money to spend on building and shaping a collection and how much to spend on actually selling the collection. How do you make these decisions? By using the principles below combined with the priorities for your own business. The ultimate decisions may differ from business to business.
So here they are, the 5 principles of allocating money in an early-stage fashion business:
Key Principle 1 – Carefully manage product development costs
While fashion is a product business that often comes with exacting standards, it is still important to carefully manage your product development costs. Creating large, unfocused sample collections with very expensive fabrics can be a death knell for a young fashion company. Not only will you have spent a fortune on developing a set of samples, you may have also created a collection that could never sell at retail because it would be far too expensive. Always use a collection plan to specifically identify the size, structure and price points for your collection, and select your fabrics with this in mind. This way, you won’t need to buy a bit of everything and sort things out once you are back in your studio, wasting money and time all the while.
Key principle 2 – Advertising is a cash sink
As a young designer, you probably don’t need to spend money on advertising, and the expensive photo shoots and super slick branding that come along with it. You can still craft a very strong profile by building relationships with editors, journalists, photographers and fashion insiders who take an interest in you and your work, and may help you for free. Those relationships will not only generate valuable editorial, their impact will also be felt longer than even the best-placed one-page ad in Vogue. As a young designer, you have a new and interesting story to tell and people will want to tell it too — you don’t have to pay them for this privilege. Supplement this with a professional looking website that is in tune with your creative vision and a clear brand identity that speaks to who you are creatively.
Key principle 3 – Focus on growing sales
As a growing company, you will likely be best off allocating your capital to people and assets that help increase your revenues. While you must invest time and resources into your product, brand image and identity, it is crucial that you are able to then leverage this raw potential to sell. Even if you have a strong collection and a growing brand profile, this will mean nothing if you don’t have a professional sales organisation to support it. One of the first people you should consider hiring is someone who can help you with sales. Also, investing in an e-commerce portion of your website (or through a partnership) helps you to increase both sales and profits, as you begin to capture the full-retail margin.
Key Principle 4 – Don’t forget about working capital
Not all of your funding should be invested in fixed assets like sewing machines, office furniture and computers. You will also need funding to make sure you can counterbalance the difference between the cash coming into your business (e.g. from sales, sponsorship and consultancy) and the cash going out of your business (e.g. for fabrics, rent and salaries) In a growing fashion business, the amount of working capital tends to grow quickly as payments for clothes delivered to stores are often not received until well after the designer has made significant investments in everything it takes to bring that collection into a store – a large part of this is a variable cost of fabrics and productions costs that will increase with time as your business grows.
Key principle 5 – Use a budget
It is absolutely essential that once you have thought these issues through, you create a budget to track your spending against your plan. Without this roadmap of sorts, you could lose control of spending and suddenly find yourself without enough money to keep your business afloat. You should track your budget, at the very least, on a monthly basis, which means investing in a good bookkeeper to help you regularly track your accounts.
Next time: Value Chain – Design and Development
The design and development process is often a very personal one that differs from designer to designer. It is important to keep this process free and unrestrained to unleash the best ideas, but there are also things designers can do to stay on track and manage their time (and their team’s time) efficiently. For fashion business people in particular, understanding your designer’s creative process is a crucial part of a successful creative-business partnership, and so designers must also be able to explain to others how you work, in order that they can work with you.
Authored by Áslaug Magnúsdóttir and can also be found here: http://is.gd/zyWvt6
This is the third in a series of articles on the Business of Fashion basics, and is taken from the business of fashion website. Originally published in 2007, this series is used to educate those interested in going into the business of the fashion industry. NosaFashions claims no copyright to this material and is used strictly for educational purposes.
Taking on financing is one of the most important decisions an emerging fashion company will make. This step is absolutely essential because the early stages of growth often requires significant amounts of working capital that cannot be generated by the business alone. So, unless you are independently wealthy and sitting on a pile of cash, financing decisions will be part of your critical path, early on.
What is the difference between equity and debt?
Financing can come in many forms, but it basically comes down to equity versus debt.
Equity investors (in this case, venture capitalists or angels) provide cash to invest in your company and therefore end up sharing ownership of the company with you. They invest in the hopes that your business will grow and that they will have some positive return through shared profits and upside. They may offer you resources and expertise to help drive the business further. In fact, this is much preferred to someone just giving you cash and leaving you to fend for yourself. If, however, you disagree fundamentally with your investor on where you want to take the company and how you will do it, then you may find their “help” a nuisance. Thus, when evaluating equity investors, choose someone who is aligned with your strategy and who has the industry and/or functional experience that your business needs to grow.
Debt financing, on the other hand, usually comes in the form of loans, where you are required to pay back the money you have borrowed, plus interest, using a fixed schedule of payments that can be spread out over many years. While debt providers won’t be actively involved in your day to day business, taking on debt will mean you will have an additional cash outflow that your business will have to be able to support each month to stay on good terms with your bank. If payments aren’t made regularly, you may quickly find yourself dealing with irate calls from your bank manager. In the worst case, taking on too much debt could drive your business into bankruptcy. Debtors are always paid back before profits are shared amonst the shareholders of your company.
The good news is that with your business plan in hand, you are in a good position to share your vision with potential financiers to sift through the various options and make the best decision for your company. Financiers may have advice to offer, and you should take this under consideration. But, keep in mind the need to stay true to what you originally set out to create. It is important that you believe in the strategy you pursue.
What legal precautions do you need to take?
Before sharing the nitty-gritty details of your company with anyone, you should request that they sign an NDA, or non-disclosure agreement, which legally restricts the other party from sharing your confidential company information with anyone else. Of course, you can’t control what they actually tell other people, but this is a good way of sending a message that you take your business seriously, and that there is value that needs to be protected. Often, NDA’s are reciprocal, so both parties are protected. Your lawyer will very likely have a template that you can use, with some small adjustments so that it is fit for purpose. It is customary to offer two copies for the other party to sign, so that they can also keep a copy for their files. Eventually, you may also need legal advice to ensure your interests are being protected in any subsequent financing arrangement that arises.
What are the equity and debt options available to you?
1) Venture capital – VC funds look for high-potential businesses with strong prospects for growth, often based on a core new technology or brand.
Many VC companies don’t even consider fashion as a core industry for investment, as it is a notoriously fickle place with all sorts of “fashion” risk. However, as the world has been awash investment capital lately and as the competition for traditional investment opportunities has increased, more people seem to seeing a gap in the market for investing in fashion. Initially, the money was targeted at larger investments that have seen the likes of Jil Sander, Helmut Lang, Jimmy Choo and most recently, Valentino, take on private equity. But now, new funds are being raised in London, New York and Paris to focus on earlier stage businesses:
2) Angel investors - If you’re looking to raise capital for a pure start-up businesses, Angel investors could be your best bet. “Angels” are independently wealthy individuals, often with backgrounds in entrepreneurship and business themselves. While the name might make them seem truly heavenly, angel investors can sometimes be anything but divine and this route needs to pursued with caution. Just finding angel investors (let alone convincing them to invest) can be tough.
The best thing to do is ask friends and family if they know people who might be looking to invest some cash. This will not only help you find angels, it also comes with a built-in personal reference from the person who puts you in touch. There are also networks of angel investors, like Pi Capital, The Go Big Network and The Angel Investor Network, which help to bring angels and entrepreneurs together.
When dealing with angels, it is mportant to ensure that there are clear roles defined before any investment has taken place. It is not rare to see angel investors, with the best of intentions, wreak havoc because they think they are fashion experts and end up interfering in the business. Make sure you agree what they will and will not be involved with based on a clear assessment of their skill set. Make sure you are confident you can jointly make business decisions with them. Test their response to pushback. It is better to know exactly what you are getting in advance, than taking the money and having to struggle later on.
Guy Kawasaki has some great lessons on raising angel capital on his blog, How to Change the World.
3) Banks - Bank loans are possibly the most readily available source of funding for young start-ups. a bank loan usually comes down to:
Since you won’t have much in the form of collateral to offer the bank in return for your loan, the amount the bank can give you may be relatively small compared to your overall funding need. Therefore, a bank loan strategy may not be sustainable over the longer term as it requires constantly going back to your bank and offers no guarantees that future loans will come through.
Finally, keep in mind that loans also add another cash outflow to your business. To reflect this in your plans, use your cash flow statement to establish your funding gap for the next 1-2 years, and add in the loan payments that you will have to make each month to learn how taking on the loan will impact your monthly inflows and outflows of cash.
4) Factors – Factors provide capital to businesses based on the actual orders they have received on a season by season basis. This is very useful in the fashion business as it can help to finance production for sales orders that have just been completed. Once you hand over your order book to the factors, they will take a cut of the total value themselves, and in return provide you with the cash up front while they take on the risk of collecting payments later when the goods are delivered. Factors may choose not to underwrite certain stockists which are too small or have bad credit records. One of the leading factors in the US is Hildun. Working with factors means giving away part of your revenues to the factor right from the start.
Where else can you look for more information
For more information on financing your fashion start-up, some general lessons can be learned from the US Small Business Administration website and from this case study.
Next time: How do I decide where to allocate my capital?
Once you have successfully raised your capital, you will need to think carefully about how to allocate this capital across various business needs that you have identified in your plan. You may not have raised all the money you need, so carefully prioritising key areas is important.
Authored by Áslaug Magnúsdóttir and can also be found here: http://is.gd/t5GJap
This is the second in a series of articles on the Business of Fashion basics, and is taken from the business of fashion website. Originally published in 2007, this series is used to educate those interested in going into the business of the fashion industry. NosaFashions claims no copyright to this material and is used strictly for educational purposes.
The term “business plan” is casually bandied about like a hot potato in the studios of emerging fashion designers. Everyone knows you need one, but still, so few emerging design businesses take the time upfront to properly plan for their success. I use these words intentionally. Success is very rarely accidental. Sure, we all benefit from some good luck from time to time, but real success can only come through hard work and good planning. For this, a business plan is critical.
So, what is a business plan for? Many people think that the primary purpose is to secure funding – i.e. loans from banks or cash from investors. And while this is certainly one important objective, it is not the most important one.
The truth is, the business plan is, above all else, for you: the person or people who will drive the business forward. It is the document that lays out your vision and objectives. It is your roadmap for how you think it should evolve and grow to achieve this vision. It contains the budget and projections for how your business will manage is finances and fund growth. It is the document that helps you decide what to do, and just as importantly, what not to do. It is a living, breathing document that you should use to measure your progress, while still being willing to adapt it to reflect new insights, unexpected competitive threats, and changes in your business environment. In short it is like your company bible – except that this is a bible you can adapt as you go along.
You can also think about the business plan as a tool for communication. Anyone who has set up a new business knows that when you are looking for investors, employees, suppliers, office space, banking services, professional advisors and everything else that you need, you have to tell people about your business and its aims. When you have spent the necessary time in crafting a business plan, you will be able to more clearly articulate what your business is all about. This makes you seem more professional and organised and will enable you to attract the people, support and money that your business needs to succeed. Going through the business planning process will enable you to distill your business down into a short “elevator pitch” of concise points that together provide a good understanding of your business aims in a short period of time. When people understand your business, they will know better if it is something in which they would like to be involved.
Now, if that all makes sense, what then do you need to include in a business plan? Essentially, it should address all of the constituent parts of your business starting from the broadest vision of the business right down to the most minute operational issues of job descriptions and work plans. The first thing to do is create an outline for all of the topics that need to be covered, and then for each of those topics jot down all the ideas and thoughts you already have. If you don’t have a written plan already, then it’s likely that much of your business plan is in your head and so you need to start getting your current thoughts out on paper in a structured way so that you can then go and revisit each of the topics in more detail.
A sample outline for a business plan for a fashion business might look as follows:
1. Executive Summary – This is something you do at the end, once the rest of your plan is fleshed out, It will quickly become the so-called “elevator pitch” for your company, when you need to describe it in a short interaction. It only needs to be a few paragraphs long.
2. Vision and objectives – This section describes the vision of your business — essentially, why you set it up. What specific market need are you trying to fill? Which customer are you targeting and why?
The more specific you can be about these issues, the more compelling your business plan will be. If the reader (or listener) can really understand the market need you have identified, then they will be much more likely to buy into your overall business plan.
The importance of knowing your target market cannot be overstated. Therefore, one of the first questions I always ask when meeting emerging designers is about their target market. When they provide a fluffy answer like “I design for people like me and my friends” or “A young woman with lots of money,” it usually indicates that they haven’t spent much time thinking about this critical question. And if they haven’t done so, it makes me wonder exactly who are thinking of when they are designing. If they don’t have a specific person in mind, then how do they know exactly what that person needs, and what occasions they are shopping for?
Understanding everything about your customer’s lifestyle and preferences will make your job as designer and manager all the easier. You will not only know who you are designing for, but also where they shop, what magazines they read and what influences their buying behaviour. All of this will feed into important decisions you make everyday about how you design your collections, manage your business, and promote your brand.
3. Market and competitive landscape – This section describes the market you plan to operate in. What is the size of the market and how quickly is it growing? Who are the other players in this space?
To be clear, market size you need to describe is not the size of the global market for clothing, but your estimate of the size of the specific market you have identified, in the geographies you are focusing on. Yes, this information can be hard to find, but you can take larger market size figures and estimate what share of the overall market your business is going after.
As for your competitors, the better you can describe and understand their products, their style and aesthetic, and their positioning and strategies, the better you will be able to shape your business to stand out from the pack.
In general, quickly growing markets of a good size with few competitors (or few strong competitors) are usually quite attractive. However, if you have identified a clear niche market that is currently unfilled, then that can also be very compelling.
4. Implementation plan – This section clearly describes all of the resources you will need to make your business successful. How many staff will you need in which roles? What type and size of space will you need to design and sell your collection? What outside expertise may you require to operate successfully?
An implementation plan therefore contains a detailed description of all of the operating requirements in your business including Design, Production, Sales, Marketing/PR, and Retail. You should have a detailed plan for each of these core steps including human resources, expertise, space and timing. Thinking very clearly about the various roles and responsibilities that need to be filled will ensure that you find the right people to make things happen for you. In turn, attracting the right team will also make it easier to attract funding. Most investors invest in people and teams, not just ideas.
Without an implementation plan, your business plan can lack the concreteness and specificity required to convince people you can take your vision and make it a reality.
5. Financials – This section is absolutely critical to your plan as it will identify your projections for how the business will grow, in terms of both profits and revenues, and what financing you will need to make it happen.
An income statement uses carefully thought-out projections of how your business will grow at the top-line (i.e. sales and other revenues) and will also project the costs of delivering that growth, including the team and other resources you have identified in the implementation plan. This statement will then project profit, by taking projected revenues and subtracting projected costs.
However, the income statement does not tell you how much money you will need to raise as it does not reflect the timing of cash inflows and outflows. This is where the cash flow statement comes in.
The cash flow statement is one of the most important parts of your plan as it shows the peaks and troughs of your cash situation on a monthly basis and identifies what funding you will need to make it through the troughs. You can think of the cash flow statement as a monthly account of cash coming in and cash going out. The difference between these two figures is your funding need for that month – and you are better off knowing your funding needs in advance as opposed to finding out later when your bank account is empty and suppliers are asking for payment before they release your goods. This is particularly important in the fashion business where you incur many costs up front (designing, sampling, sales efforts) before any of your revenues even come in.
If you can, you should have a trained financial or accounting professional (a friend, family member or other contact) to help you with this section. They will have the expertise to sense check your assumptions to ensure that they are sound and believable. It’s better to have their input before you take your plan out to investors who will inevitably ask you the same probing questions and who will be looking for concrete answers.
Next time: Finding the right investors and partners
Once you have a plan in place, you will then be ready to start soliciting financing. In the next instalment we will give you concrete advice on where to find the best investors and partners for your business.
Authored by Áslaug Magnúsdóttir and can also be found here: http://is.gd/yYUMVf
This is the first in a series of articles on the Business of Fashion basics, and is taken from the business of fashion website. Originally published in 2007, this series is used to educate those interested in going into the business of the fashion industry. NosaFashions claims no copyright to this material and is used strictly for educational purposes.
The Business of Fashion is getting a lot of play of late. At the recent CFDA/Fashion Fund awards in November, Marc Jacobs spoke at length about the ups and downs (and downs) of starting a new fashion business. Many young designers rush into setting up a business, attracted by the perceived glamour and fun that is associated with the fashion industry.
There are wonderful fairy tale stories of young talented designers graduating from St Martins or Parsons and then going off to achieve fame and fortune. The stories we hear less of are those that describe all of the failed companies and dashed hopes that are the cruel reality of this industry. I am glad that Marc shared his stories with some of the upcoming stars of American fashion who were in the audience, including Doo.Ri Chung, Proenza Schouler and Peter Som.
One of the most common questions I am asked by designers who have just come out of fashion school (at both the bachelor’s and master’s level) is: “Should I start my own business or should I go work for a big fashion house?”. The truth is, the right answer depends on you and your aims. In our first article on the Business of Fashion Basics, we will pose the questions that you need to ask yourself – so you can make the right decision.
The first thing to think about is “Do I really want to run a business?”
Beautiful people, fun parties, flights of creative fancy – what more is there to want from a career? Here’s a reality check: it’s not as glamorous as it sounds. Running a fashion business means that packing boxes at 2 am, steaming clothes over and over again, and pouring through receipts with an accountant will become part of your routine. You will likely spend less than 10% of your time designing, while the rest of the time you will be managing production, sending clothes to magazines, dealing with suppliers who want their money (now!), begging Anna Wintour’s assistants to grant you a meeting, managing your employees while hoping they don’t fall ill, and trying to eat and bathe in between. On top of all that, you have to worry about making enough money to declare some kind of dividend from the business for all your hard work. You will eat, live and breathe your business 24/7. If that doesn’t turn you off, then keep reading.
Starting any kind business requires tenacity, endurance and dedication. Setting up a fashion business is all the more challenging because this is a hyper competitive industry (who doesn’t want to be a fashion designer these days?) and a very complex one as well, even at the smallest of scales. What other kinds of start-up businesses so quickly find themselves with customers and suppliers scattered around the world, requiring so much coordination and organization? Managing to get all of your raw materials (fabrics, trims, haberdashery, etc) all to your manufacturer at the same time to start your production and then sending it all out to stores in different corners of the world (each with their own customs procedures) in only 2 months can be a nightmare, even for those with great forward planning and troubleshooting skills.
All of this is to say that one of the key drivers of success will be your entrepreneurial skills and your commitment to running a business. In order to be successful, you should think of yourself as a CEO first, fashion designer second. A CEO is a manager of people, finances and processes. Therefore, you will have a great deal of responsibility and important business decisions will face you each and every day. The buck stops at you and the business should always be at the forefront of your mind, not just an afterthought.
For some people this is an extremely exciting and energizing situation to be in. For others, it is their worst nightmare. What kind of person are you?
Next, you should ask: “Do I already have or can I find the necessary skills, contacts and funding to create a successful fashion company?”
Clearly, you won’t be able to do absolutely everything yourself. This is where you need to find other people who believe in you to join your team or provide support in some other way. Doing a self-assessment of your skills and abilities will tell you what gaps you will need to fill in order to make your business work.
You may assume that having completed a design degree, there are no skill gaps there. However, the design process in a business can often feel very different to that of the design process in school, where you don’t have to worry about things other than the product. Running fashion business means developing and following an organized creative process that works for you – and that other people can work to as well. One of the great things about designers who have previously worked in a large fashion house is that they have seen how other people organize themselves and can take lessons from there as they start. Having a clear design methodology is crucial to getting the best out of your abilities. If you don’t have this in place now, perhaps you may want to spend some time learning from someone else first.
Apart from mastering the design process, something that some of the smartest designers do next is to find a business partner they can trust, who brings different skills and connections to the table. Often it is a spouse (Patrizio Bertelli is married to Miuccia Prada), sibling (Christopher Kane’s sister Tammy runs the business) or a friend (Marc Jacobs has long time business partner Robert Duffy) who might take on this role. In this way, not only do you have someone to lean on in times of difficulty, you also have a division of roles, which allows you to focus on more on the creative aspects of the business.
You will also need to find people in the Industry who agree to support you and work with you. You’ll need a PR who will (at least initially) give you his services for almost nothing and a factory that will make your clothes in small quantities. You will also need accountants, lawyers, stylists, photographers, graphics designers, production managers and interns – hopefully all at discounted prices. You therefore need to ask yourself if you already have a set of contacts which you can leverage to make your business work. If not, you need to get out there and meet people so you can start your business on the right foot, with the right team behind you.
Finally, for most designers who haven’t come into an unexpected windfall inheritance in the millions, starting a business is also a question of finding money. There are many sources of funding, but each source will take time and effort before it bears its fruit. Family and friends who believe in you are obviously one place to start, but you will also need to deal with bank managers about loans, and think about taking on investors as well. Having a network of people who may be able to introduce you to potential sources of funding is imperative to setting up your business. You can have a brilliant business concept, a fantastic team, and all the energy in the world, but without funding in place from the start, it will be difficult to get up and running. You should also do research on grants, sponsorship and awards that many organizations make available to nurture new design talent.
Lastly, you should ask yourself: “Do I have something unique to offer the market?”
If there is one crucial thing I recommend that you do before rushing off to start a business, it is to carefully craft your business concept. What is it about your business that will be unique? Why will people choose to buy your product over someone else’s? Is it the design, the price, the value or the dream that they are buying into?
You will need to think carefully about who you are designing for. It is cliché by now, but I almost always ask designers when I first meet them: “Who are you designing for? And why?”. Most of the time, this simple question is met with groans or blank stares or platitudes like “I design for me and my friends” or “A very glamorous woman with lots of money”. This is not enough. You need to get into the mind of your customer and understand what motivates them. Where do they spend their time and for what occasions will you dress them? What makes them buy a garment? Understand their psychology, emotional needs and relationship with clothing. Visualize all the aspects of their lives and assess how your business can blend into making them even better.
It’s worth pointing out now that not all fashion businesses have to operate at the high end of luxury, although it seems that that is where every designer wants to be. Remember, your business concept needs to offer a clear proposition of value to your customer, and that value could be world-class design at more reasonable prices. Look at Zara or H&M or Coach or American Apparel and how they have taken clear business ideas that allow them to deliver great fashion to the masses. While it may seem ideal to be a “luxury” brand, also remember that some of the most influential fashion businesses are on the high street and in your neighbourhood mall, because they dress thousands of people around the world.
Next blog piece: Writing a Business Plan
Assuming I haven’t completely scared you from starting your business, our next article will go through the process of writing a business plan and why it is so valuable. In short, it will help you to raise funding, to clarify your vision, and to set a roadmap for how to get there.
Authored by Kristie Lorette and can also be found here: http://is.gd/tm2anS
An associate buyer is an assistant to the buyer of a retail store. An associate buyer assists the buyer in choosing the clothing, accessories, shoe or other fashion styles that the store will carry. The primary goal of the associate buyer is to choose the clothing and accessories that will sell and boost the sales of the store or retailer they are working for as an employee. While not all employees require an educational background in the field, some do, in addition to experience and talent. Developing these qualifications and finding retailers and fashion companies that are looking to fill these types of positions will help you become an associate buyer.
One of the first steps is to earn a degree in fashion merchandising or something equivalent. Earning the degree not only provides you with the knowledge you need to perform the associate buyer job, it also gives you an advantage in the job market when you start searching for a job to become an associate buyer.
One of the most important steps in becoming an associate buyer is to gain experience. Generally, part of earning your degree in fashion merchandising is completing an internship. The internship typically involves working with a buyer. In addition, the internship also tends to involve training in the other areas of merchandising that you will need to know to be able to become an associate buyer. Cross-training opportunities typically include advertising, promotions, marketing, sales, inventory management and working with vendors or designers.
After earning your degree and completing your internship, you can begin to look for open positions to become an associate buyer. In some cases, retailers will not hire you on directly as an associate buyer. Instead, they may hire you on as a sales associate to learn about face-to-face interaction with customers and get a sense for the styles and more that consumers are seeking.
Some may even require you to work in several departments so that you learn all aspects of the business prior to the chance to become an associate buyer. When you do become an associate buyer, you will work closely with and report to the buyer of the particular department in which you are working. Use this working relationship to gain further experience in the world of buying.
This additional experience and knowledge can give you an advantage when you want to transition from an associate buyer to a buyer. You can make this transition with the same company or seek opportunities with a different company.
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