Another stale broccoli casserole?
A few more polite words with “the family”?
Too many “what a shames” and too many “I saw this coming”...
This is getting all too common.
Seeing another promising fashion startup that has been laid to rest has really stirred me up.
And you know what?
It's really sad to see, and I’m totally fed up with witnessing the dreams and illusions of so many talented people being buried under mountains of debt with burdened and garages filled with unsold fashion pieces.
And you know what’s worse? So many of these stories could have ended differently, if they’d only paid more attention to a few important details. However, I’m getting ahead of myself here.
First I want to share with you three very special stories.
These are stories I’ve lived firsthand. These are the stories of smart, creative people who had so much going for them. They are stories with important lessons. Please read on...
STORY #1 - From $200K to a Hole in the Ground in Nothing Flat!
About 13 years ago I worked for a very talented designer who had a long and very successful career as a creative director for some of the world’s biggest brands (RL, Nautica).
He had a great concept, very distinctive design, was very clear about his target customer and the product was right on! I joined him to help with the production of his first season, a season where he booked 200k in sales right of the gate (incredible number for a first season), nit to mention some of these orders from his dream stores such as Barney’s.
Wow! What an amazing start!
Then he went from $200K sales in the first season to almost out of business in the blink of a very sharp eye.
Why?
As soon as I came on board I knew something wasn’t quite right.
Was he getting press coverage? More than you can imagine. Were his designs up to snuff? They were awesome! But when I looked at his wholesale prices and costs…. I froze!
First of all, his cost sheets had been built out by an old friend, a production manager from one of the big brands. Needless to say that the costs were based on prices and quantities that a huge company would produce, which was far from the reality of his new startup business.
Second, his wholesale prices needed to be at least 50% higher in order for him to make any profit!
Long story short, that season we worked our butts off, around the clock, pulling favors left and right…and all in order to just try and break even.
Can you imagine having $200K in sales and struggling just to survive? It was a nightmare.
A nightmare that resurfaces time and again with both experienced and fledgling fashion entrepreneurs.
STORY #2 - A head in the clouds and a foot in the grave!
Four and half years ago I met a very talented young designer who had already built a nice name for herself right out of fashion school.
She was planning the launch of her brand.
She had the concept down. She had a group of angel investors lined up. She even had a financial planner do a business plan for her.
All sounds perfect right?
That’s what I thought too, quite frankly I thought this is a sure thing!
The first season had very little sales (which btw is normal for a startup brand). But what wasn’t normal is how much she spent on that first season.
You see, the business plan was made by a financial guy who I’m sure is great in what he does, but he just did’t know the fashion industry.
The projections in the plan were way too optimistic, and the budget was not controlled by anyone.
The spending on development was way too much. And to make matters worse, for the launch they did a runway show (which as much as every designer dreams of having one, is a very very expensive event that unless you are a well-known, high end brand the ROI is simply not there).
Unfortunately lessons were not learned after that season and some of these big mistakes were repeated in the following 2 seasons. And while sales never really picked up, the bakers pulled out (cutting their losses) and the designer left with bills that she’s still struggling to pay back.
If only she had listened to a seasoned expert!
Financial planning is not a checkbox that you can simply check off and say you’ve done.
It’s a day-by-day fight to make sure every penny spent is contributing to your cause.
Don’t let a fancy spreadsheet fool you!
Those little cells can contain any number you like, but if you’re not following up and controlling every step in the process, you’re on a road to pain and misery.
STORY #3 - Death by success!
You know what can be worse than striking out?
A home-run in the first inning, that’s what!
This next story is actually quite common with startup fashion businesses.
Have you ever seen someone get carried away by the euphoria of the moment? Unfortunately, many business owners’ let immediate success get to their heads.
Once they’ve heard the phones ringing and seen some orders flying in, they let their guards down and try to jump 10 steps forward in one giant leap.
What happens next? They fall on their faces.
In this case it started like a dream story that any fashion brand would hope for.
He had an awesome product that he introduced in his first season.
Let me tell you, it was perfect.
It sold from day one like cupcakes. The factory was producing them on a regular basis. The profit margins were incredible, and the business was growing at light speed.
I came in to help with production and man was this a fun ride!
Without a doubt this was the most successful (financially) fashion business I have ever been involved with. An honest-to-God money maker!
The owner had both the design skills and the business skills - it was a perfect combination.
So, what went wrong?
Despite knowing better, he let the glamour and glitz of our industry cloud over his normally prudent business brain.
He started offering too many products, many of which didn’t make sense and didn’t line up with his previous offerings.
He went for the glam and the shiny objects, hired too many people, a designer that didn’t know the brand well enough, moved the business into a huge space, started doing runway shows and throwing fancy parties...
By that time I had moved on to a different venture, but from the outside I witnessed how the business went from being a monumental money maker to struggling to pay bills.
I saw how most factories wouldn’t take his work for fear of being paid late or never...
…and slowly but surely the sparkle and shine faded into oblivion.
What a pity.
These 3 stories represent just a few examples of common financial mistakes that all too many fashion brands face.
In a cut throat industry like ours, poor planning and poor control over your business’s finances can make or break your dream!
So, here’s the ugly truth...
If you get the nuts and bolts wrong, your chances of success are practically nil.
Do you want to build a sustainable and profitable business? Or are you just looking for an expensive hobby?
In reality 9 out of 10 startup brands fail in their first year, the number 1 reason: POOR FINANCIAL PLANNING!
As a designer, worrying over numbers and spreadsheets may not sound like a fun time, trust me i get it, but hopefully these three stories have helped open your eyes to the importance of it!
I’m tired of wearing my fashion-business-funeral suit, and as someone who has walked in your shoes, it really hurts seeing talented people lose their shirts.
So, if you’d like to avoid the pitfalls and snares that brought these great companies to their knees, I totally recommend that you sign up for my Finance BOOTCAMP for Fashion Brands.
Believe me, you’ll be glad you did!
Boaz David