Analyzing business plans pt.6

Posted by Kathleen Fasanella on Sep 12, 2006 at 2:31 pm / Newbies, Process Reviews, Production, Rants, Small Business / Trackback

Finally we come to the end of the series. Again, see the full list of entries at close to catch up on the parts you missed. Remember, this plan is typical or even better than the ones I usually get. Today’s entry continues where we left off at the section on advertising. The plan’s author writes:

Advertisement: Several Avenues of promotion will be used to develop our market. These methods include:

  • Flyers will be distributed in areas our target markets frequently attend. These locations include malls, nightclubs, restaurants, schools, fashion shows, grocery stores, car shows, local music artist and a broad-spectrum of events. E-vites which are web based flyers sent via email and will be used to promote up coming collections and events
  • E-vites are web based flyers sent via email and will be used to promote up coming collections and events. As we are distributing our flyers we will obtain email addresses to build a database for our mailing distribution.
  • We have developed several partnerships with website owners across the state, who will promote our clothing line through website banners, and pop ups. We have written agreements with several of these website owners, who have agreed to promote our brand for one year for no fees during the first year. As this did not benefit the promoters and club owners, we have agreed to dedicate a portion of our website to promote events. This section of the site will be grouped by each city and will provide clients an opportunity to know what is going on in their city. We will also offer our client a ticket for 2 admissions to these events for each item purchased.
  • We will also join message boards to promote our company and network with those in the industry. This will provide our customers with a method to contact us, and provide feed back or fashion ideas they come up with. By keeping our ears close to the customer we can ensure we bring forth the latest in fashion trends.
  • The use of creative displays will attract attention to our garments when consumers enter our retail stores. Because we are a start up company, these creative displays will ensure our customers believe they are buying the next big thing. This will show our professionalism and evoke the consumer to purchase our products.
  • The use of local music artist to promote our brand will be crucial. When fans begin to see them in our attire they will be inclined to buy our product as they begin to think that this is whats in. Not only will this promote our line it will also establish a prestige in our brand.
  • As our brand begins to develop we will explore potential avenues such as fashion shows, the use of billboards.

For the most part, I’m going to decline to comment on this section because I don’t know anything about advertising -except as a consumer. As a web user, there is nothing I dislike more than pop ups (which is why I use Firefox). I’d be more inclined to avoid a company specifically because they used pop ups. But that’s just me. I’m a fuddy duddy, humorless quasi-luddite. As far as the e-vite thing goes, I hope they plan on making that opt in because I’m getting an increasing number of unsolicited evites and advertisements from small companies and it’s beginning to wear thin. Very thin. Particularly because they are not book owners. If you have a copy of the book, then by all means pitch me. I like to keep tabs and watch you grow. However, if you haven’t invested in me, I really don’t care (the person who submitted this plan hasn’t bought one although they’ve tried to hire me in exchange for a piece of the action). Regarding displays, those are pricey and some retailers have limits on what they’ll use. Be sure to check with them before you have something designed and manufactured. I know that many displays are never taken out of the box because the store doesn’t have room for them or they don’t fit in with the decor or layout of the store.

Sales Strategy: We will utilize several avenues to bring our product to the market. Our primary source of distribution will be through urban retailers. The secondary sources of distribution will include direct sales and clothing shows. These methods of distribution have been chosen to increase brand exposure and eliminate the cost associated with opening a store. In the future we will evaluate distributing to boutique style retailers, the use of professional sales representatives, and the opening a flagship store in or near a high traffic mall.

I don’t agree with this. I think that hiring sales representatives should be a much higher priority, second behind them going out and selling it themselves to independent stores. Couldn’t independent urban retailers be considered boutiques? I don’t think boutique is limited to expensive designer clothes. It’d cost an awful lot to open a store of any kind, much less near a high traffic mall. I think the author of this plan should make getting sales reps a higher priority, followed by showing at market. Still, urban lines are having a harder time of getting into markets because there are so many of them now. A show is only going to accept so many urban lines lest the whole floor be dominated with them. Once the company had several years of successful delivery behind them, then maybe a store would be an option. Learning retail is a whole other animal and there’s a steep learning curve involved.

Following sales is where the plan gets sad. Really sad. The author of this plan spent so much time, paper and ink working out the details of advertising, branding and promotion but nothing on the production process itself. Production is the backbone of your product; without it, your plan has no spine, no skeleton at all. Nothing to hold it up. What they describe as their production plan, is exactly three paragraphs long. The first paragraph covers the design phase. The second covers pre-production and the last phase is production itself. All three sentences of it.

Operating Plan: Production Process: The production process entails 4 key steps; they include market research; sketching/graphic design; pattern, grading, and sample construction; and retail production/shipping.

We begin with trend research for upcoming seasons. The company intends on producing a fall, winter, spring and summer line. An approach used by Zara, H&M and several major retailers entering the market. This strategy will ensure the latest fashions and trends are brought to our market in a timely manner. Our inspiration will be drawn from channels such as magazines, fashion websites, fashion shows, fashion incubators, etc. Once all these channels have been exhausted a storyboard will be developed by each member of our team, and presented to the group. Following the presentation, the team will then determine what should be produced for the upcoming season. During this process the cost of producing the garment will be carefully examined to ensure we are meeting our financial obligations. Once all necessary criteria are met, the selected garments will continue to the next stage.

I don’t consider trend research to be part of the production process. That is a function of design. Second, I think it’s a big mistake to try to produce four collections your first time out. It’s best to start with two collections at most. They’ve listed four parts to the process but haven’t included sales in here at all. How can you come up with four steps in a three step process and manage to leave one of them out? I don’t think they know that they’re supposed to pre-sell based on the samples (they haven’t read the book). There are three parts to the process. Those are design, then sales, then production. They have four parts but no sales which is really kind of odd when they spent so much time talking about branding and advertising.

The second stage of production is sketching and graphic design. During this stage our ideas are brought to life. Pictures, rough sketches, and concepts are brought to the graphic design team; in turn they will create a sketch of the final designs. These designs must be extremely detailed to ensure that the pattern and sample maker have an excellent understanding of the look of the final product. The software used to design these drafts will be Adobe Illustrator, and Photoshop. The pattern making process is generally a short process. Initially, a pattern draft is created and a demo garment is fabricated using cheap material called muslin. To ensure a proper a fit the muslin must have similar weight and stretch to the fabric that will be used to produce the sample. Once the appearance of the demo garments is satisfactory, the final pattern is created and grading begins. Grading is simply the process of making multiple sizes. The pattern is then forwarded to a seamstress, who will fabricate the final sample.

Off hand, parts of this section reads like it was copied out of a book (except for the part he made up about muslin having properties of a knit; don’t use terms if you don’t know what they mean). In real life, you’re not cutting demo garments (protos) out of muslin. Whether this is a short or long process is debatable. If the author insists that the patterns be rendered using Illustrator and Photoshop, I guarantee the process is bound to be long -approaching endless. For one thing, they’ll have to find a pattern maker who uses these products to make patterns. I don’t think there’s such a thing. Not a professional pattern maker anyway. Besides, I think it is untoward that the author dictates the tools by which the patterns are made and to his detriment as well. Then, he states that once the “demo” garments -cut in muslin, mind you- are satisfactory, the final pattern is created and then grading begins. Uh oh. Big, big, boo-boo. Oh my. Anyway, the author states that once the patterns have been graded, only then is it forwarded to a seamstress who will produce the final sample. If they’re really going to do it this way, they’re going to need at least three or four times as much money as anybody else who was doing it the right way, would need.

[climbs up on soap box]
You can’t talk to people like this. They don’t listen. They will waste thousands upon thousands of needless dollars but my book is too expensive. I just don’t get it. I’m sorry to go on about that, but the whole reason I finally broke down and wrote a book was after watching this young girl lose $10,000 all because she didn’t wash one yard of fabric after I told her to. She didn’t want to “waste” $3 worth of fabric. My “rules” as she put it, were too corporate and didn’t apply to a small business like hers. $3 vs $10,000? It was such a waste. When she shut her doors, I cried. She was so irresponsible, people were counting on her (her company was located near a reservation with 40% unemployment so you’d better believe some little kids felt that). Sure, you think you wouldn’t make that mistake but believe me, you make plenty of others that are just as obvious (to me) but you won’t figure out till it bites you in the butt. I take failure very personally. I don’t know you and you don’t know me but every time I hear that another little company is gone, a little part of me dies. It is such a waste. Why do people do this? I don’t understand.
[climbs down from soap box]

Tragically, the sum of the entire production process of this full length, multi-page plan is reduced to the following three sentences:

Once a price for the required fabric has been negotiated; the raw fabrics, patterns, graphic designs, and final sample are delivered to the manufacturer for the cutting and sewing process. This process generally takes 2-3 weeks to complete. The items are then tagged and packaged and ready for shipping to our retailers.

Again, it looks like this was copied out of a text book; probably a chapter summary. First, the word “negotiated” is inappropriate. A start up has nothing to negotiate with and is in no position to call the shots on the deal. For the most part, you pay what they want, when they want it or you don’t get the goods. Some people fancy themselves as real wheeler-dealers but that gets knocked out of them pretty fast. Second, you don’t deliver these to the “manufacturer”. You -even if you don’t own a single sewing machine- are the “manufacturer”; it’s a legal designation. You deliver the goods to the contractor who does the manufacturing for you. Anybody in the know is going to wince every time they read or hear “manufacturer” when “sewing contractor” was intended.

And while it is true that the production sewing, tagging and packaging can take 2 to 3 weeks, that is only if the sewing contractor had been involved beforehand. Rather, way back when, one needed to get a quote based on the production of samples -which by the way, was well before the pattern grading- otherwise, there’s no way to know either your unit costs or allocation (needed to order the run of goods).

This plan was long on sales, PR, branding, image and advertising and short on production. The latter amounted to three sentences. Do not -by any stretch of the imagination- think that this plan is unusual. It’s very common, particularly from very bright and successful business people and MBAs. Yes, it’s true! I do not know why so many business people think that a business school education prepares them for manufacturing when they haven’t studied it. Or bothered to buy a decent book on it. They act like they think some fairy godmother is going to come out of the wings and wave a magic wand or something.

Entries in this series:
Analyzing business plans pt.1
Analyzing business plans pt.2
Analyzing business plans pt.3
Analyzing business plans pt.4
Analyzing business plans pt.5
Analyzing business plans pt.6

11 Responses to “Analyzing business plans pt.6”

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J C Sprowls
September 12th, 2006
9:43 PM

I second the motion re: business schools not focusing on production. Every product requires production and support in its lifecycle – including intangible products, like software, insurance, or banking.

So, why are these steps frequently overlooked and abbreviated beyond recognition? Is it because it’s so un-glamorous that we want to claim ignorance?

Andrea
September 13th, 2006
11:35 AM

They didn’t bother to actually figure out how advertising works, either. Their marketing and PR is based on popular ideation and has little basis in consumer behavior.

They are advertising to the end consumer first and hoping that a wholesale buyer will be influenced by consumer making demands. It is a roundabout expensive way to promote a company, not to mention highly ineffective. Advertising and PR for a start up clothing company (or any company) should be direct, concise and well researched. The bottom line with this company is that they are too caught up in their own hype with no substance to their plan. from a reader’s perspective it drives me nuts that people spend time on this stuff!! Kathleen, you are doing a great job interpreting this business plan.

graham
September 13th, 2006
12:06 PM

I can’t believe that production paragraph. That’s just mindboggling. First time out, you’re going to get something produced in 2-3 weeks? omfg. wow.

what’s life like on pluto? I mean, pluto is so far away from the sun that one of our years is like 6 pluto years. So 3 of our weeks would allow for like 18 weeks on pluto.

Karen C.
September 13th, 2006
12:24 PM

I love that patternmaking is so quick and easy in this person’s world. Maybe I can get that magic wand to help me as I’m working on my 4th version of a knit top (it has pleating and an empire waist) and will now hopefully be ready for the production pattern. But when I wrote my initial biz plan 3 years ago, I was also real light on the production and product section.

As for the advertising, I think a trip to the library may be in order for this person. Maybe check out some books on branding and gorilla marketing would help focus his/her efforts and dollars.

Kathleen
September 13th, 2006
4:00 PM

Speaking of Pluto, this just in via Geekpress:

Pluto has been given a new name to reflect its new status as a dwarf planet.

On Sept. 7, the former 9th planet was assigned the asteroid number 134340 by the Minor Planet Center (MPC), the official organization responsible for collecting data about asteroids and comets in our solar system…

Razilee
September 14th, 2006
11:08 PM

Great comments Kathleen :)

I can’t get over how easy this guy thinks production is. I manage production for a mid-size company and it’s a full-time job just dealing with the disasters every day! Okay that was an exaggeration, but still a simple just wait 2-3 weeks for production to complete itself isn’t, as Graham so eloquently put it, on this planet!

I’m in the process of planning my own start-up, so this set of posts in particular is very interesting. I wonder if he realized it would be such an eloquent manual on what not to do!

As pertains business schools and production, I agree, production should be a major focus rather than an add-on. Perhaps a required internship with a production manager prior to graduation would help.

Eric H
September 15th, 2006
11:18 AM

I was once shopping for underwear in Sears when I noticed Clyde Tombaugh, the man credited with the discovery of Pluto, looking at the bins next to me. He looked up at me with a glint in his eye, mumbled something about the lack of comfortable underwear for a man his age, and wandered off.

What the hell do you say to the last living planet discoverer when he complains to you about underwear?! I mean, maybe next time I should be prepared in case I run into Stephen Hawking and he complains about the crappy electronic voice on his computer (honey, if I’m ever in that condition, please get them to program the machine with James Earl Jones, Sean Connery, and/or Denzel Washington – preferably James Earl Jones, aka the voice of Darth Vader, since it would lend far more gravitas when you want faster service from the barista at Starbucks).

Anyhow, the point is that when Clyde Tombaugh can find a little ball of ice 5.9 billion km away, but can’t find decent underwear in the mall, maybe that is proof that this startup isn’t the only apparel manufacturer who doesn’t understand their market or the production process.

Kathleen
September 15th, 2006
8:21 PM

I was once shopping for underwear in Sears when I noticed Clyde Tombaugh, the man credited with the discovery of Pluto, looking at the bins next to me.

Speaking of Clyde and Pluto, I halfway entertained the idea of blogging the protest we had here in Las Cruces (which is where Clyde was from when he was living). Evidently, Clyde’s widow Patricia and their son Al, organized a protest on the NMSU campus venting on Pluto’s demotion to an asteroid. I think 50 whole people showed up carrying signs saying “Size doesn’t matter”. It was supposed to be funny, tongue in cheek. Only Patricia seems to take the demotion seriously but if I’m not mistaken, she divorced her husband before he died so she must not have been that much of a supporter of him. However, there was one loser comment (meaning, jingoism in all things, even science!):

“Clyde Tombaugh was an American hero,” said Herb Beebe, a longtime colleague. “For that reason alone, Pluto’s status as a full-fledged planet should be kept.”

Eric mentions (looking over my shoulder as I write this) that Herb Beebe’s wife Rita, is the one who figured out how to fix the Hubble Space Telescope. In Las Cruces, we have lots of cotton growers and astronomers. Funny, that.

Christianne Brunelle
July 21st, 2008
12:19 PM

Kathleen, you are an absolute Saint for taking your own precious time to respond to what was a delusional copy-paste hack job of a business plan. Wow. I’m saddened to hear that this is typical, yet on the other hand it gives me some hope that I actually could succeed at this! Can’t wait to get my copy of your book.

Keep up the great work and here’s hoping that all the good Karma is coming back to you.

Renee
August 17th, 2009
11:09 AM

There’s not really any reason to pick on MBAs in particular. Not all MBA programs focus on the right subjects to prepare graduates for the apparel industry or any other category of production, for that matter. It is a general business degree, to which one adds a more directed concentration. In the case of the plan author, that concentration was clearly finance, and my guess is that he, like the majority of MBAs, came from a finance background as well. Not much reason to believe he would know anything about starting up an entrepreneurial apparel industry operation, but it is truly sad that he didn’t at least buy Kathleen’s book to be his guide.

I have something like 18 years experience in the apparel industry and an MBA with concentration in Information Age Entrepreneurship and I still bought Kathleen’s book (and read it through several times) to confirm what I already knew to be true of the apparel industry and fill in the blanks in the areas I didn’t already have direct prior experience. There will always be things we don’t know but absolutely need to. The best we can do, though, is keep honing our best guesses by running ideas past content experts and by listening to our customers.

Victoria Ranua
September 19th, 2010
11:53 AM

Kathleen, I love everything you read! Even though we have worked in different fields, our thought process is eerily alike. (I read Environmental Impact Statement as part of my job… the educated authors bypass important issues of how a project will really impact natural resources, they don’t listen to commentors, the project moves ahead, and the natural resources get impacted, and they say we didn’t know).

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