Designer’s guide to a business plan

Posted by Kathleen Fasanella on Jan 27, 2006 at 1:03 pm / Newbies, Sales and Marketing / Trackback

Guy Kawasaki’s post on The Art of Bootstrapping yesterday inspired me to write my own list of most frequently offered advice to people starting a fashion or sewn products business. This list is intended to augment the information I’ve written in The Entrepreneur’s Guide to Sewn Product Manufacturing, not replace it. In other words, you’ll still need the book (while informative and useful, this blog can’t come close to providing you with all the help you need). Anyway, this post is my frequently offered advice to designers with whom I consult. Keep in mind that much of this advice may not address questions you have because all of my clients own the book and don’t ask questions about things that have been made clear to them from the text.

1. Focus on cash flow, not profitability. If you’re funding your own venture -the vast majority of you will be- you have to focus on fast turn arounds, period. First you launch with a few styles, then you take a few orders, produce those items, deliver them and get paid. Get your money at delivery! Don’t extend terms, you’ll be surprised at how many people will pay you then if you ask for it. With that money (and profit) in hand, you do another go-round, this time a bit larger. And you just keep growing. As my friend Linda says, if you make it and ship it, don’t worry. You’ll be here next month. The key is, get your money. You need it for the next production cycle. You can’t grow if you’re extending terms, no matter how substantial your profit margin. Otherwise, you’ll have to wait for payment to filter in before you can move on your next round.

Now, I know that nobody’s going to like this but the chances of you getting a loan or some venture capital to launch a product line is virtually zero. That’s not the way it’s done. You can’t just march into a bank with a business plan and some sketches to get money. I don’t know anybody who’s ever done that. It doesn’t matter if you hire a whiz-bang outfit that writes business plans for you; I’d bet that a consultant’s loan success rate is based on companies that have already been in business and have a proven track record. Nobody gets a loan for a launch so you’ll have to get some start up capital from friends, lovers or family. Now, once you’ve produced some prototypes and have taken some orders, it is entirely possible you could get a loan with a good business plan but not until then. One way or another, you’ll have to fund your first round of prototype and sample development.


2. Forecast from the bottom up. I don’t like how most designers research their markets. They figure x number of target demography spends x dollars on their given product type. Sure, maybe they do but it doesn’t mean they’ll buy yours. To a large extent, I think market research -to the extent that many DEs do it- is overkill and for two reasons. One, if you have an innovative product, people don’t know they need it till they see it so there’s little research to collect that’s meaningful. Two, even if your product isn’t innovative, people still won’t know they want it till they see it which brings me to what I think you should be doing instead. The only thing you can do is produce some prototypes and try to sell them. All of the glowing research in the world won’t help you if nobody buys off of your protos. For example, market research said I shouldn’t publish The Entrepreneur’s Guide because record numbers of manufacturers were going bankrupt and at that time, there weren’t any books for entrepreneurs. Eight years later, there are other books but mine was the first and remains the most highly rated book in the business (with 23 five star reviews on Amazon). If I’d listened to research, I never would have done it. This is not unusual, time and time again, sales forecasts for truly innovative products has been dismal at best. It’s only after the product has been released that people learn that they need it. Rather than spending money on marketing research, spend it on prototype development. Besides, it’s easier to get a loan based on prototypes than a loan based on a market research study so if you only have the money to do one of those things, prototypes are the way to go.

3. Ship, then test. I disagree with Guy on this one. He thinks most entrepreneurs over perfect their products prior to shipping. In my experience, most designers haven’t perfected their products enough; excessive product features that people don’t value is rare in this business. Still, I’ve seen a lot of paralysis by analysis from DEs. Some of you can’t get off the perfection treadmill to make a first launch. You have incredible laundry lists of “musts” that just aren’t tenable or realistic. For example, some DEs want to launch a line and at the same time, open a retail store. That is sheer insanity. Yes, I know Gap has stores and produces their own stuff but nobody starts out that way. You start with one or the other. You either manufacture or retail a few years to get your bearings and then you move into the other end. A lot of retailers get into manufacturing because they’re so close to the customer that they can read their unmet needs. The point is, they had a handle on retail first. You need one anchor, start with that.

4. Forget the “proven” team. Some DEs have the resources to go shopping for the best and brightest, usually people who’ve worked at known firms but this can be a problem. I can’t tell you how many times I’ve seen a DE hire a useless consultant who did marketing or sales at x company and honestly, the person was better at promoting themselves than getting the job done. It’s better to focus on key production people first -not marketing, business or sales- with as much experience as you can afford. Hiring young and scrappy people can also be a plus. Hire according to ability rather than track record. As Guy says, “once you achieve significant cash flow, you can hire adult supervision”.

5. Bringing in old habits and practices. (Guy’s #5 didn’t apply) Okay folks, news flash. Nearly everyone getting into this business is coming here from somewhere else. Nearly everyone’s been a professional. People have been successful doctors, lawyers, mothers, social workers, nurses, teachers, software engineers, banking executives and marketing people well before they decided to start one of these companies, so join the club. You don’t have to impress anyone the way you’re used to doing it. Much of the industry is very old-school and it’s very blue-collar, strikingly different from the image you see in Vogue magazine. Nobody thinks you’re an idiot. You don’t have to impress us so don’t try because it can backfire. The only time someone will think you’re an idiot is if you do the sort of things I talk about in my book -listed on page 82- if you do those things, you’re doomed. No one can save you. You also don’t want to bring in new-speak or popular catch phrases. Most of us don’t know what you mean, we have our own language. Say “sourcing”, not “logistical resource infrastructure”. When in Rome, do as the Romans do.

Bringing in old practices also includes things like requiring confidentiality agreements. For most of us, the thinking is, why would you hire someone you didn’t trust? CA’s aren’t common in the production side of things. It’s kind of an insult. It’s as though you believe you need a stick to make us behave. The other implied insult is that we obviously have no ideas or imagination ourselves and we’re just waiting for a great idea so we can be you. No thanks. We have plenty of our own ideas but that’s not our business. Why can’t anyone believe that we enjoy what we do and we don’t want to be you? Believe me, after 25+ years of making patterns, I could have been a designer a long time ago had I wanted to. Waiting for the one great idea is not what’s holding me back.

6. Focus on function, not form. Don’t overbuy when buying machines or stuff for your office. You don’t need the best machine out there. Used ones are just as good and they last forever. Another thing, many DEs think they have to have a whiz-bang CAD system right off the bat and that’s just plain silly. I know companies in business for over 30 years and they still don’t have a CAD system. Outsource your grading and marking to a service. That’s why they’re there. Don’t listen to what “everybody” says, you just don’t have the volume and you don’t have the cash flow to pay someone to to run it for you (no, you can’t do everything yourself). You need the function -grading- not the form -CAD system- and you can get the function from a service.

Another thing DEs do is overbuy on things like labels and hang tags. Your labels don’t have to be the absolute best! They must be appropriate to your product. If you’re making dishcloths, you don’t need an embroidered sew-in in mult-colored thread. This is a great way to piss off your contractor by the way. If he/she sees that your labels are over the top when compared to your product, he/she will be angry over your strident bargaining over the contract. Their thinking is that their concessions are what have allowed you to waste money that rightfully should have gone to them. I see stuff like this all the time.

7. Pick your battles. You can’t afford to fight every battle. Consider that you did win some of your battles, it may be to your detriment. Or worse, forcing a battle on someone can just create a defection. For example, I worked with one lady who wanted to make girls coats. Halfway into the process, she wanted to add a “one-sie” (infant’s garment) into the line. Why introduce an orphan into the line of girl’s coats? For the one baby item, we’d need an infant wear rep, a knit sewing contractor, a knit fabric supplier, a separate line sheet (with just the one item) ad infinitum -when we already had a full plate with eight styles of girl’s coats so it just wasn’t rational. I defected. It was so irrational it wasn’t worth arguing about. And then, there’s the issue of naming styles vs style numbers. I don’t think there is a more efficient way to announce to all of your peers and partners that you are a newbie than that. As I’ve said before and I’ll say again, that’s not a battle to fight. Even if you win, you lose. You just don’t know it yet. No venture dies overnight.

8. Under staff. Guy says to under staff but for most DEs, under staffing comes with the territory. Rather, I think DEs should hire someone full-time sooner than they do. I’ve found that a DEs sales increase 1000% for the first employee they hire, then sales increase a subsequent 800% for a second employee and so on. Whether it’s ego or finances (or a combination of both) I don’t know but DEs try to do too much themselves. I’ve found the key to getting DEs profitable is getting them to hire help as soon as possible. If you can’t hire someone, hire services. Now, I have seen one instance in which DEs over hire and that’s with business planners. Time and time again, designers hire business planners -you need a project plan before you can ever come up with a business plan- or marketing people to “create an image” for them when they don’t even have a product to image. It’s ludicrous.

9. Go direct. In software, this is more easily done than with apparel (Guy writes for the software industry). With apparel, the results have been mixed. If your set up is such that you can produce items to order, then great, go for it. If your product is successful, you may find that this won’t be as manageable as it once was unless you can hire other people to help you keep up. Another option is to take orders, making it clear to your customers that their order won’t be delivered immediately but within 4-6 weeks. Now, a lot of DEs argue with me when I say this and while I’m not saying it’ll work for everyone, I do believe that if you truly have a wonderful product, sufficient numbers of people will wait for it. Particularly once word gets out. Your known delivery time will come with the territory. In fact, you could play that up and make it a marketing angle. There are many niche specialized products that take weeks if not months to deliver. For example, Dell makes computers and you can order one from stock but if you want one specialized to your needs -and most customers do- you’ll have to wait three weeks to get it. Still, building your reputation will rest entirely on meeting your delivery deadlines on time. In the end, people won’t remember the pain of having to have waited 3 or 4 weeks for the product, they’ll remember the pleasure of getting it two days earlier than you promised. Trust me.

10. Position against the leader. Guy says that if you don’t have the money to explain your story starting from scratch, then don’t. Unfortunately, he uses the analogy of Lexus vs Mercedes (Lexus is half the price) which contradicts his own #2 (ship first, then test). Toyota could never put out a Lexus without extensive testing and perfection! Likewise, I disagree with this position because I see so many DEs doing it, particularly those who describe themselves as couture level and honestly, they don’t come close. Not even. Comparing and positioning yourself against the leader only works if your products really are as good or better. This sentiment also brings to mind the vast legions of tee-shirt “designers” who position themselves as anti-capitalists or “not like the big boys” when all they’re doing is slapping dye on a ready made shirt and the only people they’re employing are themselves. At least the “big boys” provide working families with jobs. I’m also offended when they describe their products as eco-chic because the average tee shirt requires 160 gallons of water during processing to say nothing of the toxic load of the dyes. Ralph Lauren didn’t get to be Ralph Lauren by slapping dye on a tee shirt. Neither did Calvin Klein or any other designer. Rather, Ralph made nice and expensive products first. No famous designer started with tees. Period. If you’re going to position yourself against the leader, you’d better be as good as they are or all of your claims will just fall flat.

I think it’s best to stand alone and position yourself against your own best effort. You already have a personal mission, write it down. What’s important to you? Write it down. Develop your own definition of integrity with regard to your people, product and practices. Then stick to it. If you’re good enough, you don’t need to borrow somebody else’s hype.

Consider buying the book, the sales of which support this site, to say nothing of it being a keen investment in your own business.

13 Responses to “Designer’s guide to a business plan”

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Kathleen
January 27th, 2006
2:01 PM

I’ll probably get 20 different emails from people thinking that I was writing about them. Rest assured, I was not! As I said, these are the most common problems/questions/advice I get from or give to entrepreneurs. Just this week, I’ve discussed these topics with no fewer than 10 different people so you can only imagine how many it’s been over the past ten years since I started consulting. Again, there are no hidden messages to anyone so please, no one should take this post as tho it were personally directed at them. Other than the girl’s coat designer -and all tee shirt designers as a group- no particular person was one of my examples either.

Leslie
January 27th, 2006
4:34 PM

Thanks for sharing all your insights! They’ve made a true impact on the way I think about my small women’s accessories business.

Jess
January 27th, 2006
6:50 PM

2. ” If I’d listened to research, I never would have done it…” Yes! I so agree with this one. When I was starting the commercial side of my font business I had so many people telling me why it wasn’t going to work. There’s nothing left to design. There’s too many freeware. There’s too much font piracy going on. Nobody will pay for a font anymore. Now, of course years later I’ve had about 5 fonts that have made it to the best sellers list at myfonts.com. How did I know that it was going to work? I had the freeware site launched for about 3 years and people were emailing me daily, begging to pay me for my freeware. ::I realize how braggy this sounds so I should knock on cyber wood, hehe::

3. “Ship, then test.” I agree with you Kathleen. I’ve set up a whole bunch of tests and nothing goes out until they’ve passed all of them. If one of my customers gets a poorly spaced, poorly kerned, poorly programmed open type font, etc. they could think that all my stuff isn’t properly done and there goes a future customer.

8. “Whether it’s ego or finances (or a combination of both) I don’t know but DEs try to do too much themselves.” Me and Josh are guilty of this one but I think we’re learning that we can’t do it all.

Carol Kimball
January 27th, 2006
8:02 PM

If you’ve read this far, you’ve demonstrated that you think this site is worthwhile.

If you haven’t already, buy her book.
If you’ve bought her book, buy her DVDs.
If you’ve bought her book and her DVDs, send her a donation.

No, I don’t get a cut of the action, other than the stimulation and learning of everyone Kathleen’s collected here, led (far out in front) by herself.

You say you will, but you won’t. Do it now.

anna
January 28th, 2006
2:52 AM

this is so good. i’ve been worrying about asking clients to wait potentially 4-6 weeks for made-to-order knitwear, but as you say, it can be made to add to the cachet of the product. thanks for a wonderful blog.

Big Irv
January 28th, 2006
11:27 AM

This is about as accurate an interpretation of the industry as I have read in many years. Your take on “consultants” was right on. From a manufacturers viewpoint, I have had great difficulty working with some consultants that DE’s have hired to help further their business. In many cases, basic technical knowledge is evidently lacking, and their actual contributions can impede growth, rather than stimulate or streamline it.
Choose your consultants wisely. Many are great at “self promotion”, and the handsome fee they demand is better used in other parts of your growing business. Thanks Kathleen. I’m emailing your post to a couple of people I know that should invest in your book. And soon.

Eric H
January 28th, 2006
12:56 PM

The concept of overdeveloping (paralysis by analysis) is treated in the book, Developing Products in Half the Time. They specifically direct you to move to prototyping as early as possible so that you can learn quickly and get the product designed and out the door.

Something else your readers might consider is to go through the process of Quality Function Deployment (QFD) (examples here , here (Powerpoint), and here). This is a formal process of mapping customer desires to your processes and process inputs, and comparing those to your competitors. It is important to plan, but since you can never have all of the necessary and accurate information locked up in your potential customers’ heads, you should develop the plan quickly with a formal system such as QFD, identify the quality of your estimates, identify contingencies, and then WORK THE PLAN. Don’t forget to update it as you go, documenting the lessons learned, but doing work is as important to the process as laying the plan once you have the basic outline down. Remember that everyone has a plan until they get hit, so get hit, get up, and get back into the fight.

Toyota’s planning and testing started when they got into the truck business even though their fundamental desire was to produce a sedan. They got hit then, they got hit again when the Occupational Force forced them to accept a union (the owner apologized to the workers because he felt the union added a level of bureaucracy to their relationsip), they got hit again when they subsequently had to lay people off, they got hit again and again. Today, Ford and GM are PWN3D!

Cinnamon
January 28th, 2006
4:14 PM

I completely agree that buyers will wait for quality made products. Most of my orders are received via my web shop and when I receive an order I email the purchaser an inform them when to expect an email from me letting them know that their bag was shipped and when they should expect to receive it.

Be advised, that unless you say otherwise on your website, you’re legally required to ship the product within 4 weeks. As long as you have it stated on your website that it may take longer, you’re fine.

Deborah Goodwin
February 2nd, 2006
2:39 PM

I am the Director of Sourcing for the Garment Industry Development Corporation in New York. I work with Young Designers (DEs) daily, and the advise I’ve been reading here could have come from my mouth as well. Too many of my designers focus on their “branding” efforts rather than their product, and also seem to overlook a key to success – SALES. You need sales to drive your business. You need cash flow to finance your operations. Try to decide how and where you are going to sell your product before you spend a cent on samples, press packs, labels, shows, etc.
Focus on your product development. What is it that will make your items special? What is the market you are trying to reach?(Really,none of you are couturiers, even if you are making custom items)Learn every detail of your product – I can’t tell you how many come to me with something they want to make, but they haven’t even sourced the fabric. Who do you expect to do that for you – you’re the one who has to know exactly what you want, or you won’t get it! If you don’t know, ask. People in this industry love to talk and share information.
Most importantly, take a deep breath, and make an action time-line, so your launch can be achieved by taking one step at a time. You don’t need to worry about spending on trade shows before you’ve made a sample.
PS – I’m going to buy the book and tell all my designers about this blog. It’s great!

Jade
August 4th, 2006
2:01 PM

I have designed some very unique, sexy, funky shoes (on paper that is) and I was wondering how do I get a company to finacially back me and manufacture my shoes?

Sonia Levesque
February 2nd, 2009
2:39 PM

This 2006 entry, resurfacing in 2009 is COMPLETELY relevant for me at the moment. But really; what ISN’T on that site? *big smile*

Thank you for the tips and “real life knowledge”. This new business plan of mine will be so different than the first one I did 4 years ago… for a business that failed.

sarah
January 29th, 2010
9:18 PM

I can’t believe I overlooked this post in the past. Maybe because it makes so much sense for me to find now. This is where the glamour of being a fashion designer could wear off for many! I’ve made a lot of mistakes getting to this point, luckily before I really sold reproduced cut and sew goods to multiple retailers! It is scary to think about making more mistakes once you get in stores. Being an equipment dork, computer geek, learning patternmaking and sewing have all helped me to know and present my products in and out and communicate to the production people, who really are the backbone and I promise to listen very closely to anything they tell me. I don’t know if I would ever stop sewing up the samples myself, as I can learn and innovate the whole time.

Just now entering, in earnest, my first ever round of sales (in this economy). I’ve been looking up tips on cold-calling and sales, crafting a script and practicing out loud while doing the dishes. I won’t be attending a tradeshow just yet. But I am launching with a very small collection, as per KF’s advice. Acting on another’s advice, I guess you could say, I’m going door-to-door. It seems a good way for me to keep initial expenses low and have a manageable project with containable misjudgements or miscalculations. I could be wrong! Although, something seems very charming about visiting the actual stores and with product in hand “that will improve your life and social standing!”

I do feel with the market I’m striving to be in, I do have to have the branding just so. It helps that I’ve gotten some press and the chance to work with other talented people, for next to nothing, to get the look my company needs. This meant gutting my entire website and rebuilding, it hadn’t been changed or updated, in about ohhhh, 3 years. Who cares, no one was looking at the time anyways! I finally went to a template model so I can update when and where I want. Control, total control, ahhhhhhhh. I then shot and created my lookbook, which included building an order form and technical drawings in PDF form. I’ve been sourcing fabrics, calling contractors and forging a database of stores in a 6 or so hour drive radius. Also, considering fella’s who would go with me on the mission to model the garments. I haven’t made a sample in every size, like a totally on point salesgirl would. There’s always next time… I see tradeshows in my future, but I’d like to grow slowly. No rush to make the millions. I’d be happy just paying the bills, traveling and dining well! Peace!

Carla
January 30th, 2011
9:45 PM

Kathleen said:

“I think it’s best to stand alone and position yourself against your own best effort. You already have a personal mission, write it down. What’s important to you? Write it down. Develop your own definition of integrity with regard to your people, product and practices. Then stick to it. If you’re good enough, you don’t need to borrow somebody else’s hype.”

…and a great example of this is a wonderful book called “Let My People Go Surfing” by the creator of Patagonia, Yvon Chouinard. It’s a short, but brilliant look at a company that did exactly what Kathleen recommends!

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