Designer’s guide to a business plan
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.