How to build a 20 million dollar company with Facebook

Posted by Kathleen Fasanella on Jun 18, 2013 at 4:30 pm / Lean Manufacturing, Operations / Trackback

lolly_wolly_doodle_logoVia the WSJ comes word that children’s wear manufacturer Lolly Wolly Doodle, got a round of funding to the tune of $20,000,000 -that’s right, 20 million dollars. For a moderately priced children’s wear company that started in 2009 out of someone’s garage, that’s not too shabby. So what are they doing and how did they do it?

From what I can tell, they followed a playbook similar to what I’ve outlined on this site for years. If you want the quick start guide applicable to a grassroots start up, you can see these entries that explain how to turn cloth into cash:
How to start a homebased handmade sewing business
How to start a homebased handmade sewing business pt.2
How to start a homebased handmade sewing business pt.3

Which is not to suggest that their journey has not been without its problems. In fact, the company has an F rating at the Better Business Bureau. Still, they must be doing something right to have picked up 20 million in funding so what might those things be? Here are a few obvious conclusions:

  • Quick delivery
  • No inventory
  • Customization
  • Competitive pricing

…all of which are only possible because they make their own products. It is because the company has good bones that an investor is interested in resolving LWD’s growth problems. If this is something that interests you, it helps to have the right kind of problems, one of which shouldn’t be demand for your products. But anyway.

The WSJ article conveniently segues into my favorite topic, namely that you need to start manufacturing yourself. Period. You can only turn orders quickly, customize it and eliminate inventory if you’re making your own stuff by pre-selling it first. So that’s how they do it on Facebook. They make a sample, post it and take orders which they then deliver in 2-4 weeks. That is still a significantly longer lag time than other companies I’ve consulted with but 2-4 weeks is an order of magnitude faster than traditional manufacturers who have their production done by sewing contractors overseas. Or even domestic production but that can still take months. Offshore is worse because timelines are often a year or more out.

If the success of Lolly Wolly Doodle is something you’d aspire to attain, you can do this yourself as I’ve been saying since 2005, over 8 long years ago. For those in the US, making your own stuff is the only way you’ll have an edge over anybody else because there aren’t enough sewing contract facilities to take everyone’s work.  Don’t be in too much of a hurry to thoughtfully ponder the reasons you should start your own sewing factory (pt.2).

I think the conversations we should be having are about how to train sewing operators, what to pay them, how to go about setting up your factory, how to know what kind of equipment you need -which again, are all topics I’ve written of before but there doesn’t seem to be much interest in it. Or rather, not as much as I’d like. I’ve also written on many of those subjects and I decided against peppering the preceding sentence with all manner of hyperlinks because it then becomes cognitively overwhelming, you’ll go away and then how will anything positive happen?  If you do want more information, you can follow the links in this entry to those other posts which have links to those related subject areas. And yeah I know, you’ll be reading from here to next week which I think is a good thing. Most people who start companies like this fail because there is a lot of homework and often, it’s not the homework one wanted to do. Unfortunately, you rarely get to pick so you take the good with the bad. No business of any kind, can be self sustaining if its owners are lazy or sissies.

_____

*Here is an indirectly related question that people should be asking themselves: why is this company so attractive to investors? Perhaps it has something to do with who sells the most [at market] and why (see also pt.2).  A post I wrote on selling your company (along with links therein) would also be helpful. Not that you want to sell before you get started but it helps to know what buyers find attractive.

21 Responses to “How to build a 20 million dollar company with Facebook”

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Heather Menzies
June 19th, 2013
3:13 AM

Thank you for posting this Kathleen. So interesting!

Mimi
June 19th, 2013
4:10 AM

Fascinating post! What a dose of optimism in the morning!

Terri
June 19th, 2013
5:20 AM

Congrats to LWD! There are many reasons to keep production local or under your own roof….the least of which is a quick turn around time. Thank you for the links Kathleen.

Dara
June 19th, 2013
6:18 AM

Cool, these guys are right up the street from me.

Rita Yussoupova
June 19th, 2013
7:39 AM

Thank you for the post and I wish all the start up and existing apparel small businesses the best.
I just want to alert all the readers of using the help of indepandent sewing contractors based at homes.
There is no such a thing and most of the time they are considered to be a statutary employees.
In California many small business owners who issued 1099 forms to thier independent contractors were audited by EDD (Employment Development Department) and slammed with UI tax (Unemployment Insurrance ) plus interest and pennalties. They consider this miss classification and there is no expiration or statue of limitations on this. Some times they go back as far as 1992 / 93.
This practice is something that I highly recommend researching before implementing.

Taja
June 19th, 2013
9:25 AM

Thanks for posting this, Kathleen!

I’m very interested in the topics related to developing a sewing factory. I’ve read everything on your site and have determined that our previous business (niche ladies RTW in the 80s through the 90s) manufacturing processes were mostly incorrect by industry standards! We did very well, though, primarily because we catered to a very specific client base.

Definitely will be reading about how Lolly Wolly Doodle functions on FB–I’m not a social media person. Need to learn more about everything in general, but am on a very limited budget at this time. *sigh* Rebuilding financially is a slow process, as I’m sure many know!

W. Mary
June 19th, 2013
9:48 AM

Thank you so much for this post. I’ve thought recently that I should be using your resources more. When Feedly loaded today, this topic was right on time. Thank you!

Judy
June 19th, 2013
6:00 PM

I do love these types of blog posts, and then I get lost in all the links. It is amazing when people find out you have a manufacturing facility – the business comes pouring in. Now if I can only find qualified people to sew…

Claire H
June 20th, 2013
8:14 AM

The BBB cites delivery issues as the most common complaint. From where do you think this problem stems? I’m sure a lot of it is figuring it out as you go but what would be a solution for managing the flow of orders so that you don’t get behind? I assume they have the blanks already
made for styles and just do the monogramming on top. I also wonder if they have a problem finding labor or if they have a training program. At the apparel contractor that I work for, we have a tough time finding people (Kathleen has touched on both) who a. want to be sewers and b. have any experience at all.

Thank you for the article! It is amazing how they were able to differentiate themselves in an overly saturated market!

Brina
June 20th, 2013
8:54 AM

What I read about the company regarding ordering and delivery is that they don’t have an organized tracking system and, for the most part, one or two people do all the processing. That means if one of those people is not available orders don’t get processed in a timely fashion. Ordering is kind of a lottery–with styles available for a certain amount of time and orders due by a certain cut-off date. If you don’t make the cut off, then you don’t get that style. Maybe the lottery system throws new customers. Mistakes are bound to happen in any business. While there are a lot of BBB complaints, which the company does not belong to, LWD seems to be doing enough right to stay in business and have a loyal following.

Here’s a video that shows her factory and more
http://www.cbsnews.com/video/watch/?id=50135843n

this page has some information about how their customer service works:
http://www.insiderpages.com/b/15254399357/lolly-wolly-doodle-lexington

Annie
June 20th, 2013
10:05 AM

This is very interesting to me and I will make sure to re-read all of those links. I just checked out the LWD Facebook page and ordering FAQ and I am amazed that they are able to take all of their orders through Facebook. I have never wanted to buy products with my Facebook account but it seems like most people don’t mind doing that now.

Leslie Hanes
June 20th, 2013
8:24 PM

I am a perfect example of a manufacturer who tried to take the easy way ( make someone else do the production regardless of cost) and after 5 years I’m doing what I should have done in the beginning. It is stressful to be taking on my own production when I still don’t know all the things that might make the process easier…ie having machinery that does in one step what I thought needed 2-3. But, if I can do it then anyone can. YES please let’s talk about training, machines, and processes that can enable us to start out right from the beginning instead of learning the hard way. I am back in the game!

Michelle Moenssen
June 21st, 2013
4:52 AM

I think the hardest part is finding people to hire who will stay long term. Training employees is a big investment, and not a lot of people want to work with their hands- they think it’s beneath them.

Miracle
June 22nd, 2013
6:07 PM

Kathleen,

I know you’ve been saying this for a while… However, I would imagine that a lot of DEs just aren’t in a position to absorb the costs of in-house production. Is there a middle ground between complete reliance on contractors and complete in-house production? For example, what functions can be “sub contracted” (if you will) vs what needs to be in-house? Certainly at their size they can do it all in house because they have enough work to keep people employed consistently. But what about when you don’t? Especially considering apparel manufacturing skills are so segmented and a “jack of all trades” is rare.

Sidenote: Why do new posts show up under “archive”?

kathleen gerber
June 22nd, 2013
8:54 PM

While Lolly started out making all of their items, I would like to point out that they now supplement with many items made in China. They now import, among other things, hair accessories and kids school items (backpacks and tote bags for example)

I bring this up (not only because I am envious of their success) so people understand they are not truly 100% manufactured by LWD in the USA. I have no issue with their importing but I think it’s important to see the whole picture.

Niome Q
June 25th, 2013
1:35 PM

Thanks for posting this. You’ve confirmed what I’ve known all along. I’ve nvr heard of LWD, but it’s very inspirational to know that it can be done.

JOYCE WYLD
July 5th, 2013
3:55 AM

I started a facebook business online with a just-in-time model, selling baby and maternity clothes which I make on a domestic machine at home. Very excited to know something like this can be done. My volume is tiny right now, but it suits me as I have 3 little ones under 4. The JIT model is great and does reduce inventory risk, however what about fabric inventory-money is still tied up in uncut fabric. I hesitate buying huge rolls, and only buy as much as I need retail from my local chainstore as the orders come in. But there is no guarantee that the fabric will still be there tomorrow. Any thought about how to go about this?

Alison Cummins
July 6th, 2013
5:58 AM

Joyce,
You might want to buy the book and join the forum. That’s where we get into these discussions.

Kathleen
July 7th, 2013
9:51 AM

Hi Joyce, take advantage of your membership, that’s what the forum is for!

Kent Mori
July 31st, 2013
11:58 AM

Wow, super interesting article. Late to the party, but here are my thoughts…From an investors standpoint, I can see why they’re attractive.

1). They probably have great revenue (no better way to impress an investor than sales). If the only thing slowing them down, in terms of revenue growth, is production capability, that’s a pretty great pitch to an investor (“we could increase revenue ‘x’ fold if only we had more capacity”)

2). The lower inventory risk is huge as well. I’m pretty green to the industry (so please correct me if I’m wrong), but from what I could gather one of the biggest “costs” to apparel retailers are lost revenues from items bought off-price, usually due to excess inventory. Even if they did hold inventory, they can probably predict demand well based on feedback on pre-orders and facebook likes, again further reducing inventory risk.

3). Other than the points Kathleen already pointed out, an investor also probably likes the fact that they manufacture (or at least when they started out) themselves. This shows they are intimate with the details and understand the complete process. So with the cash infusion they know where the money can best be used to grow their business.

Definitely something to aspire to!

Paola
August 24th, 2013
11:44 AM

How to train sewing operators, what to pay them, how to go about setting up your factory is EXACTLY the type of information I need right now!!!! Will look at past posts related to this topic for sure!! And do really hope you will continue writing and sharing links on this matter as it is of great use!!! I look forward to reading more on this!! THANK YOU for another wonderful post!!

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