Analyzing business plans pt.2

Posted by Kathleen Fasanella on Aug 11, 2006 at 4:02 pm / Line Reviews, Newbies, Production, Small Business / Trackback

Based on the comments from visitors to part one of this series, I realize I should have I recommended that you read Factoring invoices: financing a fashion line and Financing fashion: 10 mistakes designers make as well as part one of this series. You may also wish to read about a bare bones but modest and simple business plan in How to start a clothing line. Picking up where we left off in the sample business plan, the bulleted list of long term goals are:

Long-term goals:

• Develop a leading market position

• Begin foreign sales in markets such as England, and France
• Sustain the commitment to the quality of the end product through quality fabric, workmanship, and design.
• Increase sales beyond the $1 million mark by 2011

I don’t think it’s very productive to scrutinize these goals because it’s the long term goals that change the most and we all know it. How many of us even had a plan when we started? It seems that anybody I know who’s succeeded -success is a process, not a goal- has fallen into it. It’s rarely planned. Still, assuming we’d had business plans, would the long term goals we would have written yesteryear resemble anything like how things turned out? It’s doubtful. Accordingly, I’m analyzing the long term goals in matters of form and cognition, rather than questioning the viability of the ideas.

The line reading “develop a leading market position” doesn’t mean anything to me so I’ll pass. Selling in foreign markets is just dandy. Most US citizens tend to be leery of shipping off shore. It is far away and it’s scary. I think it’s great if people look to develop relationships abroad. After all, the best way to practice what you preach is through commerce. That renders the longest lasting social change. However, I don’t think I would have itemized England and France specifically but rather, would have referred to the EU . There’s not much difference in selling to France than there is to selling to most countries within the EU. Saying so makes us look less provincial.

The point on committing to product quality, I really don’t know what that means either, other than that in the long term, the commitment to quality will be sustained. One would hope this would be the case so I don’t know that you need to say so unless you were planning to actually increase product quality by some easily communicated standard. Say, a goal to go from producing mid range sportswear up to bridge or something like that. I’d include that but otherwise, I’d leave it out. Add another bullet point of marketing mumbo-jumbo if you need to fill some whitespace because I agree that a 3 point bullet list looks kind of wimpy. You have to put in something; everyone’s uncertain of the long term and resists writing it down lest we be tortured by posterity.

The last line though (increase sales beyond $1M) deserves an aside; not to say that a million in sales isn’t doable because it is. It’s worth discussing in another way, that the numbers in your plan must all agree. I realize this isn’t a spreadsheet but even soft numbers have to be in agreement. For example,

• the short term goals list first year sales of $125K

• the mid level goals list an annual growth rate of 25%
• the long term goals list sales of $1M in five years.

If you project 25% annual sales growth, based on $125,000, the result will not equal anywhere near a million dollars in five years. Even though these are soft numbers, they have to add up. Otherwise, any projections or legitimate research you may have included with your plan will be considered equally suspect. The math in your soft copy matters; if your math is off, your plan doesn’t look well thought out or well constructed. And just because you didn’t notice it doesn’t mean that nobody else won’t notice it either. I see this in business plans all the time .

By the way, $1 million in sales is not unreasonable in the fifth year, depending on what you’re doing. It helps if you’re selling pricier goods. Pushing the upper limits, I wouldn’t consider projected sales of close to 3 million in five years unreasonable. I mean, it’d be ambitious. You could do it if you had it together, were growing responsibly (cutting to order) and staying private. By private, I mean growing according to growth rather than pushing it. Some people are tempted to find and take on investors and potential partners but the best advice I ever got was, don’t take on partners if you can avoid it. I feel like I’ve dodged a bullet with all the horror stories I’ve heard about partnerships. Over half of all partnerships -like marriages- don’t survive and you’ll have to get a divorce. Again like marriage, some divorces are amicable and some aren’t. By the way, divorcing partnerships are a big source of design theft. Maybe not design theft but the ownership of the intellectual property (designs and patterns) is often contested and it’s not uncommon for ex-partners to compete with each other (at least initially) drawing from the same well. Not pretty. I’m sure you all have plenty of partnership horror stories too.

Part three of the business plan analysis will cover Mission and Keys to Success. That will be a long entry so I thought I’d break it up here. Besides, I’m under the weather and not very productive lately. Have a great weekend. I’m going home.

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