The first step
Greg Fisher, a lecturer and PhD Student in entrepreneurship at the University of Washington and a lecturer at the Gordon Institute of Business Science, states that the first step to owning your own business is making the decision that you want to be in business for yourself. "Starting a business is really hard and you need to be very motivated and determined if you want to have any chance of making it work. Next you need to uncover a need in the market, something people just can’t do without. If these two aspects are missing, then you may struggle in the start-up process," he said. Jacqueline Corfield of Hermanna Rush agreed and said that since the fashion industry is so crowded you need to develop your niche. "You need to believe in your product, understand your brand and know what you want to do with it. Deciding all these factors before you start is key."
Writing a business plan
Most experts agree that the first step of entrepreneurship is a business plan. According to Fisher, a business plan ensures that you have all your thinking aligned. "It helps you work though most of the critical issues pertaining to a business and have them resolved before you get going. It forces you to think about your product or service; customers and markets; people, operations, and all the financial aspects of the business. Without a business plan you may spend too much time focusing on one or two of these aspects at the expense of the others." Gina Waldman of Two said their business plan gives their business its focus. "We have goals of what we wanted to achieve in the next five and ten years,". Jacqueline agreed and added that a business plan helps you keep an eye your overall objectives. "All the little decisions you make have to contribute to the bigger picture. You have to set goals for each year and you can’t start working on the next goal until you have realised the first goal." They both said that it also ensures good business practice such managing your cash flow. "You have to know where you are taking money from and ensure that you are always putting money back into the company," Gina explained, "if you don’t manage your cash flow, your business will die."
Stiaan (pictured left), however, argued that while a business plan makes sense it is not always viable. "You are faced with a lot of challenges in fashion. The past year has been incredible for me and I could not have planned for it. It was all about identifying a gap in the market and using the opportunities that became available."
Jacqueline identified with Stiaan’s point but added that a good business plan will help you to adapt to the unpredictability. "You need to have contingency plans that you can fall back on. If your stockists don’t sell your clothes then you need to focus on your private clients or think of ways to attract new clients. You have to constantly be thinking of ways you can sell."
Selling your wares
If chasing the sale is key to keeping your business afloat, what is the best way to get consumers to buy your clothes? Greg ‘s advice is to sell directly to the customer. "This takes out the cost of using a retailer or distributor and it allows the entrepreneur to get much closer to the market and to learn about customer preferences directly." While selling direct to the client is optimal, both Caren Waldman of Two and Jacqueline caution against being hasty to open your own store as they have witnessed a lot of designers struggling after opening a store too soon.
Two (pictured right) stocks 40 stores countrywide and this gives the brand great exposure. While Hermanna Rush has already opened a store in Rosebank in conjunction with Miss Scarlett, they did not rush into it. They also stock over 20 stores and have over time strengthened their market position.
According to Stiaan, Jacqueline and Caren, one of the greatest dilemmas fashion business owners will face is finding stores to stock their merchandise. In most cases agreement will be on a consignment basis. For Two, consignment is a double-edged sword. "When you are a young designer you have no option but to agree to consignment." Caren explained, "and the problem with consignment is that you are permanently in the red and carrying all the risk. The shop is not held accountable if stock goes missing or if stock does not sell. You have to lay out all the capital for your collection and if it does not sell it is returned to you and you are stuck with it. But consignment is not all bad. It helped us get into a lot of stores and increased our presence throughout the country."
Stiaan commented that while it be great if you could find stores to buy your stock it is difficult if you don’t have a track record and can guarantee sales. "I now sell directly to my individual clients and stock some boutiques who have regular customers who buy my clothing," he said.
Hermanna Rush (pictured left) managed to change the terms with a lot of their stockists after proving strong sales figures. Jacqueline explained, "you can try to set a precedent from the start and not to stock on a consignment basis but a lot of stores will not stock you."
How it can all go wrong
According to Caren, while they managed to increase the awareness of their brand by stocking stores countrywide, they do think it was a mistake to stock so many stores on consignment. According Greg, the number one reason that businesses fail is that they run out of cash. "One needs to spend money before one makes money. As your business grows so your expenses grow and almost all your expenses precede your sales so you always need to have cash to fund the expenses prior to getting income from the sales that you make. Many entrepreneurs misjudge this and therefore run out of cash. Entrepreneurs also fail when they create something that the market does not really want or need. As a new business, with no prior reputation or status and no existing customer base, your offering needs to be very compelling for people to buy."
Stiaan Louw understands the importance of managing cash flow and said "I am still learning how to grow as a business as I am definitely creatively driven. I think if I knew what I know now back when I started my company I would’ve probably been too scared to get started because it is a huge sacrifice, particularly financially."
In his opinion, experience is a big factor that contributes towards starting a successful business. "A lot of graduates are starry-eyed and excited to get started but most colleges don’t really address the true obstacles that you will be faced with. I would suggest you intern with other designers who have successful businesses, even if you do it for free, and use the opportunity to learn as much from them as possible, from how to present your product to how to manage a production line."
Stiaan cut patterns on freelance basis after he graduated in 2000. He then shared a studio with Maya Prass, who mentored him.
"I think a lot of young designers have a plan to get three seamstresses and machinery, but they don’t ask: who am I making for? How am I going to make money? You can’t just be all about ideas, you have to know how you are going to make money out of those ideas. And at first, you might need to save that money by doing everything yourself rather than contracting that work out. I still do a lot by myself, so I’ve had to skill myself up. There are all kinds of elements you have to learn, for example, how to do costings accurately as you have to factor in your petrol, your salary and such.
It is also tricky find staff, sometimes you can have all the orders but no workforce to produce your orders. There are all of these factors that you need to take into account which if not tackled correctly can sink a business."
Jacqueline and Gina agreed that there are a lot of skills you need to develop as you build your business. They both emphasised that you can minimise your start up costs by starting with a smaller range. "Start by selling one item and then build from there – that is the story of our success," Gina said.
If you keep your start up capital to a minimum you can also avoid approaching institutions for loans, another cause of great strain for a new business. "We used my savings to start the company so we started from a small amount and we focused on just growing that amount of money. We didn’t earn salaries, we just poured all the money back into business," Jacqueline said.
- What are the sources of revenue for the business?
- What are the cost drivers for the new business?
- What size capital investment is required to launch and sustain the business?
- What are the critical success factors for this business?
Services for business owners
Greg pointed out that knowledge could be gained from all avenues, even if it means working as a store assistant. "Paul Simon, the founder of YDE, learnt a great deal about the industry while folding clothes for GAP in London." He also advises reading Entrepreneur Magazine or buying Business-in-a-Box – a kit he helped develop which consists of three CDs and two books that offer practical advice, business templates, contacts and inspiration.
Stiaan, Caren and Jacqueline all use the fashion week platform to market their business. Further than this, Sanlam South African Fashion Week (SSAFW) has been a fantastic support to their businesses.
"They have a great passion to push entrepreneurship in fashion. They asked us what we [as designers] wanted and they have responded by meeting these desires." Caren said. "This has included scheduled viewings of tapes of international fashion weeks, Amanda du Plessis educating business owners on how to develop costing models and do range planning; and Gavin Reddie conducting business workshops with graduates."
Jacqueline concurred, "They help you get sponsorship for your shows, and get profiled in the media. I would suggest to young designers to set up a meeting with Lucilla Booyzen as she is very approachable. Not everyone can fit in the shows programme each year but she will keep them in mind for the future."
Challenges to getting started
Amid all this support, Jacqueline warned that it is a difficult and competitive industry to get started in. "Your start-up costs are high for your first range – it is not like starting a business in the services industry where you are your product."
Greg, however, argued that the start-up process is difficult for everybody. "One of the most distinguishing features of successful entrepreneurs is their persistence – the ability to overcome barriers and to continue on in spite of challenges."
Stiaan acknowledged Greg’s point. "I was doing women’s wear and I was constantly hitting my head and struggling. I was determined to make a success of my business and spotted a gap for menswear. I have had more success with menswear in the past year than the past four years of women’s wear because I picked up that a lot of men, like me, were struggling to find clothes they liked and I created something different."