The Basics | Part 2 – What is a Business Plan For and How do I Go About Writing It?

Source: Shutterstock

Source: Shutterstock

The term “business plan” is casually bandied about like a hot potato in the studios of emerging fashion designers. Everyone knows you need one, but still, so few emerging design businesses take the time upfront to properly plan for their success. I use these words intentionally. Success is very rarely accidental. Sure, we all benefit from some good luck from time to time, but real success can only come through hard work and good planning. For this, a business plan is critical.

So, what is a business plan for? Many people think that the primary purpose is to secure funding – i.e. loans from banks or cash from investors. And while this is certainly one important objective, it is not the most important one.

The truth is, the business plan is, above all else, for you: the person or people who will drive the business forward. It is the document that lays out your vision and objectives. It is your roadmap for how you think it should evolve and grow to achieve this vision. It contains the budget and projections for how your business will manage is finances and fund growth. It is the document that helps you decide what to do, and just as importantly, what not to do. It is a living, breathing document that you should use to measure your progress, while still being willing to adapt it to reflect new insights, unexpected competitive threats, and changes in your business environment. In short it is like your company bible – except that this is a bible you can adapt as you go along.

You can also think about the business plan as a tool for communication. Anyone who has set up a new business knows that when you are looking for investors, employees, suppliers, office space, banking services, professional advisors and everything else that you need, you have to tell people about your business and its aims. When you have spent the necessary time in crafting a business plan, you will be able to more clearly articulate what your business is all about. This makes you seem more professional and organised and will enable you to attract the people, support and money that your business needs to succeed. Going through the business planning process will enable you to distill your business down into a short “elevator pitch” of concise points that together provide a good understanding of your business aims in a short period of time. When people understand your business, they will know better if it is something in which they would like to be involved.

Now, if that all makes sense, what then do you need to include in a business plan? Essentially, it should address all of the constituent parts of your business starting from the broadest vision of the business right down to the most minute operational issues of job descriptions and work plans. The first thing to do is create an outline for all of the topics that need to be covered, and then for each of those topics jot down all the ideas and thoughts you already have. If you don’t have a written plan already, then it’s likely that much of your business plan is in your head and so you need to start getting your current thoughts out on paper in a structured way so that you can then go and revisit each of the topics in more detail.

A sample outline for a business plan for a fashion business might look as follows:

1. Executive Summary – This is something you do at the end, once the rest of your plan is fleshed out, It will quickly become the so-called “elevator pitch” for your company, when you need to describe it in a short interaction. It only needs to be a few paragraphs long.

2. Vision and objectives – This section describes the vision of your business — essentially, why you set it up. What specific market need are you trying to fill? Which customer are you targeting and why?

The more specific you can be about these issues, the more compelling your business plan will be. If the reader (or listener) can really understand the market need you have identified, then they will be much more likely to buy into your overall business plan.

The importance of knowing your target market cannot be overstated. Therefore, one of the first questions I always ask when meeting emerging designers is about their target market. When they provide a fluffy answer like “I design for people like me and my friends” or “A young woman with lots of money,” it usually indicates that they haven’t spent much time thinking about this critical question. And if they haven’t done so, it makes me wonder exactly who are thinking of when they are designing. If they don’t have a specific person in mind, then how do they know exactly what that person needs,  and what occasions they are shopping for?

Understanding everything about your customer’s lifestyle and preferences will make your job as designer and manager all the easier. You will not only know who you are designing for, but also where they shop, what magazines they read and what influences their buying behaviour. All of this will feed into important decisions you make everyday about how you design your collections, manage your business, and promote your brand.

3. Market and competitive landscape – This section describes the market you plan to operate in. What is the size of the market and how quickly is it growing? Who are the other players in this space?

To be clear, market size you need to describe is not the size of the global market for clothing, but your estimate of the size of the specific market you have identified, in the geographies you are focusing on. Yes, this information can be hard to find, but you can take larger market size figures and estimate what share of the overall market your business is going after.

As for your competitors, the better you can describe and understand their products, their style and aesthetic, and their positioning and strategies, the better you will be able to shape your business to stand out from the pack.

In general, quickly growing markets of a good size with few competitors (or few strong competitors) are usually quite attractive. However, if you have identified a clear niche market that is currently unfilled, then that can also be very compelling.

4. Implementation plan – This section clearly describes all of the resources you will need to make your business successful. How many staff will you need in which roles? What type and size of space will you need to design and sell your collection? What outside expertise may you require to operate successfully?

An implementation plan therefore contains a detailed description of all of the operating requirements in your business including Design, Production, Sales, Marketing/PR, and Retail. You should have a detailed plan for each of these core steps including human resources, expertise, space and timing. Thinking very clearly about the various roles and responsibilities that need to be filled will ensure that you find the right people to make things happen for you. In turn, attracting the right team will also make it easier to attract funding. Most investors invest in people and teams, not just ideas.

Without an implementation plan, your business plan can lack the concreteness and specificity required to convince people you can take your vision and make it a reality.

5. Financials – This section is absolutely critical to your plan as it will identify your projections for how the business will grow, in terms of both profits and revenues, and what financing you will need to make it happen.

An income statement uses carefully thought-out projections of how your business will grow at the top-line (i.e. sales and other revenues) and will also project the costs of delivering that growth, including the team and other resources you have identified in the implementation plan. This statement will then project profit, by taking projected revenues and subtracting projected costs.

However, the income statement does not tell you how much money you will need to raise as it does not reflect the timing of cash inflows and outflows. This is where the cash flow statement comes in.

The cash flow statement is one of the most important parts of your plan as it shows the peaks and troughs of your cash situation on a monthly basis and identifies what funding you will need to make it through the troughs. You can think of the cash flow statement as a monthly account of cash coming in and cash going out. The difference between these two figures is your funding need for that month – and you are better off knowing your funding needs in advance as opposed to finding out later when your bank account is empty and suppliers are asking for payment before they release your goods. This is particularly important in the fashion business where you incur many costs up front (designing, sampling, sales efforts) before any of your revenues even come in.

If you can, you should have a trained financial or accounting professional (a friend, family member or other contact) to help you with this section. They will have the expertise to sense check your assumptions to ensure that they are sound and believable. It’s better to have their input before you take your plan out to investors who will inevitably ask you the same probing questions and who will be looking for concrete answers.

Next time: Finding the right investors and partners

Once you have a plan in place, you will then be ready to start soliciting financing. In the next installment we will give you concrete advice on where to find the best investors and partners for your business.

This is the second in a series of articles on the Business of Fashion: Basics

• Basics 1 – Setting up your own fashion business – what do I need to know first?
• Basics 2 – What is a business plan for and how do I go about writing it?
• Basics 3 – How do I find the right investors and partners?
• Basics 4 – How do I decide where to allocate my capital?
• Basics 5 – Design and development
• Basics 6 – Sales
• Basics 7 – Production
• Basics 8 – Marketing
• Basics 9 – E-Commerce

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20 comments

  1. Fantastic article! I’m not in the fashion business but have a web design business along side our Online Business Planning Software service PlanHQ that we made to help businesses do exactly what you’ve talked about here. I love it. You’re bang on with the bit about a business plan being a living document. This bit here really stood out to me, and I think it’s a smart line: “Success is very rarely accidental. Sure, we all benefit from some good luck from time to time, but real success can only come through hard work and good planning. For this, a business plan is critical.” Excellent stuff, Look forward to the rest in the series, cheers, tim.

  2. I’ve not been in the fashion business however I own e-business of optimizations. I guess, A business plan should be formally stated with a largely enforced business goals, the reasons why they are believed attainable, and the plan for reaching those goals. It may also contain background information about the organization or team attempting to reach those goals. That’s what my experiences says. Business which comprehend their goals *grow* and those don’t destroy.

  3. Great overview. One thing to keep in mind is to make it as visual as possible. Often, whoever reads your business plan, will have seen tons of them. Good visuals (diagrams, charts, logos, even illustrations) will make it stand out and engage the reader.

  4. i have enjoyed reading your material and would like to always receive an update on how i can continually make my business grow,different ideas and creative ways on how to develop my business plan.thankyou

  5. I really gained from these publications but when will the remaining four be out?

    sola from Nigeria
  6. This piece of work is really helpful for me. Im starting a custom designed fashion line . as im doin it online first , I was wondering if there would be any good way to increase my traffic?

  7. This is a great article. Great is an understatement, but I really appreciate the realistic view offered in these articles. I am designer looking to start my own line and finding good, useful information that doesn’t skate over the facts has been extremely difficult to find. There are tons of free information available to the public on starting other types of business, but it has been a long, arduous process finding information on fashion, which is a very specific business. The fact that this information is free is really helpful to us struggling entrepreneurs who just can’t afford to continually pay for information. I have bought books that don’t give as much useful information! I have several friends in the industry who have started their own lines, whom I’ve picked their brains trying to learn more and they still don’t have a clue! I now feel like I know more than they do, not just from my experience in the industry, but once I realized and accepted that the business component of a owning and running line is at least as important as the fashion component, if not more! Before taking any further steps, I have decided to dedicate my efforts into learning to run a BUSINESS as opposed to just designing, which is how I came across your site. Once my venture is off, I also plan to give back by passing on my knowledge to help others begin their dreams -gratis- as well. You are truly an inspiration. Please note that your insight and efforts are GREATLY appreciated by those of us who really need it, and I commend you for stepping up to the plate when many in a position to do it are not. You are helping the little people to become big, and your site, stories and tips are truly needed and appreciated! Keep up the good work! I am a huge, huge fan!

  8. I am having a hard time finding a cohesive answer on my question, and maybe you can shed some light….

    For many years I have earned a decent living doing custom work..
    Recently, I have been approached by a client and through some successes in venture, I have been extended the opportunity to partner with her in a nitche market..

    I suppose it works out to be Partner=finances with creative input and me =technical design/creative input/production .. As the runs will be small at first it does not make sense to outsource when I have both the knowledge and time…

    So in this structure (that I’m told will be an LLC), should I be recieving payment for production seperately from what would be the profit margin (I hope I am asking this question correctly)?

    And as far as 2 partners paying themselves from the LLC, is that usually a 50/50 split?

    Its possible Im making this more complicated than it needs to be.. I’m open to any answers/resources you may have for me..

    Thanks so much for the wealth of information on this site!

    Enne from Dublin, OH, United States
  9. Stunning! Finally an article that makes putting a business plan together sound like a fun project! I am busy in the research phase of setting up my own business and setting it up properl. As they say “watch this space” …and thanks to decent and honest advice I am all the more confident.

    Melinda from Cape Town, Western Cape, South Africa
  10. Interesting serie of articles but full of platitudes. For a bit that the person wanting to create his business has taken the time and effort to study business-management for not even a year, he will not get much benefi,t if not any, by reading these articles.
    To start a business maybe should they simply study the basics of business?

    Raphaëlle from Brussels, 11, Belgium
  11. That sounds very realistic, all that is required is to put it on paper and execute it. Thank you for sharing it. I am a designer and I launched my label a year ago after quitting my job.
    Finance and funding as you mentioned is crucial. I want to know your views on doing a job in the fashion industry to be able to gain experience, knowledge and also be able to generate funds, along with running the label alongside.
    Would love to hear from you.
    Thank You

    Sharmista from Pune, Mahārāshtra, India
  12. Your article very helpful. I am into the fashion world were I design my very own heels and shoes for ladies handmade in Malaysia. I also have lace collections where you can use it on your apparel and I am starting off retail by going online first. Would love to have an article on how we can increase traffic to our fashion site.

  13. this article as rly hlp,but need to know more cos i ll b starting a fashion school soon hoping to open a fashion outfit but dnt knw where to start from.
    tanks.

    Sholeye Rukayat from Nigeria
  14. Thanks for the article.. It helped me as I didnt know from where to start from.

    Rohini R from Thana, Mahārāshtra, India
  15. My brother suggested I might like this website. He was totally right. This post truly made my day. You can not consider simply how a lot time I had spent for this information! Thanks!

  16. Amazing issues here. I’m very happy to look your article. Thank you so much and I’m looking ahead to touch you. Will you kindly drop me a e-mail?

  17. incredibly helpfull

    miss udy from Nigeria
  18. This is great article that helped me in writing my own business plan! However, as a designer myself I have difficulties identifying competition. Do you have any suggestion on how to go about? Do you know any industry services or a method perhaps?

    T from Belgrade, Serbia (general), Serbia