Alexander McQueen Spring/Summer 2005 | Source: Hapsical

Tents, but No Circus (NY Times)
“But what the increasingly industrialized Fashion Week now signally lacks is a certain giddy excitement, the fanfare and promise of genius that were common in the days when you could still get close enough to it all to see the greasepaint and smell the sweat… Ms. Roitfeld claimed flatly that fashion is not much fun anymore. ‘It’s less light-hearted, less spontaneous,’ Ms. Roitfeld said. ‘Fashion has become an industry, one that increasingly stifles creation.’”

Saks, Nordstrom Say Luxury Sales Firm (Bloomberg)
“So far so good in the luxury sector, say top executives of Saks Inc. and Nordstrom Inc., as stock markets lurch up and down amid global economic uncertainty.Saks Chief Executive Officer Stephen Sadove and Nordstrom Chief Financial Officer Michael Koppel say sales at their luxury chains are holding up and that they are sticking to their forecasts.”

Cult following helps Superdry sales soar (Guardian)
“Shares in SuperGroup rose 7% after the company said total group sales were £54m in the three months to the end of July. Wholesale sales almost doubled on the strength of international demand for the retailer’s clothing. SuperGroup listed last year and has divided City opinion, with some investors viewing it is a temporary fashion fad rather than a long-term bet.”

The Rising Popularity of Hong Kong’s Young Haberdashers (Red Luxury)
“Creativity from an unlikely source — young, ambitious entrepreneurs– is cultivating China’s homegrown luxury industry. Particularly in Hong Kong, where relaxed taxes and government initiatives appeal to new businesses, industrious young men have created a niche market for haberdashery that is earning serious attention.”

Paris to sell its young (FT)
“The Council of Fashion Designers of America is taking a page out of the British Fashion Council’s playbook and is bringing 10 of the past CFDA/US Vogue Fashion Fund finalists to Paris Fashion Week. The finalists will be able to use showrooms to help them “expand their international business and increase their presence outside of the United States,” according to Steven Kolb, CFDA chief executive.”

The fourth article in our BoF Basics series for emerging designers has been a long time coming. We have been receiving emails every other day asking when the next article would be published. So, here it is, and  thank you for your patience.

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So you’ve done it. You’ve cobbled together some financing from family and friends or squeezed a loan out of your bank manager. If you’re a little farther along, perhaps you have managed to raise an injection of capital that will help take your business to the next level. The question is, now what to do with your funding? And, how do you make it last?

It’s likely that you will have had to agree fund allocation to some extent with your investors prior to securing the funds, but it will be important to re-visit and re-confirm this now that you are past the negotiation stage. In reality, you will make spending decisions every single day, how ever small. The fourth part of the BoF Basics discusses the allocation of your capital, or more simply, how and where to spend your money.

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Taking on financing is one of the most important decisions an emerging fashion company will make.  This step is absolutely essential because the early stages of growth often requires significant amounts of working capital that cannot be generated by the business alone.  So, unless you are independently wealthy and sitting on a pile of cash, financing decisions will be part of your critical path, early on.

What is the difference between equity and debt?
Financing can come in many forms, but it basically comes down to equity versus debt.

Equity investors (in this case, venture capitalists or angels) provide cash to invest in your company and  therefore end up sharing ownership of the company with you. They invest in the hopes that your business will grow and that they will have some positive return through shared profits and upside.  They may offer you resources and expertise to help drive the business further. In fact, this is much preferred to someone just giving you cash and leaving you to fend for yourself.  If, however, you disagree fundamentally with your investor on where you want to take the company and how you will do it, then you may find their “help” a nuisance. Thus, when evaluating equity investors, choose someone who is aligned with your strategy and who has the industry and/or functional experience that your business needs to grow.

Debt financing, on the other hand, usually comes in the form of loans, where you are required to pay back  the money you have borrowed, plus interest, using a fixed schedule of payments that can be spread out over many years. While debt providers won’t be actively involved in your day to day business, taking on debt will mean you will have an additional cash outflow that your business will have to be able to support each month to stay on good terms with your bank. If payments aren’t made regularly, you may quickly find yourself dealing with irate calls from your bank manager. In the worst case, taking on too much debt  could drive your business into bankruptcy. Debtors are always paid back before profits are shared amonst the shareholders of your company.

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It seems the Business of Fashion for emerging designers is a relevant topic around the world. Recently, fashion bloggers in Germany and Brazil have been commenting on The Business of Fashion Basics series in German and Portuguese. Leo Moura, who is based in Brazil, is even translating the entire articles into Portuguese.

Thanks very much to Leo and Modabot for getting the word out. Stay tuned for article three on finding the right investors and partners.

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.

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