More Money for Shoes author Melissa Browne advises designers on early financing.
When young girls and boys dream about a career in fashion their dreams are full of inspiring designs, gorgeous stores, fashion shows and success.
As adults, designers find that their dreams are consumed not with their next line but with finance, cash flow, pricing, costs, exporting, managing suppliers, quality control, budgets, capacity, production and lots more.
How do you stop your fashion dream turning into a fashion nightmare? By choosing to embrace both your creativity and your business acumen.
In today’s marketplace, having an amazing line is only half the story – you need to become great at understanding the numbers and financial side of your business.
Where do you start? My advice is to break down the numbers as they relate to your business and understand what you should be doing about them.
So, if you’re just starting out, what do you need to understand when it comes to financing your first order?
The first thing to appreciate is that lenders may not share your vision and are nervous about your industry.
If you don’t have property you may find that banks are unwilling to lend to you.
Don’t be put-off by rejection but consider the following:
1. Ask if parents or partners will act as guarantors. Banks may look more favourably at your application if there is security they can rely on
2. Prepare a detailed and realistic business plan that outlines what you want to do, why it will succeed and how much you need. If you have confirmed orders include these but know that the bank won’t automatically lend based on them.
3. Shop around. Just because one bank knocked you back, doesn’t mean another will.
4. Always have a plan b. For example, do you really need the amount you asked for? Often the extras that you might have thought were essential really aren’t.
5. Ask for what you need, not what you want. If you’ve received an order and you need $80,000, don’t ask for $150,000 with high hopes of more orders. It’s much better to fulfil an order, receive the money, repay the bank and ask for more than to borrow more, not receive the orders and struggle to repay the higher amount.
6. Look to alternative lenders. Do you have a family member that you could borrow from or have you considered angel investors or other non-bank lenders? Yes you may have to part with equity but if every other door is closed then this may be your only viable option.
7. Government Grants and loans. If you need cash now to fulfil an order this may not be helpful but longer term there are many different types of business grants and loans available. Make sure you access any that you are entitled to.
8. Budget, budget, budget. I know it’s not exciting but you need to think of budgeting as a vital business skill. At the very least you should have a budget and a rolling cash flow budget. Budgets (and accountants) may seem seriously unsexy and unnecessary but the reality is that you can’t afford, especially in the early stages, to let your spending get out of control.
If you think understanding the numbers is a waste of time and you can simply rack the whole thing up on your credit cards, create a fabulous line and everything will work out – don’t! Too many business owners I’ve met have tried this.
They end up with the façade of a great business but it’s barely profitable, they’re struggling to finance orders, they’re not paying themselves, there’s no money in the bank and there’s a whole lot of credit card debt supporting it all. Not a great look, or a great business model!
Give yourself every chance when you first start out to live the dream and not the nightmare by having a business that not only looks great from the outside but is successful and profitable on the inside. One that has cash in the bank, can fulfil its orders and truly is a successful, profitable business