Before I get into the content of part three, I want to make it clear that those of us who review a lot of plans, know that the primary reason that people send them to us, is that they hope we will be interested in partnering with them. I can’t tell you how many times somebody has offered me a piece of the business in exchange for services. Some entrepreneurs envision shopping the plan around to enough parties that they can staff the project (there are some real slick operators with impressive credentials doing this). A business plan is not a lure so don’t use them that way. The reason they don’t work as lures is because most of the time, plans are things that a business developer can figure out how to do on their own so there’s no reason for them to partner with you. Now if you had tooling, prototypes and samples, I could see it, that’d be an asset but if you don’t have protos and samples, nobody needs you. Therefore, nobody -I repeat- nobody is going to give you money to make prototypes and samples no matter how good your idea is. So, call me despotic and hard headed, I wouldn’t bother somebody with a business plan until you had proofs of tangible investment in your own idea. Besides, nobody will really know what you’re describing anyway.
[climbs down from soapbox]
In continuation of analyzing a business plan -see the complete list of entries at close- as needed. Below are the mission statement and keys of success. I’m going to refrain from commenting on these because the issues they raise will be discussed more appropriately elsewhere. Well, other than to say that I’d describe the difference between haute couture and urban fashion as a chasm, not a gap.
Mission: The label’s mission is to produce edgy designer clothing, bridging the gap between urban fashion and haute couture. Created with the trend setter in mind, we will thrive by delivering quality products and innovative fashion trends to meet the needs of the individual mind.
Keys to Success
* Recruitment of highly skilled designers with an eye for upcoming trends.
* Improvement of retail sales margins through the reduction of per unit costs.
* Ability to offer collections on a quarterly basis
* Establishing a reputable brand name through networking with fashion related buyers, boutiques, retailers and press.
It’s not until you get to the subheading of Products and Price that you realize there are some real problems with this plan.
Products and Price: During the first year of operations our product offering will consist of designer Jeans, eveningwear, outerwear, and T-shirts. Our products will fall within the price range of $30-$100.
The big problem is the variety of product types. This is too many. You cannot, cannot get the design, patterning, sourcing, marketing, selling and production down for multiple styles in four different product categories in your first year. It’s impossible. At the very least you will need four different kinds of contractors and supply sources to say nothing of having to provide the marketing and sales support that a line like that would need. You can’t sell eveningwear and t-shirts in the same market. I’ve never, in my life, seen a manufacturer that made jeans, t-shirts and evening dresses in the same plant. It is an enormous challenge just to manage one kind of product, much less four different kinds. The complexity boggles the mind. Now, whenever I tell anyone this, they just don’t get it. They think that if they have enough money, they can get it done. You can’t hire your way into producing four lines.
If birthing a design business is like being pregnant for nine months and having a baby, trying to produce four different product lines would be like being pregnant with quadruplets but having to be at your best and on your game, and not flat on your back for the last 4 months, like you would be in real life. You can’t hire your way out of the problem -even if you could get the money- because that would be like trying to hire 9 women to produce a baby in a month. Or rather, four babies in a month. You can’t spend your way out of it. You don’t have the infrastructure or experience. This would be an enormous challenge for an existing venture, much less a start up.
There is another problem with the section too but that won’t become evident until we get to the spreadsheet portion -the costing- for the line. Briefly, the product line described as “eveningwear” is wholesaling for $20 so I can only imagine that the author’s definition of “eveningwear” is a lot different than mine. Eveningwear sells for a lot more than $20.
Next section is a blurb of ownership (not reproduced); the venture is privately held but planning to go public.
Next the author describes his location and distribution (not reproduced). I have a question for all of you, is it okay these days to say that you’re home based? Personally, I would have omitted the whole paragraph.
Next the author presents his credentials the summary of which is that he’s no dumb bunny. He’s got a advanced degree, one year in finance, six years in sales, mostly in organizing social events. He also includes the credentials of a partner. She has a degree in visual arts and is pursuing another in business administration. Her qualifications are listed as a successful modeling career and a love of fashion. Note to the author: watch the resume padding. These days, if somebody is that successful, I should be able to find them on Google -and I can find the names of my cats on Google.
Next is the Organizational Structure. The key duties and responsibilities of each partner are listed as follows:
Organizational Structure: Owner will be responsible for business operations, finances, and promotions functions. His duties will include:
- The oversight of manufacturing operations, production schedules and targets
- The implementation of plans for efficient use of materials, and labor
- The financial performance analysis such as, billing, budget, payroll, accounts payable/receivable, and taxes.
- The execution promotional retail incentives
Owner’s partner will be responsible for marketing, advertising, and public relations. Her duties will include:
- The forecast of product demand for our company and its competitors
- The identification of emerging trends to utilize potential markets
- The development of pricing strategies
- The assessment and execution of advertisement channel
- The implementation of publicity programs to our target audience.
Both individuals will jointly manage sales. Their duties will involve assigning sales territories, setting goals, and establishing training programs.
To me, the two above paragraphs just sounded like a lot of goobly-gook but that’s just me. Marketing language just doesn’t mean anything to me. I can’t process it because it’s not hard or tangible enough. Reading the above is like word soup. Either that or I’m tempted to play Bullshit Bingo. No, really, it didn’t seem to me that the author is really saying anything of substance here. I gather there is a lot of redundancy and duplication of effort -mostly sales and marketing related- with very little emphasis on operations. In fact, tragically, this plan only spends 1 paragraph on manufacturing and that comes on the very last page. Actually, it is the ending paragraph of the document so I fear the author has commensurately designated it’s importance and significance. I hope not.
The next section of the document is an analysis of the industry, traditional in business plans.
Industry Overview: The “designer fashion” industry has emerged from two separate parts of the industry: couture and commercial fashion. Couture is the fabrication of highly fashionable, custom-made clothing, targeting the high socioeconomic sector of the community. Commercial fashion segment is the mass production of trendy clothing. These firms manage a mix of collections, focusing on different segments of the market. The success of these companies depends on understanding a particular sector of the market, and focusing on producing collections that address their needs; and maintaining brand awareness to retaining market position.
In real life, I just skip over the above. What does this mean? Then the plan proceeds to a section entitled “Industry Size” which is when things get sticky. This is when most plans get into projections and projections mean nothing. Really. Just because you can define the size of a given target market doesn’t mean they’re going to give their money to you. Clothes aren’t ipods, for example. You can extrapolate plus or minus, how many 13-17 year olds are going to buy an ipod but an ipod is not a size medium stretch velvet purple top with puffy sleeves. The only people who can attempt to forecast their market size for a new product line are ventures who already have presence and experience in the market. In other words, brands that already have name recognition on some level or in some way. Like Ralph Lauren adding a new label.They also have experience and infrastructure. In a traditional business plan I know you have to put something in this section but it would be hard to write something that didn’t look stupid so I don’t know what you should do. You have to put in something. I just don’t know what.
Entries in this series:
Analyzing business plans pt.1
Analyzing business plans pt.2
Analyzing business plans pt.3
Analyzing business plans pt.4
Analyzing business plans pt.5
Analyzing business plans pt.6