Analyzing business plans pt.4

Catch up with the parts you missed, see the complete list of entries at close. The next section of the plan that we come to is Industry Trends. Again, this is something you have to put in a traditional business plan but as I mentioned last Friday, what can you really say that doesn’t end up sounding silly or obvious? This plan says:

Industry Trends: As consumers continue to save less and spend more we will continue to see an increase in retail sales. As a result, consumers are demanding greater variety, frequent changes in the choices available to them, and increased garment quality.

Brands throughout the industry must be in constant review of their supply chain management strategies, forcing the use of economies of scale, by outsourcing production tasks to multiple sites across the world. Scheduling of these tasks has become exceptionally complex, and can extend the time a new product is brought into the market.

As consumer trends and demands continue to change at a rapid pace. Designer labels must focus on establishing good relationships with manufacturers, to ensure these new trends are brought to the market in a timely fashion.

I’m not saying that this is, but the above reads like a cut and paste job from somewhere else. What is he really saying? Is he saying that consumers are demanding greater variety and frequent changes because they are spending more and saving less? Or is he saying that because people are spendthrifts, it’s easy to get their money? And what does that have to do with the second and third paragraphs regarding supply chain stuff? By the way, I see that all of the time; writing about outsourcing on a global platform is very inappropriate for a start up. If you haven’t even gotten one prototype together, pass on the descriptions of your visions of a global empire in your business plan. Then, the very last sentence is highly problematic. It illustrates that this author understands next to nothing about the industry. It’s as though he thinks that designer labels and manufacturers are separate entities, not realizing they’re one and the same. While “good relationships” are to be lauded, it’s planning and payment that bring more to bear in the race for timeliness.


In the next section of the plan is an analysis of the competition and this is where things really get sticky. I’ve underlined the sentences to make note of:

Competitive Analysis: The fashion industry is saturated with designers targeting several segments of the market. The established firms have developed a strong brand loyalty by understanding their target market needs; such as the price their market is willing to pay, the quality they expect in their products, and introducing the latest fashion trends. Although we do not compete directly with many of these organizations, we recognize that their products can be purchased as substitutes. These organizations are backed by a strong financial stability, which gives them the ability to set trends, establishing a strong reputation and loyal followers.

The underlined sentence leaves the impression of what could minimally be described as over-confidence. If you’ve yet to launch a product in the market, it is not appropriate to describe the products of parties with whom you hope to compete as being “substitutes”. If anything, it is your non existent product that will be the substitute. The second paragraph shows similar problems of overconfidence:

While several brands have distinguished themselves as urban couture clothing lines. Few have succeeded in sustaining a leading brand position in both the urban and boutique market. Through our initial stages of growth, we believe our main competition will be the urban clothing lines and boutique designers. The initial stages of growth will not induce our competitors to modify their marketing strategy. As we begin to introduce a larger selection to our quarterly lines, competitors may be inclined to reduce their wholesale and retail prices. They may also introduce creative signs and displays, to preserve their market share. Despite the industry’s high start up costs, many new designers will emerge. To ensure we remain competitive within the industry we will pursue, new markets, and product offerings.

First of all, a pet peeve. If you’re going to use terms such as “couture”, please be familiar with what the word means. Minimally, couture means custom and it comes from France. The phrase “urban couture” is an oxymoron.

Again, someone reviewing your plan will not think you are highly confident but rather, delusional if you describe your future competitor’s likely strategies of dealing with your anticipated success. In the end, you are projecting what you would be likely to do in such a circumstance which could be more telling than you intend.

If you’re going to write a business plan, do assume that the person reviewing it will know a lot about start up manufacturing so you must do your homework. Saying “despite the industry’s high start up costs” leads one to think you have little basis for comparison and as such, are a poor credit risk. The reality is, not only is the apparel industry known to be rather easy to get into, it has the lowest entry costs -and barriers to entry- of any class of manufacturing.

Next in the plan is a four paragraph breakdown of their “competitors” which I won’t be reprinting (other than the third paragraph). It is problematic in that the first competitor listed is Wal-Mart. If the line being planned is “couture”, why would they introduce Wal-Mart as a competitor? Besides, Wal-Mart is a retailer, not a manufacturer so I don’t see how Wal-Mart would be competing with them anyway. In general, this plan is problematic in that the author discusses given retailers as competition rather describing other manufacturers as competitors. It is evident the plan’s author does not understand the difference between the business of retailing and manufacturing.

The third paragraph is problematic in other ways. See if you can pick out the problem here:

Commercial Designers are large companies such as Zara, and Parasuco. Garment quality is generally very good, but are able to cut cost due to the fact manufacturing is produced on a very large scale. They compete in the global market and generally, have established excellent relationships with retailers and manufacturers. They have established their success by providing the latest in fashion trends. They generally, are in malls were traffic is high. Their garments are generally sold for $30-$300.

First of all, I don’t know where this plan’s author comes up with his categories such as “commercial designers” (his other categories were problematic too). I don’t know what he means by this. Zara is a manufacturer who also happens to retail their own stuff. I don’t think the plan’s author understands this or even understands the difference between a contractor and a manufacturer. I think he is making the same mistake of many newbies in that he continually uses the term manufacturer instead of contractor. It doesn’t make a plan look very professional if you don’t know the lingo of the trade you’re attempting to enter. Still, the introduction of Zara into the discussion is deadly. Do not -I repeat- do not talk about something if you don’t know what you’re talking about. Zara does not produce on a very large scale but rather, a lot of very small ones. Their lots are tiny, no more than 300-500 pieces per style but produced with amazing rapidity. Zara competes based on a very fast scale, not a large one. I think a lot of people have missed that nuance.

Now the plan’s author gets into the SWOT Analysis.

Strengths: Our success will stem from the team’s strong management skills. The decision to use a network structure allows the team to operate in different locations effectively, through the use of communication channels, such as the Internet, email, fax and cellular phones. Their mission to outsource the designing process to rising fashion designers will strengthen their strategy of providing a uniquely diverse and marketable clothing line. Our experienced team of manufacturers and fabric retailers will also strengthen our position within the industry, as we benefit from short manufacturing turn around times. This will allow us to take advantage of unforeseen fashion trends in an efficient manner. As operations begin to expand, our manufacturers and retailers will provide the necessary resources to enable a smooth transition from domestic to foreign manufacturing.

~sigh~ I don’t even know where to start with this other than a minor detail of proofreading; all of your pronouns and verbs should agree. Switching between “our” and “their” is confusing to the reader (apparent through out the SWOT section). I could nitpick the above paragraph to death -everybody uses email, fax and cell phones these days so that’s not any kind of an advantage- but the biggest problem is the contradiction of saying that their benefit is due to short turn around times, and then closing the paragraph with transitioning to foreign manufacturing. If this company sees their advantage as lying in short domestic cycles, how to they expect to keep that benefit when they expand offshore? It doesn’t make sense. In other words, they plan on short turns in the short term but once they make it, they plan on long turns for the long term? Be mindful of possible contradictions in your plan; going offshore will not permit anyone to “take advantage of unforeseen fashion trends in an efficient manner”.

Weaknesses: As a start up clothing company, the main disadvantage is their weak brand name. Retailers are reluctant to buy from start up fashion labels, due to their limited product offerings, and fear that the garments may not sell as quickly as an established fashion label. Our secondary weakness is lack of design knowledge by core management, which may slow down manufacturing if the necessary information to complete the garment is not provided.

You certainly can’t argue with any of the above although I’d place management knowledge as number one rather than branding. I mean, if you can’t get a prototype out the door, branding is of little concern.

Opportunities: As consumer tastes begin to shift from urban clothing to trendy designer clothing, the opportunity to provide quality designer garments in the urban market will increase our brand awareness, as few companies have targeted this market. We are also considering the prospect sales through outlets such as Internet, and flagship stores. These outlets will provide us with the opportunity to sell generic products, increasing the product mix and marginal sales.

There’s not much to argue with in the above paragraph either. The one following it though made me laugh out loud.

Threats The growing concern of a world war is the primary concern, as this may impede the economic growth. This generally leads in a halt of retail spending, as consumers attempt to regulate their financial position. Our secondary concern is the production of similar “no name clothing”, which allows the consumer to purchase the product at lower prices. Though we do have immediate plans on opening a retail segment online, we believe that we may have a difficult time generating sales through this avenue, as consumers may be hesitant to purchase from companies with little or no history.

I had to laugh out loud that this company perceives their number one barrier to success as being impending world war. I mean, I’ve heard people hedge their bets in many many ways but that’s got to be the most interesting reason I’ve read in a long time. In other words, as long as world war doesn’t break out, they will be successful?

Next in the series will be the discussion of their target market followed by pricing and products. Before I leave today, I want to reiterate that I see plans like this one all of the time, this is not unusual, not at all. This one is very average. Downright typical. So don’t laugh.

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

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10 comments

  1. jinjer says:

    Kathleen says:
    “Minimally, couture means custom and it comes from France.

    I actually disagree with this. Even the Dictionary changes the definition of words as their popular usage changes, and that is definitely true of “couture” (and don’t even get me started on “tailoring”)

    I’ve seem people use the word “couture” to mean everything from “custom” to “one-of-a-kind” to “expensive.” These definitions are readily accepted by the clothes-buying public. The problem is, there are several different culturally understood definitions of the word, which makes it ambiguous, and therefore useless unless clearly defined at one or more points in any written materials using it. It seems that this business plan uses it to mean “fashion-forward.” I think. It’s hard to tell.

    …And why should the definition of “couture” include “comes from France”? Just because it’s a French word? We use lots of foreign words in English, that doesn’t seem like a reason. Even “haute couture”–which has always had a separate definition from plain old “couture”–includes some Italian and American (and Japanese?)fashion houses, they just have to have an office & show their collections in Paris.

    word aren’t static entities that retain their meaning despite how we use them. And I say this even though it grates on my brain whenever anyone uses the word “comprise” as if it were a synonym for “consist.” Sigh.

  2. Karen C. says:

    Though I haven’t read the book in a few years, I could swear that some of that language was plucked right out of “From Concept to Consumer.” Very familiar ring to it….

    This business plan also reminds me somewhat of my first draft biz plan before I really started to understand the industry. Now that I have my prototypes and getting ready for production, my plan would read a whole lot differently.

  3. Esther says:

    I downloaded a business plan guide from the SBA and tried to use it to write my own plan. I had to eventually abandon it because it just plain doesn’t work for the fashion industry. This plan seems to follow most of the same format. This was frustrating to me because a small business loan depends so much on this style of business plan. I wonder if there any suggestions for business plans that work for the apparel business?

  4. J C Sprowls says:

    Kathleen said: The phrase “urban couture” is an oxymoron.

    Oops! I think I p’d a little…

    [Putting on “serious” face]

    I’m increasingly disappointed by the fact that there are books on the market that encourage people to write bad business plans. Even worse, they bespeak the dream that a plan document can be drafted in tangibles and investor needs to be able to review.

  5. Kathleen says:

    Esther, I don’t know if there are plans specific to apparel businesses but I would definitely like for all of us to be able to come up with something. I mean, who better than us? I think it’s better if we come up with a template than using the SBA’s. If we did, we could make it available to anybody for the download.

    And I also agree with JC. I mean, plans are great to grow into even tho they change crazily. I mean, I had a plan 11 years ago but I know it doesn’t resemble anything I’m doing today (who knew I’d become a writer?) and I know that a plan I come up with today won’t resemble what I’m doing even 5 years from now.

  6. J C Sprowls says:

    jijer said: …And why should the definition of “couture” include “comes from France”?

    This will always be a source of debate, I’m afraid. In France, where business is regulated upon the old guild philosophy, couture design houses are very few. To become a couture house, the process is limited, expensive, and elitist.

    First, a house must operate in France, the house must use predominantly French inputs, and the work must be done at least N% by hand stitches. In addition, one can only apply for the appellation after having been nominated and juried by peers. Moreover, the French government will issue a certificate, grant the maker a set of labels, and register the trademark. Post WWII (exact date eludes me) legislation allows a business to register a trademark either with or without appellation controlle’.

    jijer said: they just have to have an office & show their collections in Paris.

    I’m afraid that’s misinformation floating around in the artesan community. One of the criterion is to “operate in France” – though, that has been ratified from the original “operate wholly in France”.

    From the French Minister of Industry site:

    This label is a legally protected appellation which can only be used by couture houses which have been granted it. Such houses are listed on a decree issued yearly by a special commission of the Ministry of Industry.

    Currently, there are only 10 houses registered:

    10 maisons possèdent désormais le label haute couture: Adeline André, Chanel, Christian Dior, Jean-Paul Gaultier, Givenchy, Christian Lacroix, Emanuel Ungaro, Dominique Sirop, Franck Sorbier et Jean-Louis Scherrer.

    There are many fine tailors and dressmakers in the artesan community who uphold these traditions. And some may choose to describe their work using this word. But, regardless how fine the work, they cannot call their product couture simply because they did not attend to the process of becoming appelle’. I happen to be a proponent of this system; and, am not inclined to ratify it.

    While the English language does borrow words from other languages, it typically does so when the concept is verbose or awkward to describe using English (e.g. kaizen, chi, etc). I’m afraid that rule does not apply, here. Instead, the term couture was corrupted by the masses out of a desperate need to appear bourgeois. Which, is another oxymoron, in itself; but, I digress.

    [Here endeth the entymology lesson]

  7. Thomas Cunningham says:

    jc — very interesting — but I don’t understand what you meant when you said you are a proponent of the system but you’re not inclined to ratify it?

    tc

  8. J C Sprowls says:

    Thomas,

    I happen to agree with presenting work for jury by peers. While the system is not without its flaws, it is the only method of obtaining a viable credential for some industries. In effect, a panel of peers is (i.e. the guild) endorses the new member when s/he presents work of substantial contribution to the trade.

    For the US (and, perhaps the North American continent) there are two organizations that practice the jurying process for prospective members. The Professional Association of Custom Clothiers (PACC) and the Custom Tailors & Designers Association (CTDA). There may be others; but, these are the two that I am most familiar with.

  9. Marnie says:

    There is a guide available from the Toronto Fashion Incubator entitled, “How to Prepare a Business Plan: Designed for Fashion Entrepreneurs.” (It can be found at https://www.beanstream.com/scripts/cart/view_products.asp?merchant_id=117481849 or alternately, http://www.fashionincubator.com and click on shop.) It’s essentially a template, already filled in for a ficticious business, and you replace their information with yours. I have it, and I think it’s a good document. It isn’t everything you need to actually *plan* the business, but it’s a good format, will help you put your plan on paper, and it’s helpful to see a sample breakdown of where someone else would spend a $25,000 investment.

  10. Analyzing business plans pt.6

    Finally we come to the end of the series (see parts one, two, three, four and five as needed) analyzing the average business plan I get. Remember, this plan is typical. Today’s entry continues where we left off at the…

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