Are you a target? pt.2

In my first post, I discussed ways others may unknowingly select you as a target for knock off. As I said before, the greatest tip-off to a target is product quality. This post will discuss other ways you may be a target and surprisingly, this kind of targeting may not be a bad thing. Albeit indirectly, this post will also explain (to the newbies) why you really have less to fear than urban myth leads you to believe.

First, do you know if your line is a target? Second, do you want to be a target? If you’re like most designers, you may think you’re a target if you’ve come up with some really nifty designs but in reality, that’s rarely enough to be anybody’s target. One of my favorite quotes by Howard Aiken holds the kernel of a less obvious truth:

“Don’t worry about people copying your ideas…if your ideas are any good, you’ll have to ram them down people’s throats”

The above is more true than people generally believe and explains why you’re safer than you think. Many genuinely good ideas and concepts don’t catch on very quickly and take time to reach fruition. If you really do have a great product line, you could be a target…but a target for what? Most of you assume that other businesses will just knock you off but in my experience, that’s rarely the case.

In real life, if another company really likes your style their first step is not to knock you off, it is to buy you out. The reason is they’re not stupid. If you have a great product line, they know you’ve invested a lot of time and money into developing a product line that is perceived as having value with consumers in the marketplace. You have a following. Being this kind of target means that your product line has potential to the extent that a buyer will make more money with your cooperation than without it. A buyer knows it costs less to build on your existing reputation than it costs to start from scratch themselves. That’s why knocking you off is a strategy of last resort, they’ll try to buy you out first (provided your product quality is largely intact, otherwise you become the first kind of target).

While you can’t hope to recoup every investment you made in your business and that shouldn’t be the goal, you can obtain a good return on the value of your product line. Also, do you know what the other business will expect from you; do you know the goods of the transaction? These are the things the other business will want to secure in the transaction:
1. Your label and goodwill
2. Your patterns
3. Your customer list
4. Optional: your continuing participation in the venture.

It is unlikely the buyer will want to buy any of your inputs, equipment inventory or real estate unless they are looking to buy a turn-key to operate for themselves. In the latter case, the buyer will probably want everything including your continued participation so you may serve to consult with them regarding day to day operations while they learn the business. If by chance you find yourself on either side of this equation and would like input regarding the appropriate value of a sale or acquisition, let me know. I’ve done some valuations of sewing businesses.

Being bought out can provide distinct advantages and all manner of buy-outs are possible. First, they may just want your product line (comprised of the list above). Second, they will usually want to hire you for a contractual period of time -perhaps indefinitely. Third, the buyer may want you to continue to operate the business for them and with their superior resources and acumen, a buyer can bring you up another level or three. Fourth, it is highly likely the buyer will offer you an interest in the venture as a condition of purchase. Fifth, it may be you want an exit; perhaps you’d like to try another type of product line and selling the existing one will give you the capital with which to pursue future goals.

However, I must stress one unfortunate fact. If a number of parties have approached you with regards to acquiring your label and you haven’t been receptive, it is very likely somebody will start pirating your look. This usually means you’ve made impact in the market and you may have no other alternatives in preventing this unless you actively pursue partnering with another entity larger than your own. While I don’t expect you to like it, if people start to approach you, my advice would be to sell. The reason is that by the time you find you’re having to weather competition from people copying you, your look -and the value of your label- will become diluted in the marketplace. So unless you have the extended resources to protect your label’s identity with consumers, I’d sell. If you wait to sell until after your look has become diluted, it will be worth a lot less to a buyer.

In the event you’ve decided you’d like to become a takeover target, your best angle to getting there is your product quality. As I’ve said repeatedly -quality is aptitude, not attitude- and quality is not issued by proclamation; it speaks for itself.

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  1. Selling your company

    In a similar vein as Are you a target pt 2 comes one man’s adventure in buying an existing concern. If you should find you’d like to become acquired, Buying a company is required reading, for example: To this cash…

  2. Rohme Williams says:

    I’m looking to start a new clothing line. My concept is based off the Ocean, Mountains (Snow, Lakes) type clothing and material. I was hoping that I could get a little advice about how to move forward with the first step. I am very small and have started out with t-shirts and sweatshirts….However, my vision for this company is to get into quality, durable, unique conceptual fashion. Something that will have it’s own “taste” and “vibe”……Any advice you may have would be much appreciated.

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