For your average start-up, the thought of sitting down to write a business plan can be overwhelming.Business 101 books suggest writing a business plan before embarking on any business course. How are you going to get to your destination if you don’t know how to get there? I completely agree with this popular saying, but knew that when I wrote our business plan, I would not be following the traditional outlines.
No matter your approach, the act of writing a handbag business plan takes discipline. As a consultant, if I had a nickel for every time somebody told me they wanted to start a new business and were working on a plan, only to find out six months later that nothing had happened, I would be a millionaire!
It is so easy to become overwhelmed by the enormity of it all. I see this firsthand with the designers who come to me with just ideas and maybe some samples. They can work on the products but when it comes to crafting a focused handbag or jewelry business plan, they lose their patience.
I have written more than my share of business plans and I definitely have a strategy to completing them. However, although this has worked for me, your business consultant will probably not agree with my advice. So take it with a grain of salt.
My Business Plan
When we wrote our business plan for Charm and Luck, our accessory company, we did not delve as deeply into the financials as many plans do. We used our business plan as more of a roadmap and goal setting exercise versus a business document to submit to a bank. We set out our goals and they included getting into various magazines especially the very popular US Weekly, being selected for QVC or HSN, selling $5 million in sales, and going on Oprah. We achieved every goal we wanted except for Oprah.
I knew that if I were to labor over the financials, especially the projections for each year, I would be stuck. Instead I approached writing the plan and completing the financials as goals – merely an outline – and expected to change the plan as we went along.
Why would I base an entire plan off a target I might not achieve? What if I based my numbers assuming I would get into a major department store but they did not like our product? One of my good friends is working on her children’s product line, and she plans to grow her business to be in 1,000 stores next year, an ambitious goal. If she misses her target, she will have labored over her business plan and projections, and only have to recalculate the entire sales figures again.
What Goes Into A Business Plan?
A typical business plan often has these components:
Executive Summary: The background of the principles and their unique talents that they bring to the business.
Market Analysis: A review of the reason why this business has a chance, why there is a void in the market, and how this business will excel.
Company Description: The company name, mission, and identity. What kind of business entity will the company be, where will it be located, and what kind of services will it sell or offer.
Marketing and Sales Management: How the company will sell its product, and how will the product or services be marketed.
Funding Request: If requesting funding, then this section would list what type of financing you would like or what type of equity stake partnership would be agreeable to you.
Financial: The financial section is where you list the projections for Year 1-5, along with the monetary investment supplied by your partners.
As I stated earlier, in this section I outlined our financial goals – but I did not do the cash flow exercise of putting in our rent, utilities, press outreach, or marketing costs because I didn’t know when I would need to plan for that. At this point, we were working out of my home, so I did not need to account for rent and utilities. I handled all labor, press, and marketing outreach and I was not getting paid.
Another reason I did not want to labor over the financial goals was because I was so anxious to get our company going. My partner and I were both very clear about the company motto and what our company would stand for and who our competition was, so it was easy for us to start immediately.
I did not want to write up a thirty page proposal with market analysis over various companies if the plan was only going to serve as an internal document. Years later, when we inked a partnership with a finance company in New York, we were subjected to audit after audit and had to write up various papers and statements regarding our company. If I had tried to submit our original business plan, even if done exactly as the business textbooks advise, I would still have had to re-write it entirely. Our financials and product were so different than originally anticipated, that the initial business plan would have been useless to me.
What Comes Next?
Writing a business plan was a good exercise for me, but it was an abridged document, and not the detailed document many people labor over. If you are approaching investors or feel you need to research out the market or your partners, then absolutely do the full business plan, financials and all. But if you have a very clear view of where your company is going, as I did, then do this goal-setting exercise and get going!
I constantly am asked about trade shows and what shows are the best to do? I also hear from clients, and non-clients, about them wasting money on certain trade shows and telling me it was a waste of money and more importantly, their time.
Let me say this- I am always for doing trade shows but…doing the right trade show for your brand. Do not sign up to do a trade show without walking the show first. I know this is not the advice that many new brands want to hear, but it is super important that you walk the show and take a critical look at the customers walking the show, the vendors who are exhibiting and the overall traffic.
TRUE STORY – When my company charm and luck was first starting out we decided to launch in New York. We chose a trade show a couple of months out and paid for our booth. We looked over the information from the show management detailing the ‘buyers’ who walk the show and of course they mentioned all the top department store buyers. We were excited about the expected amount of buyers who walk the show. We reserved a booth and sent in our payment.
When it was time to do the show I flew from LA and stayed in a hotel. We went to the show and took a look at our location and then figured out how we would decorate the booth. I think back on how we didn’t even have a gameplan for booth decoration and I cringe!
Well the show started and we did not write any orders. Our surrounding booths were busy, but we were not. When I started to look at their price points, their prices were so much lower than ours. Handbags for $12 when our handbags went for $50+ wholesale. I then started to take a hard look at the so-called ‘buyers’ walking the shows. They were not as professional as I would have liked. Somebody who does ‘home parties’ is not a buyer who has the buying power of 5 stores in Florida!
The show was not a complete lost. We did get into an amazing store in Nantucket and did write a couple of other strong stores, but we did not make our money back. And more than that, we felt we needed to ‘re-launch’ at a trade show which represented our brand’s caliber.
Before you send in your trade show deposit, use this checklist:
- Have you walked the trade show?
- Does the trade show you are considering have any competing shows at the same time? For instance, Accessories The Show in NYC runs at the same time as ENK.
- Are you ready to fill a booth with product?
- Do you have the funds to decorate your booth with shelving, paper, rugs etc. If you purchase from the contracted supplier at the trade show, this can run at least several hundred dollars. If you decide to not use the supplier at the show, be prepared to bring in your own shelving and decoration.
I hope you have found this helpful. I just do not want brands to lose money on doing the wrong trade shows and start their selling experience off on the wrong foot.
When starting an accessory company, there are so many things to contemplate. Name, logo, website, stores to approach…the list goes on and on. However, without any samples and designs, you are not going anywhere!
So early on you will need to start working on product development. I have listed some basic steps to get you started in the right direction.
1) Decide the direction of your collection and have it be consistent throughout. For instance, our motif is feathers and we will plan on incorporating that one motif throughout the entire collection.
2) If feathers is your theme, then decide what fashion colors you will incorporate. If you are jewelry, perhaps you may only want to use gunmetal metal throughout the collection or maybe you want to use gold and gunmetal. If you are handbags or head ware, decide on your color palette. Look at the fashion trend websites if you are unsure what the palette is. The Pantone website always has this listed. Other trend websites such as WGSN or Rocks Paper Metal jewelry trend forecasting websites are great.
3) Start visualizing the designs. Start sketching them out. Then start making them or taking them to your sample maker so they can start bringing life to your designs.
4) Repeat this whole process with another motif. There is nothing worse than having an entire season devoted to one element which bombs. So plan on having one collection with feathers. Have this collection fully realized and not half done. Make sure you offer enough silhouettes and styles to make the collection look cohesive. Then repeat the process with another motif.
Before you know it, you have the beginnings of a collection. Most of us who work in design, have many designs in our head. We tend to over-create sometimes. The trick is to put together a collection which has a clear connection and trajectory between each style. Runway fashion shows (from Paris and New York, not the school fashion shows!) do a great job of taking a theme and successfully carrying it out through each piece which comes down the runway.
The #1 question I get asked on my blog is how much money should I have for samples?
That is not an easy question to answer. I respond with – What kind of product samples are you making?
Here are a couple of questions to ask yourself as you prepare your sample budget:
1. What is the price of the material of your samples? Break down each component and add them up.
Lining, D-rings, O-rings, filler etc etc. Add up all of these costs, one by one.
2. Who is making the samples? You or a samplemaker? If it is a samplemaker, how much do they charge?
3. Do you have to make up a custom mold? Do you have custom printed fabric? Add these costs in.
Take each sample that is being made and add up each price. It is time consuming. If you can’t figure out the cost of one of the ‘parts’ of your sample, make an educated guess.
Finding the true cost of the samples is so important because if something is not priced correctly, it will determine if you are making money or losing money. Take the time now to ensure your samples are priced correctly and you are able to allocate the proper amount of money needed to produce a beautiful, comprehensive and well thought out sample collection.