Equity. Share holding. Ownership. Phantom stock. These are some business terms that has to do with finance. Fashion, like every other business thrives on finance. To really understand the legalities involved with owning and dividing a business, Mrs Jane Maguegbuna, a legal practitioner and the co-founder of Afrinolly was invited to share her personal story.
She began with the quote from Peter Drucker: “wherever you see a successful business, someone once made a courageous decision.”
Starting from when you wake up in the morning, you make a conscious decision to either get out of bed or remain in bed; workout or not; go to work or not. Every decision you make adds up to where you end up. So, it is very crucial that you make decisions that reflect where you see yourself and the goals you’ve set for yourself. Most times, these decisions are difficult and they’re not fun but they have to be made.
Equity and Share holding
Who holds what?
What percentage is fair?
How do you determine percentage?
Should you keep a reserve equity?
Equity is shared in a company as follows CEO – CTO – COO, where CEO gets the largest number of shares.
Mrs Jane Maduegbuna’s advice: at first 10% may not seem like a big deal but further down the line, you will come to see the benefit of just that amount of shares. Be careful how much shares you give away and to whom.
Types Of Employee Equity
Synthetic equity/Phantom stock: Stock Appreciation Right [SAR]. This case, you still own the stock but this helps create loyalty. As the stock value of the company rises, so those the equity share, gains more value.
Also contributing is Mr Oluwaseun Ajasa, Managing Partner ATC Legal.
Register your business name, trademark your products and always seek legal counsel on any document.
Chuks Ogene (Sunesis), is a creative entrepreneur (one who makes creative ideas profitable). He is known for his endeavours in design, fine art, brand communication, creative/art directing, fashion photography among others.
On the four brand quadrants to know where your business lies and how to effectively brand it are:
These are products that are highly needed like drugs, technology etc. Customers are drawn to these products because they need them and are willing to pay a lot of money for them.
These are products that are not really needed but wanted. The products are primarily luxurious and expen
sive. Examples include: Versace, Apple etc.
These are products that are needed but also not expensive like notepads, pen etc. Low emotional
These are products that are neither expensive nor needed, they include Limca drink, Zara brand etc.
To effectively brand your company, ask yourself these questions:
What is it about?
Why should you do it?
How do I make it happen?
Where/who will t impact?
You also need to keep in mind that to design you need to go through a series of processes beginning with learning, asking questions, thinking before finally applying.
In an earlier post, I talked about the perks of signing up for a Fashion Acceleration Program like I said it is not an alternative to fashion school. It is a program primarily focus on business and not design.
In light of this 360 Creative Hub would be hosting a specialized training aimed at Accelerating emerging fashion designers to becoming the next Valuable Brand and transform their fashion label into a sustainable business.
The program will welcome 30 fashion entrepreneurs that have existing businesses operating in Lagos, Nigeria. Fashion Acceleration Program is open to any entrepreneur within the fashion value chain; Fashion designers, Fashion Bloggers, Fashion illustrators, Fashion Retailers, Pattern makers, Jewelers, Shoe makers, Bag Makers, and every fashion-related field.
TRAINING COURSE OUTLINE
What will be taught in the program?
The Accelerator program is developed with your best business interest in mind and equip you with all knowledge needed to strengthen your business case.
The program will cover the following course material:
Business Model Design and Business Strategy
Competition & Positioning
Financial Literacy & Planning
Digital and e-commerce Strategies
The use of Social media to grow the Fashion Business.
Hands on Practical Sessions.
How it works
• Each Participant would be subjected to training for 12 hours per week (that is, 8 hours on Monday, 4 hours on Tuesday, including practical sessions)
• The 360 FAP Board will invite notable Fashion celebrities during weekends of the program to have a mentoring session with the designers,
• The designers would be given weekly assignments which would prepare them for a grand finale competition
• The graduation day will feature a competition where all the designers will showcase their designs that will be judged by Industry experts. Academic Backbone
The program has been specifically designed with a strong academic foundation in collaboration with Alan & Grant Business Solutions in order to deliver a comprehensive and instructional program that will equip the students with a global mindset. Industry Practical Know-How
The program has partnered with some international and the country’s top minds and companies as workshop instructors & guest lecturers, merging practicality and industry insights with academic backing.
Phase 1: Call to entry and opening applications
The program has a two-step application process. The first step is the online application which will evaluate the participants on basic business & financial understanding, as well as on the solidity of their business structure.
The 2nd step is a day-long boot camp, where the applicants will convey at 360 Creative Innovation Hub and embark on a day-long activity, designed to test them on key business skills such as financial literacy, sales negotiation, marketing and human interpersonal skills.
Phase 2: The Accelerator
During this period the accelerator will take place every week on Mondays (full day) and Tuesdays (half day).
Phase 3: Graduation + Announcement of 2018 Edition Winner
At the end of the program, the participants will be required to present a business case in front of the judges and review committee. All participants will graduate officially from the Fashion Acceleration Program; one participant will be nominated as the winner.
During the graduation event, our panel of judges will select the fashion entrepreneur who has demonstrated most business acumen and capabilities to become the first Fashion Acceleration Program Winner.
As you think about the overall size and breadth of your fashion collection, you should identify the number of items required to fulfil your vision, but cross-reference that with a reasonable assessment of what can fit in a store, on a website or into a retail account’s buy.
There are three fundamental elements to planning a balanced collection and it’s essential to keep these in mind, over the long-term development of your product assortment, as well as in each and every collection you produce. We often think about these as a collection pyramid.
The Base: Every successful fashion company rests upon the success of one or two items which form the foundation of the overall product assortment and a more predictable stream of revenue around which a real business can be built. These products don’t change dramatically from season to season and they become the staples of your product offering. Tory Burch has her Reva ballerina flats, Louis Vuitton has its leather goods and Acne has its denim. Without this kind of solid foundation, it’s difficult to build a successful business.
The Middle: In the middle are the products that you adapt and refresh each season with new colours, fabrics or prints, but the basic silhouettes remain the same. Over time, you may choose to slowly adapt these products and perfect them, but in general, you are using tried and tested shapes which have already been proven in the market.
The Top: At the top of your collection is the purely seasonal elements which are more about driving interest and bringing new energy to your product mix. This may be the pieces you show on the runway and which are featured in the editorial. From time to time, you may have a huge commercial hit at the top part of your collection, but as it’s generally hard to predict exactly what will strike a chord (or which product your favourite A-list celebrity decides to wear), it can sometimes be hard for a small fashion business to capitalise on the short-term buzz generated by these types of products.
Use a stylist – smartly!
Many designers choose to employ the services of a stylist. These can be hired professionals, in-house team members or even a friend or colleague with a good eye. The most important outcome here is that you receive a second opinion on how the collection sits together best and how to present it to buyers or customers. Don’t underestimate the importance of this step, as it can greatly impact your eventual sales.
Make sure that you are designing and developing a product that can reasonably be produced. While that may sound like an obvious point, many talented designers create beautiful concepts that prove to be too expensive or complicated to produce at scale.
A business plan is an essential tool, not just for raising investment, but also for clarifying your goals and objectives and communicating these to your wider team of employees, business partners and clients. There are five essential components:
A business plan is an essential tool, not just for raising investment, but also for clarifying your goals and objectives and communicating these to your wider team of employees, business partners and clients. There are five essential components:
Executive Summary: The executive summary is at the beginning of your business plan, but should be the last thing you write. It encapsulates all the key points, ideas and objectives of your business in a very short and concise “elevator pitch.”
Vision & Objectives: This section will help investors, and anyone else reading your business plan, understand what particular market need you are going after and what you will offer that is unique and differentiated.
Market & Competitive Landscape: This section describes the market that you plan to operate in. How big is the market? How fast is it growing and what evidence do you have that this part of the market is a viable opportunity? You also need to identify who the competitors in the market are, whether they are growing and what their position is on the market. What are you going to do that is different?
Implementation Plan: This is probably the most detailed section of your business plan, identifying the specific actions that your business will take to go after the market opportunity you have identified. Ideally, it should cover three years of activity, on a seasonal basis, and should include everything from how you communicate as a business and the staff you will hire, to the space you will need and the outside expertise you will require, in terms of marketing, communications or PR.
Financials: Your financial plan shows how your business will grow in terms of both profit and revenue and what financing you will need to make it happen. An income statement uses projections of how your business will grow at the top line, through sales and other revenues, and will also project the costs of delivering that growth. The cash flow statement shows the peaks and troughs of your cash situation on a monthly basis and identifies what funding you will need to finance growth.
In fashion, creating brand awareness is essential, the person designing and developing the product is often also responsible for the advertising campaigns and the brand communication. As a creative director, you will be overseeing multiple parts of the marketing mix.
Know Your Customer: A designer should keep a specific target customer in mind as they develop the collection. Think about their lifestyle, budget and what is important to them. Understanding all of these things will help you communicate with your customer and create awareness about your brand.
Brand Story: A brand story is what people will talk about when they think of your brand. It summarises why your brand exists and what are the unique characteristics of your product that makes it distinct from everything else in the market.
Marketing MixThe Four Ps: The marketing mix is a set of tools that allow you to craft a clear marketing direction and tell your story.
Product is the tangible physical product or service you provide. The fashion industry has all sorts of different products. You might be known for footwear, evening dresses or active wear. Be specific about what you are selling.
Price effectively positions you in the market. This determines who your competitors are and also the different materials and quality of materials that you will use for your products.
Place is where you distribute and sell your products to customers. You want to make sure that your product is available where your target customer shops and at a place that is consistent with the positioning of your product.
Promotion includes everything from traditional marketing with advertising and PR, to new media marketing on social media. Today it is absolutely essential to have a website and a digital presence.
Advertising: Advertising can help you reach a large audience, control and increase brand awareness and secure press coverage. However paid media comes at a high cost and it will probably be a long time before you can afford it. The real potential for moving your brand forward in terms of image and what you control is online.
Public Relations: When you have things to share, new products coming out or announcements to make, working well with different types of publications is going to be a key part of building your brand. Therefore you should build a good relationship with the press, especially the ones that have taken interest in your product and what you are doing.
Social Media: Social media is a powerful and affordable way to build awareness about your brand. Only engage in those platforms that address your target customer. Be aware that it takes time and resources to manage and provide content on social accounts, so it is probably the right choice, to begin with only one or two social media channels. The fashion community really engages first on Instagram and then on Facebook.
Financing your fashion business can be overwhelming. Each season as your sales increase and your business grows, your upfront costs will increase and the money you earned from previous sales will not be sufficient to finance the growth. You will need some kind of financing to bridge the gap. There are generally three different sources of available financing for a fashion start-up. Equity: Equity investors provide cash to invest in your business. When you take on an investment from an equity investor, they become part owners of your business, which inevitably means that you will have to share some decision-making with that investor. The best equity investors can offer you smart money, which is money that comes with expertise; contacts and other types of advice that can help you build your business. You will have to report to a board for key decisions and regularly report on how your business is progressing.
Debt: Debt financing usually comes in the form of a loan. You are required to pay back the money you have borrowed plus interest in a defined schedule of payments. Taking on the debt will mean that you will have additional cash outflow that your business will have to support each month and that can be an additional burden for a business to bear in the early stages. The big advantage with a loan is that you are not giving away any equity of your business and you maintain full control. Debt providers will not actively get involved in your business; they are mostly concerned with getting back the money they have lent you with interest.
Other Income: This can come from a variety of sources, including awards and competitions and providing advice or services to other companies. The benefit is that this kind of funding is non-interest bearing and you are not giving away any equity in your business. However, these other commitments can be a distraction from your core business, as they require your time and energy. To know more about managing the business angle of your fashion business, you can register with us.
The term “business plan” is casually bandied about like a hot potato in the studios of emerging fashion designers. Everyone knows you need one, but still, so few emerging design businesses take the time upfront to properly plan for their success. Success is very rarely accidental. Sure, we all benefit from some good luck from time to time, but real success can only come through hard work and good planning. For this, a business plan is critical.
So, what is a business plan for? Many people think that the primary purpose is to secure funding – i.e. loans from banks or cash from investors. And while this is certainly one important objective, it is not the most important one.
The truth is, the business plan is, above all else, for you: the person or people who will drive the business forward. It is the document that lays out your vision and objectives. It is your roadmap for how you think it should evolve and grow to achieve this vision. It contains the budget and projections for how your business will manage is finances and fund growth. It is the document that helps you decide what to do, and just as importantly, what not to do. It is a living, breathing document that you should use to measure your progress, while still being willing to adapt it to reflect new insights, unexpected competitive threats, and changes in your business environment. In short, it is like your company bible – except that this is a bible you can adapt as you go along.
You can also think about the business plan as a tool for communication. Anyone who has set up a new business knows that when you are looking for investors, employees, suppliers, office space, banking services, professional advisors and everything else that you need, you have to tell people about your business and its aims. When you have spent the necessary time in crafting a business plan, you will be able to more clearly articulate what your business is all about. This makes you seem more professional and organized and will enable you to attract the people, support, and money that your business needs to succeed. Going through the business planning process will enable you to distill your business down into a short “elevator pitch” of concise points that together provide a good understanding of your business aims in a short period of time. When people understand your business, they will know better if it is something in which they would like to be involved.
Now, if that all makes sense, what then do you need to include in a business plan? Essentially, it should address all of the constituent parts of your business starting from the broadest vision of the business right down to the most minute operational issues of job descriptions and work plans. The first thing to do is create an outline for all of the topics that need to be covered, and then for each of those topics jot down all the ideas and thoughts you already have. If you don’t have a written plan already, then it’s likely that much of your business plan is in your head and so you need to start getting your current thoughts out on paper in a structured way so that you can then go and revisit each of the topics in more detail.
A sample outline of a business plan for a fashion business might look as follows:
1. Executive Summary – This is something you do at the end, once the rest of your plan is fleshed out, It will quickly become the so-called “elevator pitch” for your company when you need to describe it in a short interaction. It only needs to be a few paragraphs long.
2. Vision and objectives – This section describe the vision of your business — essentially, why you set it up. What specific market need are you trying to fill? Which customer are you targeting and why?
The more specific you can be about these issues, the more compelling your business plan will be. If the reader (or listener) can really understand the market need you have identified, then they will be much more likely to buy into your overall business plan.
Understanding everything about your customer’s lifestyle and preferences will make your job as designer and manager all the easier. You will not only know who you are designing for but also where they shop, what magazines they read and what influences their buying behaviour. All of this will feed into important decisions you make every day about how you design your collections, manage your business, and promote your brand.
3. Market and competitive landscape – This section describe the market you plan to operate in. What is the size of the market and how quickly is it growing? Who are the other players in this space?
To be clear, the market size you need to describe is not the size of the global market for clothing, but your estimate of the size of the specific market you have identified, in the geographies you are focusing on. Yes, this information can be hard to find, but you can take larger market size figures and estimate what share of the overall market your business is going after.
As for your competitors, the better you can describe and understand their products, their style and aesthetic, and their positioning and strategies, the better you will be able to shape your business to stand out from the pack.
In general, quickly growing markets of a good size with few competitors (or few strong competitors) are usually quite attractive. However, if you have identified a clear niche market that is currently -unfilled, then that can also be very compelling.
4. Implementation plan – This section clearly describes all of the resources you will need to make your business successful. How many staff will you need in which roles? What type and size of space will you need to design and sell your collection? What outside expertise may you require operating successfully?
An implementation plan, therefore, contains a detailed description of all of the operating requirements in your business including Design, Production, Sales, Marketing/PR, and Retail. You should have a detailed plan for each of these core steps including human resources, expertise, space, and timing. Thinking very clearly about the various roles and responsibilities that need to be filled will ensure that you find the right people to make things happen for you. In turn, attracting the right team will also make it easier to attract funding. Most investors invest in people and teams, not just ideas.
Without an implementation plan, your business plan can lack the concreteness and specificity required to convince people you can take your vision and make it a reality.
5. Financials – This section is absolutely critical to your plan as it will identify your projections for how the business will grow, in terms of both profits and revenues, and what financing you will need to make it happen.
An income statement uses carefully thought-out projections of how your business will grow at the top-line (i.e. sales and other revenues) and will also project the costs of delivering that growth, including the team and other resources you have identified in the implementation plan. This statement will then project profit, by taking projected revenues and subtracting projected costs.
However, the income statement does not tell you how much money you will need to raise as it does not reflect the timing of cash inflows and outflows. This is where the cash flow statement comes in.
The cash flow statement is one of the most important parts of your plan as it shows the peaks and troughs of your cash situation on a monthly basis and identifies what funding you will need to make it through the troughs. You can think of the cash flow statement as a monthly account of cash coming in and cash going out. The difference between these two figures is your funding need for that month – and you are better off knowing your funding needs in advance as opposed to finding out later when your bank account is empty and suppliers are asking for payment before they release your goods. This is particularly important in the fashion business where you incur many costs up front (designing, sampling, sales efforts) before any of your revenues even come in.
If you can, you should have a trained financial or accounting professional (a friend, family member or other contacts) to help you with this section. They will have the expertise to sense check your assumptions to ensure that they are sound and believable. It’s better to have their input before you take your plan out to investors who will inevitably ask you the same probing questions and who will be looking for concrete answers.
Next time: We would discuss finding the right investors and partners
Once you have a plan in place, you will then be ready to start soliciting financing.
To know more about managing the business angle of your fashion business, you can register with us.
Many young designers rush into setting up a business, attracted by the perceived glamour and fun that is associated with the fashion industry. There are wonderful success stories of designers like Ohimai Atafo (Mai Atafo) or Folake Coker (Tiffany Amber). The stories we hear less of are those that describe all of the failed companies and dashed hopes that are the cruel reality of this industry.
One of the most common questions designers’ fresh out of fashion school (as a bachelor’s degree or from a vocational school ) ask is: “Should I start my own business or should I go work for a big fashion house?”. The truth is, the right answer depends on you and your aims.
The first thing to think about is “Do I really want to run a business?”
Displaying your collection in a fashion display, completing designs for clients– what more is there to want from a career?
Here’s a reality check: it’s not as glamorous as it sounds. Running a fashion business means, steaming clothes over and over again, and pouring through receipts with an accountant will become part of your routine.
You will likely spend less than 10% of your time designing, while the rest of the time you will be managing production, dealing with suppliers who want their money (now!), managing your employees while hoping they don’t fall ill, and trying to eat and bathe in between. On top of all that, you have to worry about making enough money to declare some kind of dividend from the business for all your hard work. You will eat, live and breathe your business 24/7. If that doesn’t turn you off, then keep reading.
Starting any kind business requires tenacity, endurance, and dedication. Setting up a fashion business is all the more challenging because this is a hyper-competitive industry (who doesn’t want to be a fashion designer these days?) and a very complex one as well, even at the smallest of scales.
What other kinds of start-up businesses so quickly find themselves with customers and suppliers scattered around the world, requiring so much coordination and organization?
Managing to get all of your raw materials (fabrics, lace, Ankara, etc) to start your production and then sending it all out to clients in different corners of the world (each with their own customs procedures) in only 2 months can be a nightmare, even for those with great forward planning and troubleshooting skills.
All of this is to say that one of the key drivers of success will be your entrepreneurial skills and your commitment to running a business. In order to be successful, you should think of yourself as a CEO first, fashion designer second. A CEO is a manager of people, finances, and processes. Therefore, you will have a great deal of responsibility and important business decisions will face you each and every day. The buck stops at you and the business should always be at the forefront of your mind, not just an afterthought.
Next, you should ask: “Do I already have or can I find the necessary skills, contacts, and funding to create a successful fashion company?”
Clearly, you won’t be able to do absolutely everything yourself. This is where you need to find other people who believe in you to join your team or provide support in some other way. Doing a self-assessment of your skills and abilities will tell you what gaps you will need to fill in order to make your business work.
You may assume that having completed a design degree, there are no skill gaps there. However, the design process in a business can often feel very different to that of the design process in school, where you don’t have to worry about things other than the product. Running fashion business means developing and following an organized creative process that works for you – and that other people can work as well.
One of the great things about designers who have previously worked in a large fashion house is that they have seen how other people organize themselves and can take lessons from there as they start. Having a clear design methodology is crucial to getting the best out of your abilities. If you don’t have this in place now, perhaps you may want to spend some time learning from someone else first.
Apart from mastering the design process, something that some of the smartest designers do next is to find a business partner they can trust, who brings different skills and connections to the table. Often it is a spouse, sibling or a friend who might take on this role. In this way, not only do you have someone to lean on in times of difficulty, you also have a division of roles, which allows you to focus on more on the creative aspects of the business.
You will also need to find people in the Industry who agree to support you and work with you. You’ll need a PR who will (at least initially) give you his or her services for almost nothing and a factory that will make your clothes in small quantities. You will also need accountants, lawyers, stylists, photographers, graphics designers, production managers and interns – hopefully, all at discounted prices. You, therefore, need to ask yourself if you already have a set of contacts which you can leverage to make your business work. If not, you need to get out there and meet people so you can start your business on the right foot, with the right team behind you.
Finally, for most designers who don’t have Bill Gates as a father or Uncle’s like Aliko Dangote, starting a business is also a question of finding money. There are many sources of funding, but each source will take time and effort before it bears its fruit. Having a network of people who may be able to introduce you to potential sources of funding is imperative to set up your business. You can have a brilliant business concept, a fantastic team, and all the energy in the world, but without funding in place from the start, it will be difficult to get up and running.
Lastly, you should ask yourself: “Do I have something unique to offer the market?”
If there is one crucial thing I recommend that you do before rushing off to start a business, it is to carefully craft your business concept. What is it about your business that will be unique? Why will people choose to buy your product over someone else’s? Is it the design, the price, the value or the dream that they are buying into?
You will need to think carefully about who you are designing for. It is cliché by now, but you need to ask yourself “Who are you designing for? And why?”.
Most of the time, this simple question is met with groans or blank stares or platitudes like “I can design for anyone” or “A very glamorous man or woman with lots of money”. This is not enough. You need to get into the mind of your customer and understand what motivates them. Where do they spend their time and for what occasions will you dress them? What makes them buy a garment? Understand their psychology, emotional needs and relationship with clothing. Visualize all the aspects of their lives and assess how your business can blend into making them even better.
Remember, your business concept needs to offer a clear proposition of value to your customer and if you can’t identify that yourself, seek help from Fashion Business School or subscribe to Incubation Programs.
To know more about managing the business angle of your fashion business, you can register with us.
For a fashion designer or anyone that is involved in the creative industry, having a portfolio is a must– no questions asked. A portfolio reflects your creativity and showcases your work to the potential clients. It serves as a true example of what you are capable of and what abilities you have to offer.
It is just as important to have an online portfolio (on the internet) as well as an offline portfolio (printed folio). Having an offline portfolio is important when you have to physically meet your clients at their workplace, where it can be taken to meetings and interviews.
The best way to build a great fashion design portfolio is to focus on the content. It should showcase the designer’s creativity and unique style. Many things should be highlighted in the portfolio including sketching ability, knowledge of how to use color, textile understanding, design development, and problem-solving skills.
Sketched illustrations should be in the portfolio so the potential client knows the designer can accurately sketch his or her ideas. The sketches should be large, colored final copies of the design, if the initial sketches are available and there is room in the portfolio, include those as well. This shows the development of the design from start to finish.
Each collection should include fabric swatches that show what the designs should be made. Small squares are preferred, but make sure they are large enough to show any texture or pattern that may be a part of the fabric.
A good portfolio will enable you to make connections, position yourself in the market and find a job. Creating a strong, eye-catching portfolio demands creativity so that it best reflects the abilities, experience and the skills of the designer.
Before preparing your portfolio, the audience for which it is designed for should be kept in mind. It is best to design an adaptable portfolio, that can be modified to fit any situation. A fashion portfolio design should be to the point and easy to read/navigate through.
The best work should be kept as the first views because nobody has the time to look into the entire portfolio. The work thus showcased should be convincing and impressive, so that it appeals the potential client or the employer.
Fellow fashion designers and creatives, I hope that this has convinced you to start compiling and creating your own fashion portfolio design.