This post was originally written for Create & Cultivate by me (Syama Meagher, CEO of Scaling Retail). Create & Cultivate Is an Online Platform & Conference Series for Female Entrepreneurs in the Digital Space. Its such a useful post, I wanted to make sure my readers saw it.
Year one for every business can look very differently. This guide is for brands that already have a strong foundation (year 0) under their belt. Year zero is your startup phase and those startup costs should be considered separately. Some of those costs may include: Branding, Pricing, Website, Samples, Manufacturing, Marketing Plan, Sales Plan, Assortment Plan, and a Cash Flow Plan. While in year zero you are also determining if you will be a collection based brand (a brand that sells tops, bottom, dresses – a whole collection) or if you will be an item driven brand (a brand that focuses on making one particular kind of product – think Bonobos when they first launched). If you want to create a brand with a budget in mind, start with item driven products then expand later.
To make a business profitable your revenue needs to surpass your expenses.
- Know what you will spend money on this year, and cut accordingly. Make a list of all the activities for the year you think you will spend money on (marketing, photoshoots etc.) then start to rank them in order of costs and potential revenue (its tough to know exactly in year one what will make you money). Focus on only the top 3-5 opportunities. Brands waste a lot of money doing a lot of marketing activities poorly.
- Leverage networks to get things done and give yourself enough time to do it. When minimizing cost you need to trade off with time. Example: The less money you want to spend on hiring a graphic designer, the longer it will take to find a good one that is in your budget. This is especially the case when looking to leverage your current networks to execute on something. Your friend who is really good at X may not have the bandwidth to do you a favor for 3 months. So, plan accordingly. Star by making a list of everything you need to get done for your business, for this example we will use a selling campaign. You will need to hire Photography, Hair, Makeup, and Graphic Designers etc. Your next list should be everyone you know in your network, including Facebook Groups and other groups you are a part of. Finally have a list of things you can do for others. When writing the post message include your offer and see who is open to trades. The low end of a photoshoot done professionally can run you $5,000, so if you have the time to pull this off working within your networks, you might save a chunk of change.
- Don’t produce excess inventory unless there is demand. I’d rather you create demand through having a strong social media profile and 2-3 units on hand per item to sell online then to produce to your manufacturers minimum at a lower price and get stuck with aging goods. These days’ brands are launching with strong social media 6 months to a year out before the product launched. Why? To create demand, so when the products are available for sale, there is an audience. You do need some product to fulfill demand when your site launches, but wouldn’t you rather sell out and start to build demand, then have a lot on hand?
- Focus on Selling IRL. It takes time to build your ecommerce following, and to get picked up by wholesale retail accounts. I have noticed that my clients who focus on selling in real life at markets, friends and family events, trunk shows and through co-branded popup events see a far higher increase in sales right away. This is because people can touch and feel your collection and you can sell to them with your charm and passion for your product. Build each event with a 360* marketing strategy to take advantage of every dollar spent. Example: Have a friend at the event taking pics for social media, give shoppers 10% off if they follow you on IG, and sell samples/damages at a big discount to get rid of inventory you cant normally sell.
- Stop Treating Your Business Like a Hobby. Hopefully, since you are reading this, you actually want to make money in this business. This means you cannot have a 4-hour workweek or magically have a business you love. It’s just not possible. You should be clocking in 60 + hour workweeks if you are really hustling. If you have a day job, that means you are working on this nights and weekends and lunches. You need a plan of action. For every dollar that you spend and every hour that you spend on your business you need to outline the 3 ROI’s you are getting. Those ROI’s (return on investment) won’t always have financial implications, but they might have brand awareness implications and that absolutely will help you in getting sales. It takes the average brand 18 months of selling to really see a pick up in sales and to understand their customer. 18 months means 3 seasons of pitching, product development, sample making etc.
There is no magic wand to make your business profitable in year one, but there is smart planning and smart execution that can get you there. How you set up and manage your business goals and brand vision can bring you closer to profitability. But keep in mind, the industry is not set up so that the brands with the most exposure, press and sales make the most profit. In fact, many highly visible brands are in debt. But, by following the tips above you will keep yourself on the safer side of cash flow management and be a stronger, wiser CEO for it.