Starting a Fashion Business: A Comprehensive Reality Check


As a lecturer, I have the opportunity to spend a lot of time with students who want to start their own fashion brand once they completed their degrees. This is great, as each of us has something unique to bring to the world and entrepreneurship has never been easier to access.

On the other hand, many fashion schools focus the entirety of their degree curriculum on the creative component of collection design, while putting much less emphasis on any other dimension of starting and running a business.

In this post, with no intent to discourage readers, we’d like to discuss some of the things a fashion entrepreneur should consider before embarking on an entrepreneurial adventure.

In this blog post we are going to discuss:

  1. Things to be aware of before starting a fashion company
  2. More than just design: understanding the value creation process in a fashion firm
  3. Key success factors in fashion: how planning and management is key to success
  4. Conclusions

1. Things to be aware of before starting a fashion company

It’s capital intensive. In a time like today, access to entrepreneurship has never been easier or inexpensive. We are very much used to hearing about tech startups which were created by two people in a garage and in a few months were able to acquire millions of customers and make the cover of the prestigious magazines. This is great, but building a prototype in software development can be much less expensive than in many other industries.

Fashion, for instance, is a very capital intensive business. With no access to capital, getting a brand to take off is barely possible. This higher threshold of access limits the number of entrants to the market, but at the same time ignites more ‘creative’ approaches to funding.

Bootstrapping in fashion is very hard to do, and because of the need for capital, founders may  Develop alternative forms of financing. This can be done with crowdsourcing or crowdfunding. This is not really an ‘easy workaround’ to the money problem, but at least it allows an entrepreneur to address a steep learning curve, and understand how much money is necessary to develop, produce and market a product.

Alternatively, we can see how many companies in the fashion industry actually developed a brand, only after having started other ventures in order to better manage cash flow more efficiently.

Poor cash flow management is often the reasons why companies fail, not just in fashion, in every industry. As a designer moves through the creation of a value chain, costs are high and profits unsure. A whole strand of management  – called lean management – has been developed to address cash flow problems, but in the reality of business, an entrepreneur is required to spend a lot of money before any potential financial reward can be even hypothesised.

It’s an all-encompassing endeavour. If everyone has a chance at becoming an entrepreneur, not many succeed at becoming one. This, however, is not just because of timing, luck or other variables. On the contrary succeeding at creating a company depends on the intimate characteristics of each individual.

Entrepreneurs need to take risks, need to manage uncertainty and need to have faith in what they do. For most people, this means that an entrepreneur might live in an existential condition of worry. You may start worrying about your business first, but eventually, you get to worry about many other things too, like the people involved with your firm and the sustainability of your own future.

Failure during the startup stage of a company is almost a certainty. What makes a difference in the long term, is how entrepreneurs react to failure, how they persist and ultimately succeed. Entrepreneurship is not a matter of ‘having a million dollar idea’ as much as ‘having a million dollar character’.

Much of the entrepreneurship literature revolves around how you build a company, but very little writing (by comparison) is devoted to building the necessary character to be an entrepreneur. Starting a business challenges everything: from your own values as an individual, to any relationship you have, to the very perception of good and bad.

This is also why when assessing business ideas, funders tend to consider the character and mindset of the founding partners, as this variable is as important as the product they are selling.

You need business training. If you look at your daily schedule you will realise that in reality what you are doing most of the time, most of your workdays is looking after the business.  Much less time than you may expect is spent on the creative and design processes. As we will discuss in greater depth in the next section of this post, research and development (in this case collection design) comprise only 25% of the value creation process of a company, the remaining 75% instead relates to managing relationships with producers, developing marketing strategies and taking care of your customers.

This is why, if you are serious about starting a company, a degree in fashion design may not be enough. You need to learn about how businesses work, and how to manage an organisation efficiently.

By this, we don’t mean that you need to go back to school and spend more money re-starting your education. On the contrary, so much can be learnt on the job, with sufficient curiosity and dedication. Being a CEO first and a Creative Director later is a necessity for most businesses, as it will take years before you can ‘pick and choose’ the things you enjoy doing the most.

2. More than just design: understanding the value creation process in a fashion firm

The issue in most cases has to do with the way in which the fashion industry is represented. If on the one hand, the fashion catwalks and top models create a dream factor which can be hard to resist, on the other hand, the complexity of the fashion pipeline will challenge any designer who is unable to manage a firm’s value chain.

What fashion students study in school, is fashion design as it’s certainly the most important thing to focus on, but it’s not nearly enough of what you need to know if you want to start a company. The process of coming up with a unique, interesting product can take years of research and years of trial and error, however, this is just the starting point a much longer process, which entails 4 distinct stages of value creation: research and development, production, marketing, distribution and sales.

The final value delivered to the customers is the result of these four stages, each entailing a series of subprocesses and substages.

Let’s see each one individually:

  • Research and Development. This can be the most creative segment of the value chain. In this stage, a designer focuses on creating a collection by selecting fabrics, creating patterns and developing samples. This might be the most intimate and cost-efficient stage too, as designers can work alone until they come up with a product sample which they love. The production of a small collection can be done in house, at the very early stages of starting a brand, but as soon as the volumes increase, it is necessary to create partnerships to manage production.
  • Production and Manufacturing. If the first stage allowed for solitude and individualism, in this second stage a firm needs to reach out to other businesses to create relationships focused on producing at higher volumes a designer’s collection. This is a complex process for a variety of reasons. First and foremost, producers become stakeholders in a newborn business, as they need to take on some financial risk too if they decide to become manufacturers for a new designer’s collection. Moreover, at an operational level, this stage entails for many strategic decisions such as: creating manufacturinglicensing contracts, choosing fabrics, manage quality standards, oversee logistics and the supply chain. As you can probably image, this already entails for a lot of paperwork.
  • Marketing and Communication. The fashion world is deeply connected to the world of media, to the point that fashion media is a very influential component of our society. If in the ‘old days’ communication relied mostly on advertising and fashion shows, now companies can leverage the power of digital media to access social media channels and promote their brands very inexpensively.
  • Sales and Distribution. At the beginning of a fashion firm’s life, designers will rely on wholesale distribution. Over time, however, as the business grows a firm can decide to own and manage a so-called vertically-integrated store. This latter option is much more expensive, but in time, many companies pursue this distribution strategy to better manage their relationship with customers.

All in all, getting a second degree in business or an MBA might not be such an overkill after all. At the same time, however, starting your own company allows for a great learning opportunity, and in (relatively) no time, one can learn about the complexity of the fashion pipeline and all that it entails.

3. Key success factors in fashion: how planning and management is key to success

Again and again, the character or the entrepreneur seems to be the most important key success factor when starting a fashion company. At the same time, however, we can suggest a few guidelines to help you get started.

  • Bring something unique to the market. Despite all of what we discussed so far, the product brought to market has a great impact on your chances of success. In order to compete with a fierce group of competitors, a designer needs to conceive something truly unique.
  • Find a business partner that can complement your skillsets. If you are the creative type, find a business partner. If you are strong in management, find a designer you believe in. In either case, you don’t need to do everything on your own. On the contrary, finding a person or a whole team capable of complementing your skills is a great way to bet on your strengths.
  • Create a network. This is where fashion schools make a difference. The people you studied with, the other designers you know, as much as your friends and connections are a key asset to your firm and you should always cherish the relationships with fellow designers, as they will bring motivation and opportunity to your firm.
  • Be Financially Lean. Don’t build structures and processes you don’t need. Keep a lean management approach and try to save as much money as you can. Cashflow is the key element to financial stability and saving resources can keep you afloat for as long as you need for your company to take off.

4. Conclusions

The point of this post was not at all to dissuade a fashion entrepreneur from starting a company. On the contrary, we very much encourage risk-taking in business. At the same time, however, as one sets out to pursue a dream, it’s necessary to have a comprehensive understanding of what managing a fashion company entails.

Ultimately it’s a matter of character, but knowing the underlying elements of the fashion business goes a long way in helping a fashion company stay afloat during the startup stage of its growth.

If you’re interested in learning more about the Fashion Industry, don’t hesitate to take a look at our course “The Fashion Industry: Explained. Our in-depth class covers a wide range of topics spanning from understanding fashion customers and markets to developing immersive retail experiences for your customers. Here’s a link to the course, if you use the discount code BLOG20 you can access a 20% discount. Enjoy!

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Starting a Fashion Business: A Comprehensive Reality Check Starting a business in the fashion industry requires more that a good design idea. In this post we'll run a reality check to help you focus.
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