So many creative entrepreneurs know that the financials of their business are important, but knowing how to budget, learning ways to cut costs, and figuring out where to spend money can be intimidating, especially when funds are limited. I talk to independent fashion designers all day, every day. And I hear conversations on the topic in the StartUp FASHION Community all of the time. Making money, spending money, saving money…all three are necessary and at times confusing. So I can see how getting a little guidance on the whole money thing would be helpful for your business. So I’m sharing my top five financial tips for fashion designers and other creative entrepreneurs.
Set Financial Goals
The first thing you want to do is set some financial goals for your business. Easy enough, right? But the trick is, you can’t stop there. Once you set those goals, you need to think about how, specifically, you are going to achieve them. You also want to think about the money that is required in order to achieve them. This will shape a better budget (spoiler: that’s tip #2) because you can recognize the amount of money you will need in the future to really grow your business to you want it to be. Keep in mind, this doesn’t have to be completely figured out. Your goals will change and your business activities will vary over time. But having initial goals is always helpful.
Setting financial goals also has an added bonus—it helps you celebrate your wins and analyze the flops. Both of these things are very important to the health of your business, your ability to keep going when things don’t go as planned, and your decision making skills as a business owner. So, how do you set financial goals? Here are some questions that you can ask yourself to get the ball rolling:
- How much money do I want the business to make this year?
- How much money do I want to make this year?
- What revenue streams am I going to use to make this money? (wholesale, eCommerce, Pop ups shows, etc.)
- How much product do I need to sell over the next year (and at what profit margin) in order to reach my business financial goal?
- What are my fixed expenses?
- What are my variable expenses?
Spending some time answering these questions will give you the financial foundation for your business in the year ahead.
Create a Budget
Once you have your financial goals in place, your next step is to create a budget for yourself. A good budget is one of the keys to growth and success, yet no one really tells us how to budget. By definition a budget is a journal of how much money you are bringing into your business and most importantly, how you are spending your money. Many businesses have multiple budgets for multiple time periods and for various sectors of their business; to start off, just have a monthly budget for a 6 month or 1 year period. Once you feel good with that, you can branch off if you like and create budgets for things like marketing. Here are the steps to take for creating your budget:
- Open up an excel spreadsheet or a Google sheet
- Add the months of the year across the top
- Add your revenue streams to the left side
- Skip a few rows and add your expenses in categories: marketing and advertising, professional services, software and web development, Dues and Memberships, Licenses and fees, travel, etc.
The key here is to create three 3 columns for each month: Budget, Actual, Difference. That way for each month you can use your financial goals to create projections for the “budget” column. Then you can add what you actually made next to it, and see the difference. Finally, you should be comparing your business income to your business expenses each month to see where the money is going after it comes in.
Invest in Marketing
My next tip is about marketing. One of the biggest mistakes I see independent brands and creative industry entrepreneurs make is spending all this time designing and creating a beautiful product and launching it to the world with no real idea of how they’re going to get people to see it. Marketing is an absolute must and much of marketing take money. Now, I’d like to add a caveat that you don’t need excessive amounts of money to successfully market, but you do need something. So get comfortable with the fact that you will need to invest in marketing. Now don’t worry, you don’t have to do it all right away. As your business grows you will start to invest in more marketing initiatives. But to start, there are some core, fundamental investments you want to make as a product based business.
- Lovely photography
- Visual branding (logo, colors, design assets, fonts, etc.)
- Well designed and beautifully branded website
The next stage of your marketing investments should include some or all of these:
- Branded packaging, thank you notes, and postcards
- Facebook and Instagram ads (for both the images/graphics and the ad spend)
- Copywriting help for your website (whether that’s taking an online course to become a better writer or hiring a professional)
- Email automation for newsletter signups as well as for customers (if you don’t know how to set this up yourself)
Then there are things that are wonderful to have but you don’t necessarily need them right away, if at all:
- Public relations help
- Videos about your brand
- An assistant for social media marketing (or subscriptions to automation platforms)
Keep in mind, that the above information may be tweaked for some businesses. Like, maybe you have the most incredibly interesting process for creating your product and the only way to really communicate it is with video. Then video becomes a priority marketing asset. You get it. Zero in on the things that convey your professionalism and give you potential customer confidence to buy. From there, add more marketing spend as you are able.
Have an Event Fund
This kind of builds on the last tip, since it’s a tied to marketing. With so many of you independent makers focusing on direct to consumer sales through your websites, getting offline and meeting your current and potential customers is so important. Too often I see designers anxious and wondering why their online sales are not great. A big part of that is that no one knows who you are yet. So get out there and meet people. If you start a fund for doing in person events, you’ll be prepared when an exciting opportunity presents itself. Here are a few instances when you might want to be saving for events in your creative business:
- Organize PopUp Shops
- Participate in Markets and Fairs
- Launch a series of In-home trunk shows
Even if you’re focusing more on wholesale than direct to consumer, in-person events can still make a huge impact on your sales. You want to build relationships with buyers as much as you want to build relationships with consumers. And meeting buyers in real life, rather than relying on the often-ignored email pitch, is a great way to do that. Here’s how:
- Host a buyer preview
- Produce a presentation
- Co-host a trunk show with your current retailers
- Participate in Trade shows
Consider Smaller Collections
This last financial tip I’m going to cover is one that is focused on cutting costs. I see so many independent makers, in particular fashion designers, feel compelled to create large collections; multiple styles offered in multiple colors and patterns. And it’s expensive.
When you’ve got a product based business, costs can be high. And one great way to get those costs down is to rein in your offerings. This is especially doable if you’re focused on direct to consumer sales because you’re not answering to retail buyers demanding a large assortment. Producing smaller collections is also great from a market research perspective. Launching with a few styles in one or two colors can help you learn what your customers really want before you spend a lot of money producing samples and runs for too many styles. From there, you can decide how often you’d like to introduce new styles and colors. To tie it all together, setting goals, using a budget, investing in marketing and events, and assessing your production plan are all great ways to develop a financially healthy and thriving business. So open up your to-do list and make these a priority!