Asking the right questions before starting any business can be the difference between success and failure. As a fashion entrepreneur, there are so many questions you need answers to before the launch of your business that will guide how it will go. Financial questions are some of the most important questions to ask because no business can thrive without money.
So, before you start your fashion business, here are 6 financial questions to ask;
6 Financial Questions To Ask Before Launching Your Fashion Business
1. What are my business costs?
For businesses, costs come in 2 categories. There are the initial startup costs and the recurring overhead costs. From the get-go of your fashion business, decide the essential tools you need to get the business running and figure out their costs. Items like sewing machines, scissors, thread and needles, measuring tapes, and so on fall into the initial startup costs category.
Your overhead costs come in after this. These are the costs you need to pay to keep your fashion business running every month. Think about costs like electricity bills, rent, salaries, internet bills, and other bills you have to pay regularly.
Getting the right estimates for your startup and overhead costs is very important at the start of the business. This will help you plan adequately how to fund your business as time goes on. Underestimating these costs can lead to serious cash flow issues later on in your business.
2. What will my monthly cash flow be?
Having an idea of what your monthly cash flow will look like is important in planning your business’ financial future. The monthly cash flow of your fashion business is the sum of the amount of comes into and goes out of your business every month. That is your revenue against your expenses.
Determining this can be very tricky, especially for fashionpreneurs with no prior entrepreneurship experience. However, with adequate research and guidance from your mentor, you should be able to come up with a good estimate. At this stage, it is important to plan for the worst-case scenario even though you believe your fashion business will hit the ground running.
3. How much capital do I need?
Once you have determined your business costs and cash flow estimates, deciding the amount of capital you will need is easy. As a startup fashion business, you cannot afford to source funds to the exact amount you determine. It is always wiser to have 6 months worth of operating costs on hand before launching your business. This is because you most likely will not make a profit in the first few months of starting your business.
When determining your business capital, you should tend more towards overestimation than underestimation. This way, you know you will not be cash-strapped at the early stages of your business.
4. Where can I get funding?
The type of funding you have access to as a fashion entrepreneur depends on the type of fashion business you run. Before starting your business, you have to figure out where your funding will come from. For most fashionpreneurs, the best bet is to source funding from your saving and family and friends.
However, there are many other funding opportunities available. Some of these include funding from government agencies, angel investors, venture capitalists and grants. Another funding option to look at as a startup fashion entrepreneur is getting a bank loan. You will most likely end up going for a combination of funding options, but it is important to plan this way ahead of time.
5. Will I be able to generate cash from customers immediately?
Depending on the type of fashion business you run, you will have to figure out if you will get cash from your clients right away. Sometimes, at the start of your business, you will have to do lots of giveaways to attract clients to the brand. If this is the route you wish to take, you need to consider what that would mean for your business before you start it.
Another important thing to consider is if your business will be able to take care of itself and still pay you a salary for you to handle your personal needs. When you think about this, you can decide how to make your financial projections so neither you nor the business suffers.
6. Where do I see myself financially in 5 years and 10 years?
Right from the start of our fashion business, you have to pen out goals for it. These goals should include short and long term projections of where you want your business to be in 5 and 10 years. When you ask yourself the question of where you see your business financially in a decade, you will know how to plan your finances better.
This question stirs up in you a desire to want to attain the goal you have set for yourself. This informs the kind of strategy you pen down for your business’s financial goals. This way, you can figure out how much revenue you need each day, month, and year to reach your goal.
Asking these questions before you launch fully into your fashion business can save you from a lot of financial ruin. They help you better prepare for the financial future of your fashion business so no rude surprises can spring up on you in future. Also, always remember to be realistic with the financial aspect of your fashion business.