Every business, most especially young businesses, needs a business plan to grow as effectively as it should.
Knowing how to write a business plan is essential for every business owner regardless of the field or industry they find themselves in.
A business plan is a key element for business growth.
The Business of Fashion, teaches in this video the essentials of writing a fashion business plan.
What is a Business Plan?
Unlike popular belief, a business plan is not just a tool to raise investment but is also a communication tool and device that enables you to ensure alignment amongst the different constituencies in your organisation, whether that is your team, your wholesale partners or your board of directors.
Why do I need a Business Plan?
A business plan provides clarity about where you want your business to go. This means that at any given time you have something to share with people who ask about your strategy.
A business plan helps you to measure progress against your goals and milestones. Every few months you can go back to your business plan and have a look at where you stand.
A business plan also helps you attract the people support and money your business needs.
Treat your business plan as a living, breathing document that changes over time.
A business plan is however not cast in stone so as your business grows and you learn more about the market it is only natural to change the business plan.
Key Elements of a Business Plan
There are 5 essential components to a fashion business plan: Executive Summary, Vision and Objectives, Market and Competitive Landscape, Implementation Plan and Financials.
1. Executive Summary:
This provides an overview of your business plan. It is typically something you do at the end of the process but it sits at the top because it becomes what peope call an “elevator pitch”.
An executive summary should contain every detail about your business that might interest potential investors.
It encapsulates all the key points, ideas and objectives of your business in a very short and concise statement which is usually not more than one page long.
Since it contains the summary of every stage of the busines plan process it is recommended you do it at the end of the process.
2. Vision and Objectives:
This helps people understand the overall goals and objectives of the business. At this point, you can bring your unique point of view to life.
The vision and objectives portion deals with the details of the market you’re targeting; what is it you’re bringing to the market that is different? what is your “special sauce”? what particular market need are you trying to fill? and which customer are you targeting?
When investors, business partners and anyone who reads your business plan understand your vision and mission, it gives them a clearer picture of what market you’re going after and helps them see that there is indeed a need in that market.
Doing this aspect yourself helps you understand if your focus is on the right things. For instance, if you’re aiming for the luxury end of the fashion market, after going through your vision and objectives you might find that your product is better suited for other segments of the market like the contemporary segment.
3. Market and Competitive Landscape:
This aspect helps people understand what part of the market you’re playing in, how quickly it’s growing and who the players are. This part of the business plan greatly goes through the market in detail; how big is the market? how quickly is it growing? what evidence do you have that this part of the market is an investing opportunity?
Investors will want to know who the other competitors in the market are, if they’re growing, what their positioning in the market is and what you are going to do differently from them.
If you can really describe that landcape, that competitive environment, you will be able to build confidence in the investor’s eyes that there is really an opportunity there.
Just because there are other players doesn’t mean there is no opportunity there, eg if you are going into a new fast growing market then you and everyone in that market will grow together but if you’re going after a market that is not growing so quickly, to grow and take a position in that market you need to steal market share from other people or companies by identifying their weaknesses and taking advantage of that.
You have to be very clear on what it is that is going on in that market landscape and why you believe there is an opportunity there.
4. Implementation Plan:
This is a plan that helps you explain and understand exactly what it is going to take to deliver. After identifying the overall goal of the business and getting a sense that this is a growing market, then what is your plan to go after that opportunity?
Here you have to identify what the specifications are that your business will be taking in order to make that opportunity happen. This will include everything from how you communicate as a business, the things you’ll do in terms of staffing, the space you’ll need, to the outside expertise (marketing, communication or PR) your business will need.
This is the largest and most detailed section of the business plan. It should be on a step-by-step basis in a chronological order about what you are going to do for the foreseeable future in terms of actions.
For example, you might say, “I need to hire two to three people mostly in design and production and maybe work with a sales agent too. I’m going to try to secure between three and five accounts and sell approximately $20,000 per account so I’m expecting revenues of $100,000 indices in this first six months.”
You need to get into deep details about what what you need to do achieve your goals. At every stage, the business should be seen as growing and you need to identify the resources and people you need at each stage to continue the vision and objectives you have set out.
You need to think very carefully about this aspect of the business plan as it has to be very detailed. An investor will usually expect a three year plan on how you are going to take the steps to achieve your long term vision.
Though the most scary aspect for many designers, it is one of the most important things to get right. You may need help from advisors, partners or individuals in putting this together because it is absolutely critical.
The financial section answers the questions of how the business will grow in terms of both profit and revenue and what financing will be needed to make it happen.
This sections includes both an income statement, also known as profit and loss statement, and a cash flow statement.
The income statement shows the top line growth of your business and the costs for delivering this growth, this basically will project when you will be profitable. For an early stage fashion business, it is expected that you won’t be profitable for a long time as every money you earn is invested into the business, but over time, as the business grows you might start earning a profit.
The cash flow statement shows the peaks and troughs of cash on a monthly basis and identifies what funding need you will require in order to finance growth. You might be profitable on an income statement but it’s very different from a cash flow statement.
Cash is what you have in the bank and income statement is your overall profit over a period of time.
Having a great business plan can open all sorts of amazing doors for you, never postpone writing one.
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