STARTUP

How to Break Into the Fashion Industry

Emerging designers, beware: Even if you are able to create a beautiful product, the fashion world is fraught with tricky choices on incorporation, competitive analysis, sales, and protecting your brand.
 BOOTSTRAPPING THE RUNWAYS : Chloe & Reese started small, but two years into business the label is sold in Saks Fifth Avenue and Neiman Marcus, as well as small boutiques all over the world.

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BOOTSTRAPPING THE RUNWAYS: Chloe & Reese started small, but two years into business the label is sold in Saks Fifth Avenue and Neiman Marcus, as well as small boutiques all over the world.

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When Annmarie Scotto-Dinan quit her Manhattan public relations job to launch a women's fashion label, she knew she'd need to invest a significant amount of time in learning the trade, but she didn't know she'd also be investing a massive chunk of her savings. Dinan figured a small business loan would be key to financing her endeavor, but by the time she applied for loans in 2008, the economy was beginning its slide into recession.

Despite being unable to secure a small business loan, she went ahead with founding her label, Chloe & Reese, digging into her significant savings to do so. Her bootstrapping worked: Chloe & Reese has grown steadily through the recession, and Scotto-Dinan is coming out of the economic downturn with her dresses sold in global department stores like Saks Fifth Avenue and Neiman Marcus, as well as small boutiques all over the world.

How'd she do it?

"It's not just making a design that's great – it's figuring out wholesale margins, adding in the cost of packaging, shipping, taxes, tariffs, and making sure your profit margin will keep your business running," Scotto-Dinan said. "Like many designers, I'm so much more creative than analytical. But you have to focus on the numbers to make your business actually work."

In other words, breaking into fashion requires a lot more than just a degree in design and a talent dreaming up runway styles. We've interviewed emerging designers who have built their businesses from scratch, as well as legal experts who filled in the finer points of financial and legal sustainability to guide you through the fashion start-up process.

Breaking Into Fashion: Pin Down Your Dreams

Whether you create handcrafted vegan footwear or custom ball-gowns, before you take your product to market, experts suggest you ask yourself why, precisely, you want to do so. What's your goal?

George Nemphos, the chair of the corporate practice group at Duane Morris, a law firm in New York City that works with a lot of emerging and established fashion designers, says he asks all of his clients what their goals are for the business they're setting up.

"People in the apparel industry are very creative, and some of the legal aspects can escape them," Nemphos said. "It's part of the business that goes unseen. It's not what they're thinking about when designing, or are out there with the buyers."

Nemphos suggests before even enlisting an accountant or attorney to help set up the business, that an emerging designer solidifies plans for what kind of company they want to have, and what kind of life they'd like in coming years. How big they want to be, and where they'd like to sell their designs, will determine a lot of how a company should be set up – and help guide legal issues going forward.

Scotto-Dinan agrees that entrepreneurs in fashion and design should ask themselves: "Do you want something nice and easy, something that brings you joy and a bit of income without much stress? Or do you want to be a fashion empire? I really do think that goal speaks to how you're going to work."

For designer Jiminie Hayward, starting her business small – and keeping it small – is right in line with her goals. She graduated from Boston's School of Fashion Design in 2007 and began scoping out a target audience for her custom-made formal dresses. Her dream: to sew and sell custom-fitted hand-made dresses at an affordable price. Mass-producing was not an option.

So, Hayward designed 10 dresses and launched her brand softly, selling it online through an Etsy shop, MyBlackDress. She says she started with about $500 in fabric and supplies, and now orders from individuals account for $2,000 to $4,000 of income monthly.

"I get lots of requests for wholesale from boutiques and online stores. I will look into that in the future, but I can't handle it right now. I really like doing custom work for now," she said. The number of orders coming in online keeps her at the sewing machine from 8:30 a.m. until evening.

For Sonali Singh, who met her business partner and husband, Jeet, while they were students at New York's Fashion Institute of Technology, the greatest bulk of preparation in starting their label, San & Soni, went into market research.

"We had to do a lot of market research, as far as price points, what brands we wanted to sit in with," she said. The pair's label doesn't offer basics, such as a simple white blouse. Instead, it's centered on inventive construction. "We spent a lot of time on theme and inspiration, and that's how we came into the contemporary market – and we're in the higher end of contemporary."

Dig Deeper: Fashion Entrepreneurs Capitalize on High-End Rentals


Breaking Into Fashion: Get the Financials Straight

Considering that manufacturing, importing, distribution, and sales are in your future, unless you're particularly numbers-savvy, you'll mostly likely want to enlist an accountant and a legal counsel to help advise on business incorporation and how to set up your financial accountability.

Nemphos suggests that too many independent clothing and accessory designers don't work with advisors, and instead end up simply setting themselves up as a sole proprietor of their company without exploring other incorporation options.

"As a sole proprietor, you are on the hook for everything – so we advise them to not do that necessarily. Setting oneself up as an S-Corporation could also affect them if they are possibly going to seek financing in the future," he said.

Creating an LLC might seem more complex from the start and for tax purposes, but doing so can give business owners organizational flexibility – and doing so ensures there is a corporate entity comfortably wedged between your business and your personal liabilities. It also allows some flexibility in terms of changing your form of business incorporation later without harsh tax penalties.

Scotto-Dinan said her top advice to a bootstrapping fashion entrepreneur would be to invest in a good accountant and a good attorney. "Definitely speaking to a good accountant about your goals so that you can set your business up, and to be careful about how you set it up, because while at the moment it might not feel like a crucial decision, it absolutely is a wise investment."

If you decide to keep accounting in your own hands and file for incorporation yourself, which Hayward successfully did, you might want to consider educating yourself first. And, no, Googling isn't sufficient.

"It's really important to take some tax classes," she said. "That's the least fun part about running your business, doing your taxes. But the city often offers bookkeeping classes, and they can teach you how to create monthly income statements. Absolutely do those, then it makes it a lot easier at the end of the year."

From the start, you'll also want to protect your label from trademark infringement. "If you have a service mark or trade name, you're going to want to file with the patent and trademark logo. Once you have done that, you can use that on a label, for events, and on your website," Nemphos said. He also warns that brands should be proactive about promoting their brand online, because simply getting your name out, and attaching it to products, protects your use of it. He suggests registering URLs with your brand name right away, and using the brand name prominently on products and labels. Doing so doesn't hurt marketing, either. "Brand development comes from just being out there and known, and that you take the steps to show off your product and your concept."

Once you have a legal counsel and accountant in place, remember that they likely have a great deal of expertise in the industry – and can serve as valuable advisors to your business. Don't be afraid to ask questions – doing so can open your eyes to everything from money-saving options to marketing trends.

Dig Deeper: How to Incorporate


Breaking Into Fashion: Build Your Production Model

Today, in the era of super-simplified online sales via eBay, Etsy, and a host of other online storefront options, it's easy to start small. You can learn how to set up an Etsy store.  Inc.com also has guides on setting up shop on eBay and how to use your local market as a business incubator.

Hayward could be considered model of how to make a sustainable, and truly profitable, business that exists solely through an online storefront. But she's planning big: she'd like her own boutique, complete with sewing lab – as well as to use the space to offer educational courses in designing and sewing. She's anticipating hiring her first employee soon: another seamstress.

"You can start small – you can do custom wedding dresses or bridesmaid dresses. Start small with a very focused audience," she said. "But I'm getting to the point where I'm working late evenings, and I'd like to create every dress myself, but I'm going to have to expand production."

Scotto-Dinan, on the other hand, knew from the beginning she'd need a production facility. She read Womens Wear Daily to learn about the industry, and found advertisements for a variety of New York factories in its pages. Once she found a handful that seemed aligned with her goals, she interviewed them, and found one "that was a good match for what I was planning. I aligned myself with one local facility – and to this day I'm with them."

Scotto-Dinan, who is based in New York, knew that she wanted to work with a local producer. However, sourcing a product abroad is a popular – and often money-saving – choice, though doing so creates myriad shipping, customs, and quality control issues.

When you're ready to sign on with a production house, mind the contract, attorneys caution. "The cutting houses and factories will throw a contract at you. There's a standard contract that they give you, but some of them come back and say, once you're working with them, that they own the patterns. You can't let that happen," Nemphos said.

One way to preempt disputes is to have a legal confidentiality agreement and a development agreement ready. Also, if you're using unique patterns or fabric designs, you might want to consider trademarking them. Yes, that's right: patterns are considered intellectual property and fit into the trademark purview rather than being considered patentable.

Then again, if you're developing a new fabric, or chemical compound that creates a fabric, you should consider patenting that process, Nemphos says. "There's a great deal of change in the materials that are used in apparel. A lot of it is specially designed and created – and that material has to find its way into contracts, because you have a trade secret on your hands," he said. "That can, and should, be patented."

Nanette Heide, a corporate partner in the New York office of Duane Morris, added: "You really have to be careful who you give access to information on how your product is made. That's handled through confidentiality agreements. You have to make sure your stuff is kept secret."

Before establishing your brand, search out others who might be using the same, or similar, names. Don't enter the same retail space as a direct competitor with the same, or a similar, mark. That said, Heide advised that throughout your brand's lifetime: "You want to keep a watchful eye on whether someone out there is using a similar mark or name. If someone is, at that point, you'd need to send a cease and desist letter." In other words: call your lawyer.

Dig Deeper: Creating a New Online Fashion-Buying Experience


Breaking Into Fashion: Ramp up Sales, Think Big, and Address Market Desires

The legal issues involved in establishing a brand only expand as your business grows. So do sales and marketing demands. At this level, both innovation and sales are your keys to success, Scotto-Dinan advises.

"If you know your market, and it's department stores, call the fashion director at Bloomingdales. You can find these people. You have to sell your product, and if you know it's good, just do it," she said. "Send them your look book and don't look back."

Another part of succeeding as a designer in this economy is being innovative. But also being mindful of your audience helps. If your brand is selling well in a few boutiques, listen to their buyers, Singh said. If they're not talking, actively solicit their advice on your last line, including what they liked, what didn't sell well, and what they'd like to see in the future.

"One thing I would share with any emerging designer is you have to be open to things your buyers are saying," she said. "It's true that designers can be like babies, and be very attached to what they design. But being open to what buyers have to say can really help you make a collection they want to buy."

And that can tune you into what consumers want. For instance, when Scotto-Dinan began receiving a bulk of calls requesting dresses for bridal parties, she knew the bridesmaid dress market was ripe for the picking.

"We launched this January a second collection, the Ardour Collection, in bridal stores last year, to fit that demand," she said. Now the Ardour Collection is in 25 bridal stores.

Scotto-Dinan has also built on the shapewear trend, which has been firmly established with the popularity of Spanxs, by creating a line of shapewear-lined dresses called SLEEK NYC, which will be launching this year at department stores. She has a fourth label, a private label for Anthropologie stores, called Annabelle, this year.

"What I love is the big question mark, how you don't know what will happen, but that you can strive to build it. Even if it doesn't grow to that huge point, you know you're building it," she said.

Dig Deeper: Revamp Your Fashion Marketing Plan

Last updated: Jun 14, 2010

CHRISTINE LAGORIO-CHAFKIN | Staff Writer | Senior Writer

Christine Lagorio-Chafkin is a writer, editor, and reporter whose work has appeared in The New York Times, The Washington Post, The San Francisco Chronicle, The Village Voice, and The Believer, among other publications. She is a senior writer at Inc.




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