Post originally sourced from The Business of Fashion – http://www.businessoffashion.com/2012/07/finding-your-m-o-part-4-making-the-most-of-mentorship.html#more-35154. Full credits to Áslaug Magnúsdóttir, co-founder and CEO of Moda Operandi for writing this timeless piece on personal and professional development.
Earlier this month, my mentor, former boss and business partner, Marvin Traub, passed away at the age of 87. Marvin was a defining figure in the American retail industry and the man who, in his longtime role as president and CEO of Bloomingdale’s, pioneered the concept of bringing entertainment to retail. With his out-of-the-box ideas and ability to rally people around his vision, Marvin put an indelible stamp on the way the industry operates today. And even in his later years, possessed of a rare energy and passion for life, Marvin worked harder than anyone I have known. I was extremely fortunate to have had the opportunity to work closely with him, learn from his vast experience and meet many of the industry contacts that he nurtured over half a century of work.
Marvin’s passing got me thinking about the extraordinary importance of good mentors. In life, in general, we often rely upon select people — parents, teachers, spouses — to help mold us into who we are. The business world is no different: we need bosses to grow us into successful business people. And, in turn, we need to mentor those who are looking to become the same. Marvin was a boss and mentor who greatly shaped my career. And now, with him gone, he has inspired me to do the same for others.
Not all bosses are Marvins. Sometimes a boss is and will always be nothing more than somebody you work for. But even in a more favourable scenario, mentoring and being mentored isn’t easy. We don’t always like to be shaped and it’s not always fun doing the shaping. Indeed, many of my most important learnings from bosses like Marvin came during bumpy moments when we did not see eye to eye on a particular issue. Similarly, the process of mentoring some of the people of whom I am most proud was almost as painful childbirth. The fact is, great mentors and mentees are not necessarily great friends. With that said, here are some words of advice on how to mentor and be mentored effectively.
HOW TO BE A GOOD BOSS AND MENTOR:
1. Lead by example — and stick to it.
Good bosses and mentors take a stand on how they want things done, which sets the standard for the organisation at large. No manager’s style will make everybody happy. The key is to be consistent, so that employees learn how to operate within your particular approach.
While at McKinsey, I worked on a project for a manager with incredible attention to detail. His reports were premeditated and polished to a tee: the structure of the document, the choice of words, the rigour of the analysis, even the labeling and placement of the footnotes. At first, I grumbled about his “anal-retentiveness.” But I soon learned that his painstaking approach drove real results and I benefited greatly from employing it throughout my time at the company.
In my next job, I made investments for a billionaire entrepreneur who was a risk taker, unbound by process, structure and other norms. At first, this was chaotic and confusing. But he, too, was incredibly successful and he taught me to be comfortable operating in an environment in constant flux. I learned how to anticipate the unpredictable. And without this guidance, launching and running an internet start-up would have been a daunting task indeed.
The key is: whatever your style, teach it and bring others onboard. They may not love your approach, but they will adopt it. Nobody respects a flip-flopper.
2. Inspire through conviction.
The best mentors and bosses are those who inspire through passion and conviction. Marvin was a master at getting people to do things they normally wouldn’t do because he believed in his ideas so strongly. He got Diane von Furstenberg to ride an elephant to a Bloomingdale’s store opening event. He convinced the city of New York to change the direction of traffic on a major avenue so that the Queen of England could visit Bloomingdale’s. For Marvin, the sky was the limit and his passion inspired those around him to dream big. Whatever you believe in, whatever you stand for, broadcast it with all of your heart. Conviction is infectious — demonstrate it and your people will dream big with you.
3. Give honest feedback frequently.
You need to be extraordinarily honest and forthcoming about the feedback you give your mentees, positive and negative. Your people can’t be proud of what they don’t know they’ve done right and they can’t fix what they don’t know is broken. A month into my job at McKinsey, I was shocked by a performance review from the partner leading my first project, detailing my need for improvement in several areas. But I sucked it up, made changes and came to really appreciate granular criticism on a regular basis as critical to my growth. I probably would not have progressed at the company without the constant, tell-it-like-it-is feedback loop.
Last month, when M’O completed its latest round of financing, I received a message, out of the blue, from that same partner who gave me my first performance review. “I am so proud of you,” it said. So the cycle of feedback continues. Be honest, be critical, be forthright.
4. Share yourself
Have the confidence and willingness to share your experiences and relationships with your people. That’s half of what they are looking for.
Marvin Traub went out of his way to share with me his vast network of contacts. Over daily breakfasts at the Regency and lunches at the Four Seasons, Marvin and his business partner, Morty Singer, introduced me to hundreds of colleagues and associates — including my co-founder, Lauren Santo Domingo. Many of these introductions have formed the basis of my professional community. And Marvin’s generosity in this regard motivated me to work even harder for him. The point: be generous with your network of knowledge and contacts and your mentees will bend over backwards for you. Hoarding only slows their growth and fosters resentment.
5. Encourage debate
Just because you are the boss, it doesn’t mean you have all the answers. Sure, you know that, but you really have to believe and show it. Encourage debate among your people. Get them to speak up and voice their opinions, even if they’re unpopular opinions, particularly with you. Let feisty people tell you your idea is stupid. Help timid people articulate their support for your idea. Good mentors listen and learn and develop outcomes that take into account different personalities and all sides of the argument. To be clear: this is not about letting people be rude — it’s about enabling people to say whatever they think about the idea at hand.
HOW TO BE A GOOD EMPLOYEE AND MENTEE:
1. Debate respectfully
In keeping with the previous point, when your mentor encourages debate, be vocal in expressing your opinions. Articulate your point and provide evidence to back it up. But don’t get out of line if your boss doesn’t see it your way. Your boss is usually your boss for a reason. Pattern recognition and concern for other factors may influence the final decision, even if the outcome seems counter-intuitive to you.
2. Learn from the good and the bad
Nobody is perfect. All bosses and mentors have good and bad qualities, just like you do. Don’t lose sight of the good because you are preoccupied with the bad. And try to learn from what you don’t like: make a note of what you don’t agree with, so that you might do differently when you find yourself in a similar situation. If you’re not also a mentor already, you will be one day and you’ll want to draw on all of these notes.
Make sure you share the work you are doing. Your mentor isn’t psychic. So share loudly and share often. Provide regular updates and schedule frequent one-on-ones. Pick up the phone, pop into the office. Do not wait until a mentor or boss has to ask about something. Indeed, if he or she has to ask, it’s a clear sign that you are undercommunicating.
4. Ask for help
Always ask your boss or mentor for help when you need it. Whether you don’t fully understand a task or feel stretched by your workload, it’s your obligation to ask for back-up. If you think you might need help, then you need help. Said differently: it’s unacceptable to not ask for help and then miss a deadline. That’s a sure fire way to get fired. No boss should be upset with you for asking for help. A boss will, however, look at you critically if you overpromise and underdeliver. Don’t mess this one up.
5. Your boss is human too
Just as you want your mentor to take a genuine interest in what you are doing, take a genuine interest in return. It can be lonely at the top and there is often a lot of good that comes from trying to get your boss to open up in an appropriate but personal way. Having a relaxed human dialogue with a boss or mentor is often the best way to strengthen your relationship and make the most of your learning. But be honest and respectful about how you reach out. Idle chatter or kissing-up is interpreted as just that and may do more harm than good. Better to pick a topic of common interest and dive deep, batting stuff around over a period of time, like an extended chess game. Bosses need love, too, and sometimes the best form of love is a conversation with about something where both parties temporarily put business aside and lose yourselves in something personal or even frivolous.
Written by Áslaug Magnúsdóttir, co-founder and CEO of Moda Operandi for The Business of Fashion.
When founding a company, one of the most important decisions you will make is how and when your company grows. Growing a young company is not an involuntary, linear process, like how a baby grows. Growth tends to happen in sizeable, step-up increments, like a set of stairs, based upon deliberate decisions you and your team make. The key is to balance careful planning with speed of execution.
The implications of this tricky balance are multiple and very real. Do you “get it right first,” subordinate growth to perfecting your product or service, or do you “get big fast” and shun polishing the decks while it’s full speed ahead?
As you will hear me say often, there is no right solution to this kind of puzzle. But as co-founder of Moda Operandi (M’O), I mulled this balance carefully and decided I needed to “get big fast.” I saw an opportunity for M’O to be first to market with our unique “pre-order luxury goods” concept and I knew that meant aligning myself with key people and companies to help me do it quickly and cleverly. In short, I felt the need for speed was a critical competitive advantage that outweighed hoarding equity and control. This decision had significant implications for how I thought about taking on a partner, where to raise financing, and how much. And since, 16 months later, M’O remains the only store in the business with our dedicated pre-order model, this decision has turned out to be one of the most important I’ve made for the company to date.
TO PARTNER, OR NOT TO PARTNER
One of the first decisions to make when you come up with a business idea is whether to do it alone or with a partner. You have probably heard that entering into a partnership around a company is like entering into a marriage, and it is true. Partnerships, like marriages, are exciting because the whole is greater than the individual parts and together amazing offspring can be born. But also, like marriages, partnerships require work and compromises and they have real costs. Decision-making and control is shared; equity and wealth potential is diluted. So just like getting hitched on a whim in Vegas is not necessarily a great long term idea, you shouldn’t pick a partner unless you think you need to. And if you do need to, make sure that person is kick ass.
I knew Lauren Santo Domingo, my co-founder, would be the perfect partner. Why?
After our first chat about it, I knew there was nobody else I wanted as a co-founder of the company. But we can’t all be this lucky. And taking on a bad co-founder can kill your business before it is born. So here are a few things you need to think about when making the decision about partnering-up or going solo:
Divorce is a mess, not least because it will really slow you down. So only pick a partner if you need to. And if you need to, pick someone who will help you get there faster and smarter. The last thing you need is the old ball and chain.
Investors are your friends. They give you money, you build cool things, consumers spend money, everyone is happy. However, there are different kinds of investors and each has pros and cons. Specific to speed to market, here are a few things to consider:
The key point: if you believe you need to get your company to market now, make sure you match your expectations with those of your potential investors. You may not have the luxury of options. But you don’t want to take on an investor who wants you to get it right first, when you’re focused on getting big fast.
HOW MUCH MONEY IS ‘ENOUGH MONEY’?
Another common question I am often asked is, how much money should I raise and how quickly should I raise it? Fundraising is painful and time consuming. Some founders prefer to raise just enough to get something to market now. On the other hand, some founders prefer to go the extra mile and aim for a bigger raise so they won’t have to suffer through the process all over again in just a short while. There are pros and cons to each approach.
At M’O, we went the extra mile. While we were fortunate enough to have some seed money to get our proof of concept going, we parallel-tracked the fund raising process in full swing until we secured our first round of venture capital. Grabbing market share was critical. We had to build the car while driving it down the highway.
This may not always be the right decision. A young company might be better served in its early days focusing its attention on perfecting the product rather than on fundraising. And depending on the economic environment and the appetite of the investment community, raising more early on might mean giving up more equity to investors than if you wait. But you probably will need more money than you think. And it is always good to stash away cash today for a rainy day tomorrow, like a sudden downturn in the market or the unexpected arrival of a formidable competitor.
During our latest fund raising, I had a meeting with a Chinese businessman, one of the most successful retail tycoons in the world. He said, “You guys are hot. Everyone is talking about M’O. Raise as much money as you can now.”
The point? If capturing market share is of the essence, raise as much money as you can now. Having too much money is a good problem, even if it means dilution, giving up control and sharing the throne. But get to market. Raising all the money in the world means nothing if you aren’t open for business.
In February 2011, I launched an online store — Moda Operandi — with my business partner, Lauren Santo Domingo. Moda Operandi (M’O) was the first of its kind, offering the latest runway styles for immediate pre-order following their presentation at fashion shows in New York, London, Milan and Paris. The site was the result of an idea that I had back in the Fall of 2009 while I was running the premium division at Gilt Groupe: why not allow fashion lovers to buy anything off the runway, in any size offered by the designer, from the comfort and privacy of home? That idea became an obsession that I knew I had to see through to fruition. And I did: Friday last week, M’O announced a Series C round of financing in the amount of $36 million. Investors in the round included venture capital firms RRE, NEA and NAV, as well as strategic investors Condé Nast, LVMH and IMG. Champagne was uncorked. M’O was cemented as a real business.
While celebrating the closing of our latest round, I sat down for coffee with my friend and former McKinsey colleague, Imran Amed, founder of The Business of Fashion. Imran suggested I write a column for BoF about my experience as a founder and CEO of a fashion startup. Our conversation got me thinking about my career, M’O and how it all came to be. Specifically, what are the key requirements for success as an entrepreneur? Why do some start-ups prosper while others fail? How much of it is a result of planning and skill, and how much is just dumb luck?
There is no perfect script for launching a business and I don’t pretend to have all the answers to these questions. But I do hope that sharing my thoughts and experience over the weeks to come can shed some light on the issues that fashion start-ups face and tease out some lessons learned. And, most important, I hope that my story might help others obsessed with an idea to take the plunge to see it through.
1. SOLVE A PROBLEM, EVEN IF OTHERS ARE ALSO PRESENT
You have heard it before and you will hear it again: a start-up that solves a problem, addresses a need and/or fills a void is one that is best positioned for success. The fact that M’O fills a gap in the market has been one of the key factors that has taken us this far. M’O also is unique in that it is the only business specializing in letting consumers pre-order the latest designer runway styles. But if solving a problem is critical to a company’s success, is uniqueness a requirement as well? Absolutely not. Many examples exist of successful companies that were not the first of their kind. In the online fashion space, Gilt Groupe is a good example of this. Gilt took its concept (selling exclusive fashion at a discounted price through limited-time “flash sales”) from a business previously launched in Europe, Vente-Privée, but shaped the concept to address the needs of a US customer base. And Gilt is not alone: flash sale sites have taken the US by storm, delivering discounted goods and services to customers who crave them. The bottom line is that while filling a void is key, being first to do it is not.
2. ACTUALLY, IT’S REALLY ALL ABOUT THE TEAM
When I started thinking about the concept for M’O, I immediately knew that Lauren was the perfect business partner. We had both worked in the fashion industry for a long time and we had complementary skills. My background was steeped in the business side of fashion, having worked as both an investor and consultant to fashion brands. Lauren’s expertise was in the creative side: a long time stylist and editor, she has an exceptional eye for fashion and deep relationships with designers around the world. We knew that technology was our weak spot, so we embarked on the notoriously difficult task of finding a qualified CTO in New York. Once this problem was solved, we knew we had the key skill sets covered. We could then move on to building our initial website with a small, but highly qualified team of passionate people.
The key take-away? Your initial team is everything. Nail down the key people at the get go who are critical to success and then get going with it. Don’t get bogged down with hiring in non-essentials at the early stages. Outsource other needs or just acknowledge to your investors and partners you aren’t wasting time on those areas now and will address them later.
3. PASSION WILL GET YOU FAR
People often ask me what it is like to be a founder and CEO of a start-up and whether this is a path I recommend. My answer is simple: don’t start and run a company unless there is nothing else in the world you want to do. Being the CEO of a start-up is all consuming. You no longer have weekends, holidays or a truly carefree drink after work. You are on constant alert, thinking about the people who work for you, planning out the future of your company, fussing over every small detail that might contribute to the success (or demise) of your business. The ups and downs are real and extreme. So the one thing you absolutely need to keep yourself and your team motivated is complete and utter conviction in and passion for what you are doing. Anything short of that and your team will smell it, your partners will smell it, your customers will smell it and you will fail.
Years ago, while living in London, a business partner and I spent several months researching and developing a concept for a healthy fast food chain. Despite it being a solid business concept that catered to a real need in the market, it just wasn’t my passion. And when things started to get tough, I didn’t have the conviction to keep myself going. M’O, on the other hand, has captivated me from the day I picked up the phone to call Lauren. With that kind of love for our company, I am motivated to wake up every day to nurture and grow the company.
4. LIKE IT OR NOT, CASH IS KING
At the risk of stating the obvious: you might have a wonderful business idea, but unless you are independently wealthy or able to convince someone else to fund your idea, it is unlikely to go much further than the drawing pad. Raising money is like most things in life, an acquired skill that requires practice and dedication. When I moved to New York in 2006, I started an investment company, TSM Capital, with retail legend Marvin Traub. TSM invested in fashion brands, such as Matthew Williamson and Rachel Roy, and I spent a good deal of time (and heartache) raising capital for early stage fashion companies. This was an extraordinarily difficult task, as many investors were not comfortable assessing the competitive advantage of individual fashion brands. I had to hone my fund raising skills by learning the do’s and don’ts of selling brands to investors: what motivates them, what scares them. That learning was critical during M’O’s fund raising process and we have been blessed with the ability to access capital to fund our growth and development, having raised nearly $50 million in under two years. Without this money — and without knowing how to raise money — the beautiful idea behind M’O would have stayed a sketch on the drawing pad.
5. LIFE IS ALL ABOUT TIMING
This lesson is may be the hardest. Timing is everything, too. Some ideas are great but they are just too far ahead of their time and they fail. Some ideas are great but they arrive at the party too late and they fail. This is as true in the online fashion world as anywhere else. Gilt got its timing completely right, launching just when the economy was experiencing a significant downturn and full price luxury sales were suffering heavily. As a result, Gilt’s business, selling discounted fashion merchandise from previous seasons, was an instant success.
At M’O, we knew our time was now. We saw the writing on the wall. Consumers were demanding online access not just to commodity products from Amazon but luxury goods from designers. With the economy rebounding, we worked hard to get to market fast — even at the expense of making mistakes along the way. As a result, M’O has been able to generate the sales and financing required to put the company in a unique place. In short, while you can’t time everything, do your homework to determine the right moment for your idea. Once you see that wave coming, paddle as hard as you can to catch it. There might not be another big one on the horizon for some time.
This article is a blatant copy and paste job from The Business of Fashion but upon reading it I thought it was such golden information I had to drop it here for future reference.
Written by Áslaug Magnúsdóttir, co-founder and CEO of Moda Operandi.
NEW YORK, United States — Early stage entrepreneurs often ask: is a business plan really that important or can you get away without one?
The quick answer is: yes, it’s really that important, and, no, you cannot get away without one. If you’re looking to third parties to raise capital, they’re understandably going to want to see a plan for what you want to do and how their money is going to be spent, with some very specific topics addressed along the way.
Certainly, there are exceptions to the rule. Friends and family sometimes just want to fund your business no matter what, or maybe you’ve found an angel with such an understanding of your concept that a plan isn’t necessary to get the checkbook out. My partners and I at TSM Capital sometimes invested in fashion brands that did not have business plans, but did have management teams with very clear ideas about growing the business. But even in those situations, our first order of business was always to sit down together and map out a plan. A business plan, at its core, forces the entrepreneur to clearly articulate the business in writing so that the entrepreneur, key team members and investors all stay on the same page in terms of product, strategy and financial expectations.
In short, you’re most likely going to need a business plan to get funded. And if you’re lucky enough to get funded without one, you’re still better off having one as it will serve as a roadmap for your early months.
So beyond wanting exceptional management to be pioneering a high margin, scalable business that takes advantage of an exploding industry trend, what else are investors looking for in a business plan? Here are a few general rules to keep in mind in terms of the presentation of the plan itself:
Be brief. Professional investors like short business plans, generally no more than 10 pages and certainly no more than 20. Remember that you are catering to a short attention span, since these people see lots of plans. Get in, make your points and get out. Yes, there can be exceptions: The investor deck for Moda Operandi’s last round of financing crept up to nearly 70 pages, since we had multiple investors with numerous requests, and, thankfully, we ended-up being oversubscribed. But honestly, what do you accomplish with 70 pages that you can’t with 20?
Be visual. If a picture is worth a thousand words, in a business plan, a picture might be worth a million dollars. Your goal is to make sure your potential investor understands and is focused on the beauty of your concept and good graphics help convey good ideas. I learned this the hard way: an ex-lawyer and a McKinsey alum, I drowned M’O’s first business plan in a sea of microscopic data, lists and charts with very few pretty pictures. One investor, gasping for air, (who, fortunately, did come in on our Series A) asked whether I came from McKinsey’s German office! Your business plan needs to let investors breathe so they can digest what is going on. I now always balance key data with gorgeous visuals, and I have a brilliant art director who helps create this precise aesthetic.
Be numerical. As you might imagine, financial investors are particularly focused on — you guessed it — the finances. Not only do they want to see financial projections, they want to see these same financial projections twisted and contorted into a baffling array of numerical analyses: P&L projections, cash flows, unit economic analysis, customer acquisition costs, customer lifetime value analysis, conversion funnels, etc. At the risk of jeopardizing the brevity point: the more numbers, the better.
If you want to stick to the 10 page rule, below is a framework that works for most businesses:
Page 1 – The Team. Either start with “The team” or “The summary of the concept” (see Page 2 below). I like to start with The Team because when you’re presenting to investors in person, it makes sense to introduce everyone at the beginning of the meeting. The goal is to give investors a quick summary of the experience you and your team bring to the table. Don’t spend more than a minute on this when presenting.
Page 2 – Summary of the concept. Here you want to give the big picture about your concept before diving into details. For example, at M’O, this was a description of an “online trunkshow service that sells luxury clothes and accessories to consumers immediately following their presentation during fashion week,” plus a couple of other points.
Page 3 – The problem you are trying to solve. This is critical. Why is there a need for your business? What real problems does it solve? What voids does it fill? Investors are going to love to debate this one with you so make sure you really drill down to the specific value add your business provides. M’O example: “Customers can only purchase a small percentage of a designer’s overall collection at traditional retail and often only in a limited number of sizes.”
Page 4 – Your solution to the problem. What is your solution to the specific problem? How does it benefit the various stakeholders (customers, businesses etc.) M’O example: “M’O consumers can order any item from our designers’ runway collections in any size the designer offers, from the privacy and comfort of home.”
Page 5 – The size of the opportunity. This one is also critical. You want the bread baking in the oven and wafting over to the dinner table. While some investors are willing to invest in strategic but financially “small potatoes” opportunities, most VCs are looking to invest in businesses that have the potential to generate hundreds of millions of dollars in revenue. So you need to research and quantify the opportunity and then paint a picture that tells it clearly (and aggressively), i.e. a top down analysis of how big the market is to how big a share your company will take.
Page 6 – Your competitors. Who else has tried to solve the specific problem, or a similar problem, and how have they done it? What makes you unique versus them? How do you position yourself versus them?
Page 7 – Why will your concept succeed. Time to peacock. Why are you good? What is your competitive advantage? What assets — IP, expertise, contractual rights, relationships, technology etc — do you possess that will allow you to demonstrate success? You want to show off here anything that is unique or superior. Don’t be bashful.
Page 8 – Your marketing and customer acquisition plan. Assume in the beginning that you are unlikely to have a significant marketing budget. How are you going to get the word out there about your business without breaking the bank? Think PR, partnerships, customer relationships, social media, etc.
Page 9 – Five year financial projections. Full disclosure: no one has a crystal ball and it is unrealistic to create a perfect (or even near perfect) five year plan for a completely new business. Investors know this, too, but they want to see how YOU think about growing the business; whether you’re really in it to win it. There is no right answer to how you shape these financial projections. Different entrepreneurs have different approaches, ranging from being aggressive (fearing investors will deflate the numbers anyway) to under promising and over delivering (hoping investors will appreciate a conservative tact). Bottom line, the numbers need to look attractive but achievable. You need to show them the money. And if you can’t, then why are you launching this business?
Page 10 – Next steps. Take a deep breath, you’re almost done. Let them know quickly where you are in terms of the product, the team and your timing. “Next steps” is less about what’s on the page and more about how you talk around it: that this is a huge opportunity for investors, that other investors are interested, etc. Remember that fundraising is like dating: honesty is important but go slow. Don’t reveal all of your quirks and flaws on the first date, it is up to the other party to discover those attributes over time. By that point, hopefully both parties will be in love.
Care more than you need to, more often than expected, more completely than the other guy.
No one reports liking Steve Jobs very much, yet he was as embraced as any businessperson since Walt Disney. Because he cared. He cared deeply about what he was making and how it would be used. Of course, he didn’t just care in a general, amorphous, whiny way, he cared and then actually delivered.
Politicians are held in astonishingly low esteem. Congress in particular is setting record lows, but it’s an endemic problem. The reason? They consistently act as if they don’t care. They don’t care about their peers, certainly, and by their actions, apparently, they don’t care about us. Money first.
Many salespeople face a similar problem–perhaps because for years they’ve used a shallow version of caring as a marketing technique to boost their commissions. One report by the National Association of Realtors found that more than 90% of all homeowners are never again contacted by their real estate agent after the contracts for the home are signed. Why bother… there’s no money in it, just the possibility of complaints. Well, the reason is obvious–you’d come by with cookies and intros to the neighbors if you cared.
Economists tell us that the reason to care is that it increases customer retention, profitability and brand value. For me, though, that’s beside the point (and even counter to the real goal). Caring gives you a compass, a direction to head and most of all, a reason to do the work you do in the first place.
It’s only two words, but it’s hard to think of a better mantra for the organization that is smart enough to understand the core underpinning of their business, as well as one in search of a reason for being. No need to get all tied up in subcycles of this leads to this which leads to that so therefore I care… Instead, there’s the opportunity to follow the direct and difficult road of someone who truly cares about what’s being made and who it is for.
I stumbled upon a great interview with Paul Smith, courtesy of Bloomberg TV’s Eye to Eye program. In the interview he describes growing his business slowly, how he has remained independent through the clever management of his cash flow, and setting the old fashioned expectation of going into business to “just have a nice day.”
It might sound silly but with a growing empire and employees who have been with the brand in excess of 15 years he must be doing something right…
Here at EF we’re not really about flogging others peoples products, but this one time we felt like this one needs to be out there. Over the weekend we came across a unique business book titled “Built to Sell.”
The book written by John Warrillow is ranked one of the top 10 business books ever written by Inc.com. It explores why a business should be built forever but also always ready for sale, and profiles the story of an advertising agency transforming itself into a sellable business.
This writer personally found it a paradigm shifting read and one that would resonate with almost any boutique or young designer toiling away at building their our cog in the fashion business machine.
To really understand the implications, reasoning, and steps of making your business sellable you need to read the full story (you can read the book cover to cover in a single day), but below are the core tips of the story.
Follow these to make sure your blood, sweat, tears, passion, and excitement for your design and entrepreneurial zeal are one-day duly rewarded.
TIP 1) Don’t generalise, speciliase. If you focus on doing one thing well and hire specialists in that area, the quality of your work will improve and you will stand out among your competitors.
TIP 2) Relying too heavily on one client is risky and will turn off potential buyers. Make sure that no one client makes up more than 15% of your revenue.
TIP 3) Owing a process makes it easier to pitch and puts you in control. Be clear about what you’re selling, and potential customers will be more likely to buy your product.
TIP 4) Don’t become synonymous with your company. IF buyers aren’t confident that your business can run without you in charge, they won’t make their best offer.
TIP 5) Avoid the cash suck. Once you’ve specialised your service, charge up front or use progress billing to create a positive cash flow cycle.
TIP 6) Don’t be afraid to say no to projects. Prove that you’re serious about specialisation by turning down work that falls outside your area of expertise. The more people you say no to, the more referrals you’ll get to people who need your product or service.
TIP 7) Take some time to figure out how many pipeline prospects will likely lead to sales. This number will become essential when you go to sell because it allows the buyer to estimate the size of the market opportunity.
TIP 8) Two sales reps are always better than one. Usually naturally competitive types, sales reps will try to outdo each other. And having two on staff will prove to a buyer that you have a scalable sales model, not just one good sales rep.
TIP 9) Hire people who are good at selling products, not services. These people will be better able to figure out how your product can meet a client’s needs rather than agreeing to customise your offering to fit what the client wants.
TIP 10) Ignore your P&L in the year you make the switch to a standardised offering even if it means you and your employees will have to forgo a bonus that year. As long as your cash-flow remains consistent and strong, you’ll be back in the black in no time.
TIP 11) You’ll need at least two years of financial statements reflecting your use of the standardised offering model before you sell your company.
TIP 12) Build a management team and offer then a long-term incentive plan that rewards their personal performance and loyalty
TIP 13) Find an adviser for whom you will be neither their largest nor their smallest client. Make sure they know your industry.
TIP 14) Avoid an adviser who offers to broker a discussion with a single client. you want to ensure there is competition for your business and avoid being used as a pawn for your adviser to curry favour with his or her best client.
TIP 15) think big. Write a 3-year business plan that paints a picture of what is possible for your business. Remember, the company that acquires you will have more resources for you to accelerate your growth.
TIP 16) If you want to be a sellable, product orientated business, you need to use the language of one. change words like ‘clients’ to ‘cusotmers’ and ‘firm’ to ‘business’. Rid your website and customer-facing communications of any references that reveal you used to be a generic service business.
TIP 17) Don’t issue stock options to retain key employees after an acquisition. Instead use a simple stay bonus that offers the members of your management team a cash reward if you sell your company. Pay the reward in tow or more instalments only to those who stay so that you ensure your key staff stays on through the transition.
How do great leaders inspire action? How do companies inspire marketplaces to investigate and purchase their products, fashion or otherwise? The answers to these questions I discovered within a 18 minutes TEDx talk I found this morning by Simon Sinek.
The points within the this talk are simple, yet immensely profound for the world of fashion. People don’t need fashion. People only need clothing, and that depends where they are located in the world. People purchase the ‘why?’…
Check out Simon’s talk below. It may inspire you to re-think your communication of your ‘why?’.
After you spend years investing to build an aspirational brand, a competitor launches a new clothing brand or perfume and your customers disappear to buy the new new thing. The luxury and fashion industries are full of such stories.
Luxury and fashion have been playing this aspirational model forever. It works like this: I am not part, but would like to be; because I want to be recognized as a rich and important person, I buy a Gucci’s bag, Prada’s shoes, and so forth. To aspire and be recognized is part of being human.
But the aspirational branding strategy is intrinsically risky, because it is so exposed to consumers’ fashion hypes and downs. How can a luxury business stand apart from the aspirational crowd?
Let me present a successful case in Europe and parse out the managerial lessons. Loro Piana sells both exclusive wool and cashmere fabrics and its own branded clothes. An six-generation-old Italian family business, the company’s sales have grown from €243 million in 2000 to €478 million last year, despite two deep recessions. Loro Piana is distributed globally in 22 countries and operates 135 retail stores, most of them directly owned.
The company’s mission is to sell excellent products made from the best sources of raw material (wool and cashmere). Over the years, the company has been able to scout in remote areas of the world the best raw materials, building local sustainable ecosystems and preferred access to breeders.
For example, Loro Piana has been working with the vicuna from the mountainous steppes of South America for many years, culminating with the animals saved from extinction thanks to a project developed with the support of Peru government and the local community. By acquiring 2,000 hectares in the Andes, the company is establishing a natural reserves to further protect these animals. The vicuna produces the finest fiber capable of being spun with an average diameter of only 12-13 microns against the 15 microns of cashmere. Thanks to its preferential access and local community bonds, Loro Piana buys 85% of Peru’s production.
Another example is baby cashmere, a fiber the company obtains from the undercoat of young Hircus goats in the remote Gobi desert in Mongolia. Loro Piana works smoothly and sustainably with local nomadic Mongolian goat herders and has set up a local Mongolian company to manage the process of baby cashmere sourcing to be closer to the local nomadic community.
For Loro Piana, success depends not only on its ability to build competitive advantage through access to the best raw materials, but also on its sophisticated marketing skills and ability to use its exclusive raw material access for its branding. Baby Cashmere and Vicuna are now prime Loro Piana labels, associated by clients and consumers with product excellence. The company uses a very limited advertising budget compared to other fashion houses, mainly focused on promoting local ecosystems and stories of raw material excellence. The company does nearly no advertising on clothing lines or what aspirational brands usually do. In contrast, Loro Piana wants to be hidden.
Over the years, thanks to its obsession for sourcing and product excellence and sophisticated marketing, Loro Piana has become a classic of elegance. Its branding consumer’s perception is the opposite of aspirational. This brand and strategic positioning preserves them from the hypes and downs of fashion brands. Business is more stable, less cyclical, with lower advertising investment requirements — and, as a consequence, very profitable.
Do you have a plan for you brand on how to become a classic and shy away from the aspirational crowd?