I haven’t given a proper update on the progress of the shop in a while and I figured it was time for one. I’m thrilled to say that I received startup funding from Futurpreneur in November (thank you Futurpreneur). I had to submit a business plan to apply, and my friend Maureen Dickson from Slow Fashion Forward told me that Futurpreneur had a user-friendly online business plan template that she recommended I use.
What a great tool. Each section gives instructions on what to include as well as examples of text from different sectors to give a clear idea of exactly what to write and what to omit. Even if you aren’t applying for funding through Futurpreneur, you can use the free online template and rearrange or delete the sections to fit your needs. You can download the plan as a Word document and work on it from your desktop. Oh, and a real plus, you can download the financial sections into Excel and they have a lot of automated fields (a life-savour for somewhat business math illiterate people like me).
The one section that stumped me for quite a while was the market one. In this section, which is one of the most important if you ask me, I had to not only provide a detailed description of my ideal target market, but also identify, as well as possible, how big this market share was. I searched Statistics Canada and other online sources for population figures, but the consumption of sustainable fashion items, especially online consumption, is too granular of an activity to be captured by census at the moment.
After weeks and months of trying to pin down a number, I decided to take the number of Canadian women that shop online, which was available on Stats Canada’s site, and then out of these women, find the number of them that are in my target market age range (also a regular stat). I had a separate percentage that represented how many women bought clothing and accessories online, but again, it didn’t specify whether or not the clothing was sustainable or not, let alone whether the purchases were for themselves or their children, etc.
- Statistics Canada
- Online news articles on sustainable fashion
- Online news articles on online shopping
- Online industry articles on online shopping
- Online industry articles on sustainable consumerism
- Google is your best friend
*Don’t forget to site your sources at the bottom of each page where you refer to them. This also helps you keep track of where you got each piece of information.
I’m not, as I’ve said before, a numbers person. But I knew that if I wanted to apply for funding and if I want to run a successful e-commerce business, I had to get my feet wet in Excel. The good thing about crunching numbers for your business is that your excitement about the business and your motivation to get it going fuels you to stay focused and to pay attention to the numbers.
So what do you have to consider?
First off, how many clothing items and accessories do you want to buy? To answer this question, you need to figure out the average cost of each product. To get this number, I contacted several designers that I was interested in buying from and looked at the wholesale prices of their products. I averaged out the price by adding up the cost of each time and dividing that total by how many types of items I’d buy. This gave me my product cost – how much the item would cost me to buy.
- Pair of pants – $50 cost price
- Blouse – $60 cost price
- Sweater – $80 cost price
- Dress – $90 cost price
- Total = $280/4 = $70 (average cost per product)
Next, I had to figure out how many items I wanted to buy and how many of each size. I asked the owners of an online shop in the UK how many of each size they bought. They said to keep things small and only offer two to three of each size per item. With this in mind, I started writing out my list of items, sizes and quantities per size.
Pant #1 – $50 cost price, two size 2, two size 4, two size 6, two size 8, two size 10 = 10 total = $500
Pant #2 – $65 cost price, two size 2, two size 4, two size 6, two size 8, two size 10, two size 12 = 12 total = $780
Blouse – $55 cost price, one size XS, two size S, two size M, two size L, two size XL = 9 total = $495
Top – $45 cost price, one size XS, two size S, two sizse M, two size L, two size XL = 9 total = $405
Total cost of inventory sample = $2,180
From here, I knew that the wholesale price was about 50 percent of the sale price, so I knew that an item that costs me $50 to buy would sell for $100. This is my product price. In an ideal world, if I sold all of my sample inventory above at sale price by the end of the year, I’d make 2,180 x 2 = $4,360 in sales.
Don’t forget, this sales total isn’t what I’d get to take home. I’d have to deduct all of my business expenses from that year, including initial start-up costs and operational costs. The startup costs are one-time expenses to get the business up and running such as the incorporation fee, initial inventory costs, and branding. The operational costs are regular expenses such as shipping, office supplies, taxes, web hosting and advertising.
To calculate how much you’ll make in net sales in one year, you have to take your gross sales of $4,360 and deduct your expenses. What’s left is your net profit.
What I liked about Futurpreneur’s Excel cashflow sheet is that I could easily play around with the number of items I plan to sell and see how those figures affected by total net profit. Obviously, the more items you sell, the more money you make, but your expenses also go up. This sheet calculated all of this for you so long as you included all of your start-up and operational costs properly.
This is a sample of some tips I learned while writing my business plan. Remember, as long as you show the promise of generating revenue and of revenue growth in year two and so on, you have a better chance of getting funding. Funders want to see that you have put a lot of time and effort into your plan and that your business has great potential to succeed.
Last-minute business planning tips
- Be reasonable in your sales projections. Don’t say you’re going to make $50,000 in sales in year one if in reality you can only afford to buy enough inventory to make $20,00o. Each sale takes time to make, from promotion to basic shipping, only take on as much as you can handle.
- Don’t be afraid to start small. I work full-time, so realistically, if I don’t want to run myself into the ground and lose my job, I can’t spend additional eight hours a day processing and shipping a hundred orders each day when I’m already working 8.5 hours a day. I have to start small, keep the business demands manageable so that I can do things well and scale up when the numbers add up.
- Read. Read sample business plans and talk to people you know in accounting, banking and funding. I asked a few friends who work in these sectors to review my draft plan with me, especially the financials. Their advice and help was wonderful and reassuring for me.
- Take your time. If you have the time, take it. No one wants to write a business plan under fire. Then again, I know that some times I work well under pressure, but there are some aspects of a business plan that take time. You can’t pull figures out of your derriere and expect them to be right.
- Remember that your business plan is a living document. Once it’s done, I encourage you to continually refer to it and update it as your business takes off. You may learn that your client base is a different demographic than what you had predicted. Write this in. You may find that your marketing messaging has changed over the years, write this in too. Your business plan is there to help you put on paper your idea but to also guide you along the way and to record your thoughts as your business develops.