It’s not easy to get the proper funding for your fashion business. As the founder of FWRD Funding and Marketing, my team and I receive a lot of inquiries from potential business founders and see the same mistakes happen time and again.
Mistake #1: Not Having A Fashion Business Emergency Fund
When it comes to an emergency fund, a fashion business works the same way as your personal finances do. When an emergency happens, you will need to have the funds available to cover it as well as any ancillary needs stemming from the issue.
The prevailing thought is that a business should have anywhere from three to six months of operating capital that can cover all of the expenses for that time. The emergency fund should be able to handle this without the need for additional debt or loans.
Some experts suggest that having access to a loan will suffice as an emergency fund. Others tend to agree that the best protection in an emergency is to have the funds liquid and readily available as needed. After all, you have no idea what kind of emergency could happen, and it could impact your ability to get the loan.
Mistake #2: Mixing Personal and Fashion Business Funds
Let me say it now, mixing your personal and fashion business funds is a big problem. Not only can it turn tax time into a nightmare, but you lose the ability to adequately monitor and project your business financials. Without the ability to analyze where you stand in your business, it is hard to plan for the future.
Keeping separate business accounts (including checking accounts) should be considered mandatory for any small business owner. When your business grows, you may need to show your financial information to banks and other lenders. At that time, you need to have your business finances clearly defined, something impossible if they are mingled with your personal expenses.
Mistake #3: Over-Estimating How Quickly You Will Turn a Profit
The act of over-estimating how quickly your fashion business will turn a profit is a leading cause of failure for many new companies. Many times people will burn through startup capital in the hopes that profits are right around the corner.
When things don’t pay off in that time frame, the business runs out of operating funds and is forced to close. You can avoid this by underestimating the time it will take to become profitable. If the money starts coming early, you are in even better shape. But preparing for the worst case scenario is one of the best ways to make sure that you are well equipped.
It might be that you are currently supporting your business by working a full-time job. Don’t quit your current job until you are sure that the profits are already rolling in and can adequately support you after all of the expenses are covered.
Mistake #4: Not Planning for Taxes
If you have a fashion business, you have to plan to pay your taxes. There is absolutely no way around this requirement, and you need to make sure that it is accounted for in your planning.
The good news is that your small business might be eligible for several deductions that can help with the growing pains of starting out. Talk to an accountant as to what these deductions might be and how you can use them to your advantage. But above all else, make sure that you have a tax plan.
Mistake #5: Not Hiring a Good Accountant
Believe it or not, a good accountant is just as crucial to the success of a small business as it is in a large one. In some ways, it might be even more critical since some financial mistakes could be disastrous to a fashion business just getting underway.
A good accountant should be able to help you with your taxes as well as annual statements and other documents to assist you in getting financing for your fashion business.
Mistake #6: Not Getting Business Insurance
In today’s world, business insurance should be considered an essential part of your business plan. It takes valuable equipment to run a fashion business, and you need to protect these assets. A business insurance policy should cover everything you need to work in the case of vandalism, theft, or other losses.
Mistake #7: Not Keeping the Books in Order
Doing the books can be a tedious task at times. But it needs to be done to avoid potential loss and other ongoing mistakes. One of the best strategies for keeping up your books is to schedule a little time each week to review everything.
By making it a habit, you will find that it becomes easier the more you do it. If you are struggling to have it all make sense, there are many bookkeeping classes for small business owners both locally and online. If you aren’t familiar with spreadsheets or bookkeeping software (whichever option you prefer), check online at YouTube and other places for valuable (and often free) learning resources or consider using a paid service like Bench.*
Mistake #8: Not Having a Plan Before Going into Debt
Many small business owners will take on debt without having a proper plan for using the funds or paying them back. Sure, perhaps it is only a credit card or family loan, but every loan that you make on behalf of your fashion business needs to have both its uses and a repayment strategy defined before you get the funds.
Mistake #9: Not Researching Your Fashion Business Name
The name of your fashion business is going to be the brand that you are banking on for success. It is vitally important that you do the research before settling on the name. You will want to make sure that it isn’t already trademarked, and perhaps equally important in today’s business world ensure that a domain name to identify the business is available.
Mistake #10: Not Having a Fashion Business Budget
Any new fashion business needs to have a budget to make sure that the money will last. You need to have the incoming outlast the outgoing once the venture is making money. And when the business is just starting, there is often very little incoming.
Budgeting will help you to make sure that the money you do have will last until the profits start appearing. In many ways building a business is like building a bridge, and funding is like building material. If you can’t build the bridge all the way across the river, it is all going to fall in. An accurate budget is the best tool you have for making sure that you can reach profitability.
It’s easy to miss some of the crucial details when it comes to getting small business funding.That’s why working with a professional is the first step in the right direction.
Guest post: Juliet Obodo is the founder of FWRD Funding and Marketing, which provides a variety of financial solutions and opportunities to enhance businesses in the beauty, fashion, and tech industries. To learn more, contact them or check out their website here.
*StartUp FASHION uses the Bench service (and loves it!), and is an affiliate of the company.