Cash Flow Tips for New Fashion Designers

Before you launch your fashion brand, there are many tasks that you must take care of: marketing, sourcing suppliers, and more. All of those tasks require cash flow. Unfortunately, you may have a limited amount of funding actually coming into your business before you launch your brand. So how can you manage cash flow when you’re still a new fashion designer?

Tip #1: Focus on efficiency

As a fashion entrepreneur, it’s easy to get caught up in the activities you enjoy (designing your items, for example) and ignore the ones that you want to focus on less (let’s say, for example, putting together that spreadsheet that shows your profits and losses- ugh). In the early days of your startup, you’ll have to take care of many tasks on your own. Do not let those less-desirable tasks get lost in the shuffle! Instead, focus on efficiency. Prioritize the tasks that need to be done most, then get them done quickly and effectively, rather than leaving them for the last minute.

Tip #2: Do your research

As a new fashion brand, there are plenty of opportunities to overspend. You might end up with a supplier that charges far more than necessary for the work you want done or the materials you want to use. You might start marketing, only to discover that you chose the wrong channels. In order to maintain your cash flow and keep your finances in order, make sure you do your research before you start spending! Carefully evaluate:

Your potential suppliers. Will the supplier you’re considering offer good value for the money you’re spending? Do they use high-quality products? Can you expect the supplier to deliver? It’s well worth asking for samples before making a commitment to a specific supplier, especially if you’re struggling to decide between two suppliers who may have dramatically different financial expectations.

Your marketing channels. As a fashion entrepreneur, you have a relatively specific target audience. Do your research and learn which channels are the most effective for marketing to that target. For example, if you’ve created a brand for children, you want to find their mothers. Know which channels they can be found on. Is Facebook a solid marketing tool for your brand (probably)? Can you find people who are interested in your fashion items on Instagram (likely)?

What about magazines and other print media? Do the research that will tell you how much value those specific platforms can offer. Many fashion brands lose a lot of money on ineffective marketing–and especially in the early days, you can’t afford that loss.

Photoshoots and modeling opportunities. While these offer a great way to spread the word about your business, make sure you carefully evaluate and research your costs before you get started. Good photographers may cost more, but they are also well worth the expense. You also don’t want to waste money on an ineffective photographer or a model that fails to represent your target audience.

Tip #3: Carefully evaluate how much stock you need

As a fashion brand, you may struggle to fully predict how much stock you need for each season. That prediction, however, can make a big difference in your overall cash flow. Managing your inventory effectively can be the difference between a successful launch and a flop–not to mention a number of problems with cash flow. Many entrepreneurs over-stock in their first few years. For a fashion brand, which must keep up with changing trends, excess stock can end up being a waste, which you end up selling off at a loss in order to make way for new items.

Tip #4: Keep up with invoicing

Pay attention to your past due invoices. Make sure that invoices go out on time. In those early days, you may let invoicing fall through the cracks, especially if you aren’t sure how to handle collections–and that’s incoming funds that your fashion business needs in order to stay afloat. Prior to launch, you may have comparatively few invoices, or they might be smaller. As you launch your brand, however, it’s critical that you keep up with invoicing and have a process in place for collecting on delinquent accounts.

Tip #5: Pay your debts in a timely manner

Just as you want to manage the funds you have coming in, you also want to keep up with the funds you have going out. When you have payments due, pay them promptly. If they get lost in the shuffle, you can end up owing more than intended as you pay late fees. Worse, you may end up with strained relationships with suppliers. This can make it more difficult to get the items you need in the future. Prioritize paying invoices before they’re due to help ensure that you don’t accidentally miss a payment.

Tip #6: Consider where your funds are coming from

Did you elect to find investors to commit to your business? Did you need a bank loan to launch your fashion brand? Most brands will need some outside source of funding in those early years. If you have investors, you will need to show them how you’re working to generate a profit. On the other hand, if you’ve taken out a bank loan, you will need to repay that investment and manage your funds carefully. Make sure you’re aware of where your funds are coming from and how that will continue to impact your business.

Tip #7: Reinvest as many of your profits as possible during the early years

It’s tempting to start pulling funds out as soon as you start generating a profit. As a fashion brand, however, you want to continue to make your mark. Reinvest profits as they start to roll in. You’ll find that by establishing this habit early, you can make it easier to handle your finances in the future.

Financial management is just as important as the creativity and passion that led you to get involved in fashion design in the first place. By carefully managing your cash flow in these early days, you will set your business up for success in a way that will last.

Contributor
Contributor

StartUp FASHION is an online community where independent designers and emerging brands are coming together, helping one another, forming friendships, collaborating, letting off steam, sharing victories, and belonging to a network of people who get it; who are doing it too.We’re a place to access and discover the tools and information you need to build your fashion business. We help you define your path and give you the guidance, encouragement, and resources to follow that path.

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