Just like you, I have many things to tackle in 2012 if I want to keep my business going and growing but I have figured out that first and foremost on my list is better financial management and structure. I have been blessed with success as a result of hard work in 2011. I have increased my gross sales 8 times what it was in 2010. However I am finding that there is nothing left in the bank. Yes nothing. Which begs the question “what the H E double hockey sticks?!?!” How does that happen?
Let my mistakes be your lessons. I have created this blog to help small fashion business along their way I want to share some mistakes and corrections I will be making.
- Mistake 1: Not opening a business account and using accounting software from the start.
- Mistake 2: Showroom fees and production costs are eating all my profits.
- Mistake 3: Advertising on faith.
- Mistake 4: Too many hats, too little time, lost focus.
- Mistake 5: Giveaway Frenzy!
Mistake 1: Not opening a business account and using accounting software from the start.
I did not anticipate the growth I had so I have simply used my PayPal account and transferred money to my banking account to pay for business expenses. I am a sole proprietor so really this can all be figured out with a lot of help from my accountant but it really has created unnecessary work and has not given me a clear picture of the business financial picture since I have personal income and expenses not involved with the business.
Correction: Business account is up and running, separate PayPal account and merchant processing is now set up for the business. Ths will allow me to have a clear picture of business finances and help me make better financial decisions.
Mistake 2: Showroom fees and production costs are eating all my profits.
Now this is sticky. Without my showroom reps I would not have the success I have had this year. From 4 to almost 50 retailers in a year! However, while 50 sounds like a big number what really matters is the amount they are spending and the profits you make. My production costs are high as a small business and I find I am paying monthly showroom fees some months without enough showroom orders to cover showroom costs. So I have lots of product going out but very little profit coming in.
Correction: First I am going to figure a way to cut material and production costs in my next season. I do have a few ideas. Next, I am going to do a year analysis of showroom fees, commissions and sales to see if there may be a way to restructure payment arrangements. Also working with my showroom reps to maximize sales and reorders is in the plan.
Mistake 3: Advertising on faith.
I have a small budget but I did advertise with a few magazines and blogs this year. They are a bit newer but have decent followings. However, I was a little disappointed with the results. I am able to track in my Etsy shop where my visitors and sales originate and have found that the avenues I have chosen have yielded little or no results. I have had much more success with social media relationships and blog reviews.
Correction: Save costly advertising until I can REALLY afford it. I will continue social media marketing and I have brought aboard a new PR intern to gain reviews and features on blogs and in magazines.
Mistake 4: Too many hats, too little time, lost focus.
Any small business owner will tell you it’s a 24 hour job but how you spend those 24 hours is key! I have found myself doing a lot of labor and research this year which has sucked time away from design and strategy. At the end of the year I was exhausted and discouraged and it was time to start a new wholesale season. UGH! I didn’t stop to delegate (or trust to delegate, or be able to afford to delegate) so I wasted a lot of time I could have spent on my best skills. Not a good business move.
Correction: My husband now does all my errands like running around to vendors, meeting with the seamstress over smaller issues, creating reports for me to analyze and make business strategies and has also started sales in territories not covered by my reps. I have also taken on a PR intern who I can delegate marketing tasks to. This is going to free up my time to focus on the core of my business-designing quality product.
Mistake 5: Giveaway Frenzy!
Now I do have a lot of fans as a result of giveaways but not many giveaways have resulted in immediate sales. And now facebook makes it almost impossible for your fans to see your posts so I know I am reaching a small percentage of the fans I have gained from giveaways. Consider the cost of the giveaway items and I am not so sure this is a good strategy.
Correction: I will be way more selective in giveaways and I will focus more towards blog based giveaways with active followings, I have had more success in this area.