Leaving the relative safety of full-time employment to strike out on your own is a bold step to take. Drapers meets three brave souls who have done just that.
If you think launching a business during today’s age of austerity is madness, think again. More than 200,000 businesses opened in the first six months of last year - a rise of 51% on 2009, according to consultancy firm Yoodoo.biz. And even though banks are reluctant to lend, there are ways to muscle your way in.
Stephen Pegge, head of external affairs at Lloyds TSB Commercial, says: “Start-ups have a far higher chance of succeeding if their owners take the time to prepare for changes in the economy, shifts in consumer spending and fluctuations in the price of raw materials. Identifying risks early and developing strategies to eliminate them will increase the likelihood of success. Getting a good handle on the financials is a necessity.”
PricewaterhouseCoopers head of private business Mary Monfries points to initiatives like the government-backed Enterprise Finance Guarantee Scheme (EFGS) and Enterprise Investment Scheme, which gives tax relief to those who invest in start-ups. “When you approach the banks for an EFGS,
you need a business plan with a clear idea of your product offering,” she says. “And think creatively about your cash sources. Some people have used redundancy packages and help from friends and family.”
Another option is ‘invoice discounting’, which involves borrowing money from a bank on the basis that your business is owed money by a customer.
Consider contacting an “Angel Investor” too. These are industry figures, often retired, who fund smaller ventures.
Roger Best, former chief executive of handbag brand Radley, is one such investor. He says: “If you have a great business plan and unique proposition, there will be individuals who will be pleased to invest.
Former Great Plains sales manager Liz Jefferson left the brand to open her womenswear indie Doodie Stark in Lindfield, West Sussex in March 2010. It sells contemporary brands such as 7 For All Mankind, Barbour and Pretty Ballerinas to local yummy mummies. The shop has outperformed all expectations, breaking into profit within seven months. She reveals how it was done
Why did you decide to leave Great Plains to start your own business?
We wanted a lifestyle change. I had been working flat out at Great Plains. I still loved what I did but it was time to move on. I now drive 10 minutes down country lanes to my shop and it is a very sociable, very fun working environment.
Why do you think Doodie Stark has been such a hit?
We did a huge amount of research to find the right location for the store and decided on Lindfield. It is a very affluent area but there are no shops like this. Women here have all got children. Many have moved here from London and have husbands who commute to the capital so they are cash rich but time poor. They want to find the same brands they used to buy on Northcote Road [in Battersea, south London].
How is it performing?
We spoke to people who had set up their own businesses and asked them what to expect in the first year. So we came up with a figure. We achieved it within the first five-and-a-half months of opening and became profitable after seven.
How did you fund the venture?
It was self-financed. My husband and I both sold properties in London at the top of the market and we used that money. The plan is to pay back the directors loan by the middle of 2011.
What top tip would you give to aspiring entrepreneurs?
Have courage in your convictions. A lot of people were surprised we were setting up our business in a recession but we knew it would work. Because of our location our rent is very low so we can afford to have the odd quiet day.
Monica & Joe
Husband and wife Joe and Monica Wahla believed there was a gap in the market for an online womenswear boutique for established, affordable luxury brands and less well-known European labels. Last year, they jumped ship from lucrative jobs- Joe at Ted Baker and Monica at Dorothy Perkins - to start Monicaandjoe.co.uk. Joe spoke to Drapers about the launch
Why do you think Monica & Joe will succeed?
There is nothing out there for fashionable, urban professionals in their 30s and 40s, who want pieces to wear again and again. People are buying fewer but better-quality items.
The next few years will be tough for the economy. Are you worried?
With 20 years of experience in the fashion industry we think we’re on to a good thing.
I was buying and merchandising director at Ted Baker for three years and before that I was group merchandising director at Mulberry. Monica was at Arcadia for 15 years, working her way up to head of buying at Dorothy Perkins.
How much money do you need to fund an online fashion start-up?
It is in the hundreds of thousands. We’ve ploughed our savings and investments into it. We wanted to use our own money so we could make all the decisions ourselves.
What are your financial expectations for the business?
We expect to break even in the first year and make a profit in years two and three.
What were the biggest challenges?
We thought getting brands on board would be difficult but our CVs opened doors. It was harder delving into areas we knew less about, like developing our website. Networking is also important - you need
to speak to people who know about packaging and e-fulfilment.
Lily and lionel
Aged just 27, London College of Fashion graduate Alice Stone set up accessories brand Lily and Lionel two years ago. Her ethical scarves have featured in Vogue, the Sunday Times Style supplement and Grazia and are sold around the world, as well as on her website. The brand has 30 UK stockists including indies
Whistles, Matches and The Dressing Room. The company, named after her late grandparents, is close to becoming profitable
Why did you decide to go it alone at such a young age?
I worked in PR for a couple of years after graduating and then worked for designer Matthew Williamson as an intern. Being part of a small company was inspirational. It was on a trip to India that I got the idea for an affordable luxury accessories brand.
Did you get support?
My family owns a successful wholesale company called Bandana, so I had the links in the industry.
What tips would you give to other start-ups trying to get funding?
I had some financial help from my family but I also got a loan from the bank.
I would advise anyone to be very cautious. Don’t live beyond your means. For example, look at freelance staff, or look at how you can achieve a look on your website without spending too much money. You don’t need to go bananas to begin with.
What has been the toughest challenge?
I knew I had good taste, a good eye, but I’d never done anything like it before. Building the website was tough. I had no idea about the technical side of things.
I had to trust other people to do it.
And the biggest breakthrough?
When we got our largest order to date for 2,000 scarves for retailer Anthropologie in the US. That was amazing. It still feels quite bizarre saying it out loud. I almost can’t believe it happened.
What lessons have you learnt?
Be flexible. I’d always wanted to be a retailer and not get involved with wholesale orders. But agreeing to sell my products in Whistles and Matches has been great for my business. Wholesale now accounts for 70% of sales, and without it I’d have to do a hell of a lot of advertising of my website.
How important is PR to you?
You must never underestimate the power of the media. Make sure your website is up and running, so people have somewhere to go to. Make sure you have plenty of product being featured in the press. It’s amazing the impact a mention in Vogue has on sales.
My job is quite tiring but I absolutely love it. I can’t imagine doing anything else.