One of the biggest hurdles faced by entrepreneurs, a lack of capital can cause the progress you’ve made on your fledgling start-up to grind to a halt. Fashion start-ups, in particular, require a significant amount of money to get off the ground, as business owners will have to invest in stock to sell to their future customers. No matter how on-trend or disruptive your ideas are, if you don’t have the financial stability to back them up, it’s unlikely that you’ll be able to make your business dream become a reality.
Fortunately, there are ways you can get the capital you need without spending the next decade of your life setting aside cash from your day job. If you’re really committed to your venture, then it’s worth jumping through some hoops to try and get the funds you need. It won’t be an easy journey, but thousands of entrepreneurs secure funding each year, so there’s no reason why you can’t be one of them.
In 2022, it’s expected that the fashion industry in the UK will be worth an incredible £60.1 billion. Not to mention the rise of online shopping makes it the perfect time for budding fashion entrepreneurs to set up an eCommerce platform dedicated to clothing trends. Here are some ways you can raise the money you need to join this thriving market:
Understand your expenses and taxes
Before you even begin to look into financing options, you must have a concrete understanding of how much money you’ll need to start and run your business. Skipping this step will only lead to problems further down the line, as you may find that you don’t actually have enough to launch your start-up successfully.
To begin developing a clearer picture of all the expenses you’ll incur, make a list of everything you need to get your business up and running. This can include items such as raw materials, stock and physical premises, but should also include running costs such as electricity bills, shipping expenses, the cost of running online advertising and printing labels for your garments.
Once you have a figure in mind, it’s time to project your revenue. Think about how many sales you need to make in your first year of trading and start calculating how VAT will impact your profits. Some goods will be charged at the standard rate of VAT, but others might be subject to a reduced rate. Clothing is usually billed at the standard rate, but children’s clothing may be exempt. During this stage of the process, it’s also a good idea to read up on tax deadlines and get more info on Making Tax Digital guidelines. MTD means that businesses with an annual turnover of £85,000 will need to submit their VAT return using tax software, which might mean changing your existing accounting setup.
Find investors
Once you’ve done all the hard work figuring out how much your business will cost to launch, you can reach out to investors. The easiest way to get started with this is online, as there are lots of communities filled with angel investors who want to support small businesses. To stand out from the crowd, you’ll need a solid pitch and business plan to present, so make sure you do some research into what each individual investor might be looking for. Ideally, you want to pitch your fashion business to investors who are interested in the industry, as they’ll be better able to see the viability of your venture.
If you’ve been unsuccessful at securing an investment from an angel investor, look into partnering with a venture capitalist instead. The only downside to this is that they’ll typically want a larger share of your company as well as a say in the direction your business takes. This can be beneficial for first-time entrepreneurs who are feeling unsure about managing their startup by themselves, but other business owners will resent giving up their control.
Don’t forget, the fashion industry is a very visual one that often hosts events and takes networking seriously. While finding investors online might seem easier, you might have better luck showing your face at fashion shows and conferences. Being confident and introducing yourself to key figures might just help you to stand out from the competition.
Crowdfunding
If you’re starting your own trend-led clothing line, then crowdfunding could be the perfect way to get your products on the market. This strategy is especially powerful if you already have a loyal online following who loves seeing your fashion creations, as they’ll be emotionally invested in your venture. However, you can still drum up a large amount of interest by offering discounts or exclusive products to anyone who donates. For example, you could give everyone who donates a certain amount a special limited-edition T-shirt that will never feature in your collection again. To start crowdfunding, you’ll need to use a platform like Kickstarter or Indiegogo.
Loans
While not the most attractive option to entrepreneurs, loans can be simpler to find than investment opportunities, though they do carry more risk. Before taking out a loan, it’s a good idea to discuss your financial situation with an advisor or accountant. You’ll need to have an idea of how you’re going to pay back your loan and should pay close attention to interest rates.
While you do have the option of asking your current banking provider about business loan options, there are companies dedicated solely to lending money to entrepreneurs. If you’re yet to start your venture and don’t have any proof that you’ll succeed, many bigger banks will refuse to lend to you, or may only offer you a very small amount. Loans are often better suited to small business owners who can prove their venture is growing and already have some assets to their name.
Financing your fashion start-up can feel like a never-ending journey, but once you’ve landed upon an avenue that works for you, you’ll be able to start working on all the really exciting parts of your business.
