A failed apparel brand that faced problems with budgeting and planning
Survivorship bias skews the reality of starting a successful business. Aspiring entrepreneurs are better served by looking at the stories and lessons of unsuccessful businesses. Brink Insider is challenging that by highlighting the stories of unsuccessful businesses and sharing those lessons with aspiring entrepreneurs.
We interviewed Ali about what he learned from trying to start his own apparel brand — which unfortunately didn’t work out. In this interesting interview, he offers advice to any entrepreneur looking to enter a similar space.
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And here are the fast stats on Ali’s apparel company:
Location: United States
Founders: 2
Industry: Apparel, Fashion
Biggest Struggle: Budgeting, Planning
Tell me a little background on your business. What do you do, how did you come up with the idea, and how did you get started?
As far as the business that failed, it was actually with the same business partner. We had started an athletic apparel company but naively went in without doing our due diligence. There ended up being a lot more capital investment than we initially anticipated.
And it would be a long time before we would be seeing a solid ROI. Seeing that our coaching business was doing so well from the beginning, with much better margins, we decided it didn’t make sense to pour money into a business that would produce much less revenue.
Instead, we cut our losses on that business so that we could invest that into a coaching business we had started. So having a fitness apparel company has always been on my list of things I wanted to do, and me and my current business partner and one other decided to get after it as our “passion” project.
So this was alongside our other business ventures. We hired a fabric consultant since none of us had experience in the fashion industry. We found a manufacturer in LA through our connections and went back and forth to LA each weekend for 2 months to prepare our samples, make alterations, pick fabrics/color swatches, etc.
When all was said and done we had dumped about $17K collectively into the project. We had everything ready to go for our first round of production, but the manufacturer quoted us at $20K for production which was out of our budget — and would yield a significant loss even if we sold everything with no marketing expenses (which we knew was not going to happen).
At that point, we started looking to outsourcing partners out of the country. While we were doing that, our coaching business started to take off. We did $6K in sales in our first 2 weeks at 95% profit margins, and we knew that it would be at least a year just for us to break even with the clothing business.
Not to mention that we would have to have a lot of our capital tied up and the profits would be split between 3 of us. It just didn’t make business sense for us to continue. We agreed that our passion project shouldn’t get in the way of the growth of the coaching business with higher potential, so we decided to cut our losses and focus on the new business.
Ultimately, we learned that we shouldn’t go blindly into an industry and count on consultants to keep things running smoothly. This could have easily been avoidable if we had a better understanding of the industry. It is a business venture.
I plan to revisit with revenues from the coaching business and my other ventures in the future. All in all, I have no regrets. It’s a lesson that had to be learned and which I will take with me in business for the rest of my life.
What would you say the biggest hurdle you faced when you were actually starting this business?
The biggest hurdle was that we didn’t understand all of the steps involved in the clothing manufacturing process. We kept having random expenses popped up that we did not see coming.
We counted on the manufacturer’s word that our original budget was realistic even though we went way over, and this made it impossible to have the numbers planned out which made it very frustrating for us. We were in the dark and basically always waiting on our consultant or manufacturer for information about costs and the process.
What advice would you give to someone who wanted to start the same business that you did, or even a similar one?
Do your research and get very clear on what your costs are going to be and set a realistic budget around that. Have a clear roadmap of every step involved before getting started, rather than taking it step by step and hoping the numbers work out, and don’t go into a business in an industry with low profit margins with 2 business partners, it will be a long time before you see a worthwhile profit.
I think the takeaway is that you can’t fear failure. It’s always a learning lesson and it’s how we experience the greatest growth as entrepreneurs.
It seems like budgeting is a huge issue found across a lot of failed startups. For people who want to start online businesses, how would you advise them to balance their budget between marketing, ordering supplies, etc.?
Yes for sure, failure to budget is just poor planning which is asking for trouble down the line.
It’s going to vary based on industry/product as well as marketing strategy. I think it would be irresponsible to give one hard rule on the proportion for the budget. I would recommend determining the cost of supplies and materials, how much product that would yield, and then research the rough average advertising costs for that industry.
If it’s an informational product or a service, I would recommend limiting spending on advertising and producing the initial revenue organically. From there, 20%+ of revenue reinvested in marketing would be solid.
How have you used your past experience as an entrepreneur in life, and what career have you pursued because of it?
I run a business coaching program for personal trainers who want to launch and/or scale high-ticket online fitness coaching businesses. We teach them everything A-Z from finding a niche with high opportunity, crafting a strong high-ticket offer around the needs of that niche, generating leads organically through social media, closing leads over the phone, efficient fulfillment, and finally, scaling with paid advertising.
Me and my business partner have both been serious about fitness since our early teens and see a lot of value in helping others improve their fitness, so we both have backgrounds in personal training ourselves. He went on to start his own facility where he rents space to independent personal trainers, and I took a different route and went deep into sales and online marketing.
The personal training industry has a problem in that it’s highly commoditized, leading to the vast majority of personal trainers making very little compared to the value that they can provide. It’s always been an issue we were aware of, so we decided to partner up and combine our expertise to help PTs in the industry move out of financial struggle and into a position where they could produce high incomes with location and time freedom (not being tied to a gym, not trading their time for money with hourly training rates, etc.)
We spent a couple of months just putting our whole coaching framework together and getting it down. From there, we just marketed our social media pages and got started by reaching out to personal trainers to get them on the phone and make our offer to those we knew we could help. And here we are!
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