• Designers: Should You Sell Your Business? (Part 2)
  • March 23, 2015
  • Law Firm: Phillips Nizer LLP - New York Office
  • You took the plunge and decided to go into the fashion business. Once you’d taken a couple of seminars, read “Accounting for Dummies”, let your bookkeeper set up your system, and actually listened to his advice, it wasn’t as hard to get started as all that. All you needed was an endless supply of money and the ability to function on an average of 3 hours of sleep nightly. With a little help from your friends you were able to get your samples made, and you found an agent who set you up in a group showroom. As long as you didn’t pay yourself anything, you were able to cover your costs and survive on two meals a day.

    In this your third year in business, you have taken enough orders to assure a positive cash flow, absent the occurrence of some unforeseen disaster. In fact, your accountant’s projections anticipate enough extra cash to make some important additions to your team, should you need them. There was that flattering editorial piece in a top fashion magazine that you didn’t have to pay for. With the PR coup, additional orders are practically in the bag, but you don’t know how you will be able to deliver on time. Your greatest dream is quickly becoming your worst nightmare. Your profits may be healthy, but what about you?

    Should you sell your business before it overpowers you? You have reached the first real crisis for most growing young companies. Yours is a problem of success. Just as you don’t quit acting when you finally get a call-back, you don’t sell your business just as it begins to take off. This is the perfect time for bottom-feeders to pick up a bargain from an overworked and frustrated founder - one who may not think herself capable of repeating the feat anytime soon, while the truth is that you can no longer do it alone. You need help.

    The moment the designer realizes that her company requires the support of experienced, seasoned managers is the point at which many newly-minted entrepreneurs make the grave error of getting out when they should be digging deeper. Those who choose to sell at this juncture focus on having shown that their concept can indeed turn a profit. Those who don’t sell figure that if this is what they can do when running their company by the seats of their pants, just think what could be achieved with the assistance of knowledgeable, professional management.

    You are one of the fortunate few able to prove the commercial viability of your concept. Now is the time to shape your company, to make it become the most important design that you have ever created. See whether you can picture the business in 5 years, then in 10. You should be looking for the best financial officer you can find, someone familiar with the industry who will do everything you hate to do and will do it much better. Now is when you find that person who knows how to execute and produce your designs in quantities that you can only imagine, and who will get the product fabricated and delivered to your customers when their shipments are due. This is the stage at which you identify and hire that individual who understands your market and who can work with the press as easily as she can work with distributors.

    Should you consider selling your business to the bottom-feeders, or should you be designing a management team for the future?