Kick Start: skirting a fashion disaster
- Naomi Hulbert
- 26 June 2008
Le Black Book founder Kath Purkis. Photo credit: Justin Alexander
. She'd put in all the preparation and hard work but, at the eleventh hour, the contractors dropped the ball and things were starting to unravel. "What can I do?" Kath asked.The panel
- Jonathan Crossfield, Netregistry, expertise: web presence, online
marketing
- Marnie Neck, PagesOnline, expertise: online business, fashion
- Todd Sarris, Commonwealth Bank of Australia, expertise:
finance management, raising capital
- Naomi Hulbert, Nett magazine
Ironing out online wrinkles
Kath: LeBlackBook.com.au is like the Net-a-Porter online shopping experience.
It's a luxury online store. We're launching, fingers crossed, this week. We were meant to launch today, but I've had a few problems.
Naomi: Well, we have web, retail, fashion and financial business experts here to help you. What are the particular problems you're facing with your launch?
Contractors who don't deliver
Kath: My biggest challenge is getting the website content management system finished. There are some essential functionalities the developers promised me, which they now can't deliver on time. I find it frustrating when you've paid people
in advance and they don't actually do their job.
Marnie: It sounds like your priorities aren't theirs. They're really stretching it, but you have a deadline and you need to launch. I would be inclined to get rid of them and move on as quickly as possible.
Jonathan: Your deadline is more important to you than it is to them. This is a really common problem in business relationships - they're not the ones lying awake at night worrying, you are.
Marnie: It can be great to build people's trust by paying in advance, but not paying in advance gives you some power: if they don't deliver, you don't pay.
Jonathan: This means the contractors don't have any urgency to meet the deadline, as they've already got the money. Sounds harsh, but it's true.
Naomi: What can Kath do now, apart from stomp her feet?
Kath: At the moment, money is the last of my concerns. I just want to launch as soon as possible and not be awake 24/7 worrying about it.
Jonathan: But your contractors' first concern is money - and they've already got it. You need to tell them you'll be asking for a refund if they don't deliver what was agreed.
Marnie: What about approaching some other content management companies? Tell them about the problems you're having and ask if they could do better.
Jonathan: That would give you leverage to go back and say, "These people can provide what you said you would and they can do it tomorrow. I want my money back."
Work on, not just in, your business
Marnie: Kath, why is this launch date so important? Can it be put back?
Kath: I've already bought all the stock for spring/summer 2009 and it's all sitting in the office. I really need to move it before next season's stock arrives. Fashion buying and networking is what I really love. It's what I'm good at, and
it's the part of the business that I really want to focus on.
Marnie: That's really important, but it's only one part of a massive pie. You need to get the foundations of the business set up before you launch, or it could all fall apart.
Naomi: What I'm gathering is that you see yourself as a buyer and networker. But now you're also a small business owner...
Kath: Yes...
Naomi: It's the classic concept of working on, not just in, your business. Any tips for Kath on being a business owner?
Jonathan: It's always worth getting several different quotes. One company may undercut another considerably and also offer better delivery terms.
Map your money
Naomi: How can Kath walk the line between managing her budget and using her money to manage other people?
Todd: When you're running a small business, you have a million things on your mind and, in your case, dealing with international suppliers as well. My supreme advice would be to employ an accountant. Do you have one yet?
Kath: No, I don't have an accountant to do all that.
Todd: Sadly, many new businesses fail in their first year, and the primary reason is lack of preparation. I advise you to employ an accountant to do a cash flow projection for your first year. They'll take set-up fees, technology fees, all
that type of stuff into account, and do it over a 12-month period. This will allow you to better manage your time and money over those first critical 12 months.
Consider teamwork...
Marnie: Do you have financial backing?
Kath: No, it's all my savings, but just a few days ago, someone made me a proposal to partner in the business...
Marnie: Take it!
Todd: Do they want equity as well?
Kath: They want to invest in the business and take a percentage of the profits, but I really love the idea that this is my business, and I don't think this person would be a silent partner.
Marnie: I started PagesOnline myself and if I was going to do it again, I wouldn't. My advice is to recognise your skills and bring in people who have other business skills. You'll grow faster than you could on your own.
Jonathan: It's a matter of setting boundaries. You could say, "Look, leave the buying side to me because that's my thing, but I would love your help with accounts."
Choose partners carefully
Kath: I know a partner would be beneficial in the beginning, but I'm trying to think long-term and I'm quite torn. I've put everything into this business; emotionally, financially, everything...
Naomi: What are the long-term implications of a partner?
Todd: It would make it much easier for you to raise money in the short-term, but then if you are incredibly successful, you would still be handing a percentage of profits to that person. In my experience, when someone is the brains of an
enterprise and they take on an equity partner, nine times out of 10 the equity partner gets more than half the profit. The attitude tends to be, "You're the brains, but I'm the money," so they'll always go for more.
Marnie: The more your business grows, the more money you're going to need. You could sell your business for millions down the track, but right now you need to launch.
Todd: On the other hand, if a partner buys 50 per cent of your business, you can't then say, "Shoot, that was the wrong decision." You need to be 100 per cent certain this is a path you want to go down.
Compromise for short-term sales
Kath: I'm feeling fairly confident as I have loads of stock, and thousands of people have already registered online.
Naomi: What's the conversion rate from ‘website registrations' to actual customers?
Jonathan: I'm loath to put a figure on it. It depends how qualified and targeted your traffic is. You'll have a better conversion rate if the traffic was through, say, fashion forums, rather than general hotmail campaigns. But if you do have
thousands of people ready and waiting to shop, don't leave it too long or you'll lose them.
Naomi: It all comes back to that deadline...
Jonathan: Yes. If it turns out that the site may take even longer to get up and running, Kath really needs to do something in the interim to keep up the interest.
Marnie: You could target those specific people.
Jonathan: That's right. You could do an email marketing campaign - just to those people.
Marnie: ...and use a PayPal account to accept payment.
Jonathan: Something like, "We'd like to offer you an exclusive sneak-peek of our new products." You could end up making a whole stack of sales just by sending out an email catalogue - even if the website's not quite up and running properly
yet.
Kath: And I could target the industry, fashion media.
Marnie: And ask your designers to add a to link back to you on their websites and tell everyone on their database.
Jonathan: Ratings and comments will enhance your service. The rating system made eBay what it is today. It's about generating trust.
Kath: It's scary, but it's so exciting at the same time.
What next?
A few weeks after our chat, we're pleased to say Kath finally got Le Black Book up and
running. Visit the site to see for yourself, and don't forget to leave a comment on her blog.
