The first collection is designed. The prototype is created and you have your second round of samples. You found the perfect location for your shop or studio. You’ve got a really good idea and strong vision of how to share it with the world. But how do you take that next step? And who’s going to pay for it?
For creatives working in the fashion, music, art, new media, and technology industries, there is often a gap between being ready to launch a project and being able to afford it while keeping the fridge full and the lights on. That’s where an investor comes in. Whether it’s an individual angel investor or a venture capitalist firm, a cash injection from an outside investor can help cover production costs, staffing, legal fees, studio space, insurance, as well as cover living expenses while you grow your business into a profitable one.
Finding that investor can happen in many ways, but will you be ready for the first pitch meeting when it arrives? Here’s our guide to preparing for a conversation with an investor. Even if you’re still searching for those opportunities, going through the following steps is best practice for all creatives hoping to make a living off their art.
Set up a Company
Forming your own company shows you are serious about your business. It also makes the logistical process of receiving investment funds easier. In most cases, an investor will give you cash in exchange for partial ownership of your company, or equity. First, decide on the corporate structure for your business. Historically, corporations are preferred by investors as splitting up equity is a bit easier. These days, limited liability companies (or “LLCs”) also very commonly seek investment. A lawyer and accountant can advise on what works best for you. The way you set up your business dictates what kind of legal documents you’d need to structure the investment. (More on what kind of company to start and when: https://www.luque.us/whenshouldistartacompany.
Write a Business Plan
A business plan is a formal written document detailing the goals of the business, how you will reach these goals, and the timeline for getting there. What are you doing? And why? The business plan is your roadmap as a business owner and brand director. It is also a key document potential investors will want to see to ensure you have a solid plan for growing your business. You can find business plan templates or hire an expert writer or business manager to create one for you. The plan is typically structured around a few key elements, including:
– Mission Statement: A short statement of why your brand exists and your overall goal.
– Market Analysis: This details the dynamics of your market. Who are your competitors? Who are your contemporaries? This is often called a “SWOT” analysis: strengths, weaknesses, opportunities, and threats of your business.
– The Team: Even if you haven’t hired your team yet, include a list with brief job descriptions of each role in your company. If you do have a role filled, include the name of the person and a short summary of the expertise and value they bring.
– Financial Plan: How will you make money? Include the cost of creating your product and what you will charge. How will you grow to be profitable? When do you expect to make a profit?
– Marketing Plan: What is the rollout for your collection or product? How will you reach your clients? Who are your clients? Where do they eat, shop, what do they wear? Include key details on marketing strategy, like social media, advertising campaigns, seeding, or hiring PR.
– Key Milestones: These should be quantifiable, specific goals with deadlines attached. For example: earn $50,000 in gross profit by the end of 2022, or open a storefront in London in 2024.
Draft a Budget
What if you had $100k to spend on your business? What would you do with it? Here’s where a budget comes in. A budget is a financial plan for a defined period, usually one year. It should include all money coming in (revenue), all money going out (expenses), and whatever is left over (profit). If you are planning to start a new business, you should consider mapping out a budget for launching, as well as an operations budget for your first year. Start by making a list of everything you’ll need to spend money on: rent, office supplies, production costs, packaging, licenses, insurance, staffing, marketing, legal fees, accountant fees, subscriptions, transportation — and remember to save for taxes! This list is your Chart of Accounts. You also need to decide what you will charge for your product or services so you can project potential revenue and determine a healthy profit margin. To determine your profit margin, use this formula:
Create a Pitch Deck
If the business plan is the roadmap, the pitch deck is the look book. It should include key text and be strong visually. The deck is your agenda for pitch meetings and a summary you can send to potential investors, partners, and collaborators. This is your chance to share the look and feel of your brand. Paint the picture. Consider working with a designer to create your pitch deck. It helps to have a logo and a unified brand identity (fonts, colors, graphics). A pitch deck should have short, topline versions of key elements of the business plan, including:
– Vision and value proposition: A few short sentences giving an overview of your business and the value that you provide to your clients.
– The market: Who are your clients? What is your market, and how does your business fit into it? Add data on how much people currently spend on your market.
– Revenue model: How will you make money? Detail all the businesses’ revenue streams and your rates.
– Investment: How much do you need and how will you use it? Investors want to know how their money will help you achieve your goals and build a profitable business.
Wherever you are in the process of turning your art into a business, the above steps will help you level up. Going through the brainstorming and research process is a great way to solidify your goals and strengthen how you talk about your practice. Create the world you want to live in.