Having your own fashion line can be tough, especially where taxes are involved. Maybe you’ve got the creative side down to a science and know nothing of the business side, or vice versa? Because it’s Toronto Fashion Week (AND tax season), we turned to Nikki Wirthensohn Yassemi (Designer and Creative Director of leading Canadian fashion brand NARCES) and Silvia Jacinto (Tax Partner with Crowe Soberman) for their combined know-how and business savvy to provide advice to those starting out in the industry.
Nikki Wirthensohn Yassemi shared with us her first-hand experience of growing her own business and eponymous fashion line and how she was able to establish herself as a successful businesswoman. She believes that to be successful in the industry, it is important to find your niche, stand out in a crowded marketplace, and nurture your own entrepreneurial spirit.
SDTC: What do you love most about your career?
NWY: My career so far has been a good balance between the business side and creative side. I’m very fortunate to have been involved with several retailers at a merchant capacity. And through NARCES, as the creative director, I ultimately tie in my experience with design, merchandising, sourcing, and sales.
What was the biggest challenge you faced with getting NARCES off the ground, and how did you overcome it?
The initial challenge of ‘getting started.’ There is never a perfect time to start a project that you have a lot of passion for and I had been delaying the start waiting for that perfect moment. The start for the line came from a competition through Toronto Fashion Incubator.
The owner of one of Canada’s best chain of boutiques, TNT, was at the final show and ordered the collection. As of that date we slowly built a list of retailers where we are now stocked. We have been at TNT since the start!
What advice do you have for budding fashion designers?
Follow your passion. The ultimate goal is to be happy and for that you need to love what you do! I recommend getting experience working for retailers, other designers, manufacturers, importers and any company or organization that can give an insight into the fashion industry.
What three qualities do you most attribute to your success?
1) Being passionate and determined
2) Learning, adapting and growing
3) Taking a real interest in the customer
If you could go back in time to when you first started NARCES, what would you tell your younger self?
Focus on creating a strong social media presence as a powerful form of marketing and market research. It is a fantastic way for building your brand and getting out there faster, cheaper, better, and reaching more people in a creative way.
As a new designer, I’m still learning to balance the creative and the business side of running my own label. Do you have any advice for nurturing your entrepreneurial spirit without getting overwhelmed?
I believe it is important to continue to learn and grow no matter what stage you are in. Whether you are looking into starting your business, a new business or even a successful one, learning about your industry and how to better yourself and your business will keep you ahead and identify opportunities.
We also got a chance to speak with Silvia Jacinto about the financial side of things for those of us looking to launch our own fashion business.
On average, how much can one expect to invest in their start-up during the first year?
The answer to this question really depends on the type of business the entrepreneur seeks to start up. Is the entrepreneur a fashion designer who will be designing, manufacturing and selling his/her designs? If so, a budget is required for things like sewing machines and other equipment, fabric inventory, sales representatives, rental space, etc. This type of business may require more funds upfront than a simple fashion distribution or sales-only type of business, which can be run from home (for example).
I would recommend that a thorough business plan be prepared prior to starting up the business. This budget should encompass the estimated costs required to launch the business for success, as well as project revenues with an understanding of the market to be served.
I started a small fashion business and would love to have my best friend come work with me in a partnership capacity. What should I know before signing on the dotted line?
Business partnerships can be very complicated. There are a lot of considerations to take into account before accepting a new business partner. One of these considerations is the structure of the partnership. Will you be working together through a corporation or will this be a partnership of two individuals? If you plan to incorporate your business, what will the ownership structure of the corporation be? Will each of you own 50%, in which case no one person has control? Moreover, whenever there is more than one shareholder, consideration should be given to implementing a shareholders agreement, which will set out how corporate matters will be dealt with in certain situations, such as the disability or death of a shareholder and what would happen to the interest of that shareholder.
From an income tax perspective, if the business is operated in corporate form, any start-up losses will have to be retained in the corporation and utilized when the corporation begins to make money. The shareholders would not be able to claim these business losses in their personal tax returns.
Another business structure to consider is a partnership. This would involve the two entrepreneurs carrying on the fashion business together with a view to profit. Similar to a shareholders agreement, the partnership would be governed by a partnership agreement. Many of the same provisions that are applicable to shareholders agreements would be included in a partnership agreement.
From a tax perspective, a partnership is not a tax-paying entity. The net business profits and/or losses would be allocated to the partners and taxed in their hands personally. This may be a beneficial structure in the start-up years when losses are expected. If the partners have income from other sources, then the losses can reduce or offset that income, in contrast with the corporate form.
Now that I’ve gotten my business off the ground and am looking to expand into the international market, I’m considering applying for additional funding and financial support. Any tips on where to look/what to look for/what to avoid?
You will want to approach the bank you already have a banking relationship with to see what loans are available to you to expand your business. Having a solid business expansion plan will prove to be beneficial in securing these types of loans. Another avenue to consider is any government funding available in Canada and/or in the country/countries you are looking to expand your business in. There may be grant programs or favourable loans offered by the governments in those countries to attract foreign businesses and investment.
You may also want to consider bringing new investors into to your expanding business and raising capital from there. Any time new owners are brought into the business, you will have to consider entering into to a shareholders or partnership (depending on the structure) agreement with them. They will be your business partners and will have a stake in the success of your business.
If you are getting a bank loan, be sure to consult with your accountant and/or business advisor. You will want to understand all of your loan conditions, which may include giving the bank a personal guarantee. Ensure you understand the loan conditions before agreeing to them. Moreover, where government funding is concerned, you want to ensure you understand all of the loan provisions before committing.
Like many creative people out there, I’m not great at doing my taxes. Can you help?
We can certainly help! We are trusted business advisors to our clients. We not only take care of preparing and filing your annual personal and business taxes, but we are also there with you every step of the way through the growing pains of your business. We will advise you on planning opportunities and will be there to guide you through obtaining business loans, seeking government funding and expanding your business internationally. We are a full service accounting and business advisory firm.
What advice do you have for budding fashion designers?
We would advise you to focus on what you are really great at – your creative fashion vision! You should certainly understand the business side of your creations, but do not hesitate to lean on professional business advisors to guide you in the right direction so that you can worry less about the administration of your business and focus more on building your brand and your business.