•Raised $250,000 for 40% of equity from friends and HBS classmates. •Gave company 3-year royalty free license on her name.
•Gave investors a “put” on their stock at a multiple of earnings in years 3 and 4. •First line sold well -- She used contacts for “free” publicity, etc. •First line did not sell through, she could not sell second line. •She would have been successful if designs had sold!
•Appears attractive, good fit between skills, desires and market needs. •What does Heather have to do to capitalize on opportunity? oProduce designs consumers want
oLine up retailers and advertising support
oGet items produced and delivered on time
•What are advantages of opportunity?
oLittle capital needed
oGood market niche: Unserved, fragmented, and growing
•What are key factors for success?
oAbility to sell retailer design
oAbility to manage cash, production, delivery, and quality
•What is the upside?
oLiz Claiborne public value of $661 Million
oLicensing of name a big dollar plus with no additional cost oLots of expansion potential in “niche”
oCosts of operations mostly fixed
•What is the upside?
oDon’t need to control --Production--Cutting, Sewing, Shipping, infrastructure built up in industry to allow people to do just what she is doing. oLow working capital need
•What is the downside?
oPossible risks include:
• Will her designs sell?
• Successful designs will be “knocked-off.”
• Heather’s ability to design for 5 seasons, 20-30 designs per season •What could Heather do to reduce the design risk?
oHire a proven designer.
oDo some market research.
•Built up expertise in industry:
oModel; Summer job with Jackie Hayman.
oChose Market segment that matched her background: Morgan Stanley and HBS. Both feed into “professional women’s” segment. •Spent a great deal of time starting business:
oAt expense of school
oLots of research, talking to retailers, office space, etc. oUsed field study effectively
oSpent lots of time on business plan
•Built momentum. When business plan out, she had already: oIncorporated
oHired and paid Belinda Hughes
oDesigned a line
oArranged for a factor
oPaid rent / found building
oReserved production capacity
•All of Heather’s actions builds:
•In investors’ eyes (contrast with First Place & Ice Delights) oHeather’s Efforts
•Was flexible - kept eyes and ears open:
oWorked with Robert T. Vin, then abandoned him -- Saw would not work out oUsed phone to check up on Barbara Tarpe.
oSeized opportunity when 550 7th St. space opened up.
•Used support for key areas (see field study plan):
•Used existing contacts: