BoF Insights is The Business of Fashion’s in-house consultancy. We partner with leading fashion and beauty brands and investors to help them sustainably grow for the long term. Get in touch to find out how we can support your business.

This article is part three of a series by BoF Insights that outlines today’s playbook to translate cultural heat into commercial success. Read part one and part two.

For many fashion founders, generating buzz is the easy part. Where these creative visionaries often struggle is with how to build a strong business foundation that will allow their brands to scale.

For that, they need help.

“You can drive a business by being a very hot brand with the consumer begging and wanting and desiring it. But that’s just one small component of what makes the brand successful,” said Christopher Burch, founder and chief executive of investment firm Burch Creative Capital, which invests in LA-based contemporary label Staud. “If you were to say to me [that] you have a great creative [founder], I’d say to you, then we need the best CFO or COO in the world.”

This is especially true in today’s cooler financial market. Leaders who make good choices on financing, choose the right path to profitability and are willing to take a hard look at their brand’s DNA are primed for success.

“The world’s changed,” said Burch. “VCs around the world have learned that profitability is more important than growth.” Brand leaders need to flip the growth playbook and double down on strategic fundamentals before moving onto riskier, capital-intensive expansion activities.

By strengthening their internal cash flow position, recruiting executive talent and reinforcing the distinct DNA that gave them their initial start, independent labels can lay the groundwork for a sustainable scale journey that effectively translates buzz into performance.

In conversations with BoF Insights, The Business of Fashion’s in-house consultancy, independent brand leaders and investors outlined the imperative to foreground business fundamentals to secure future growth in the long term. In the third and final part of this series, BoF Insights breaks down the formula for transforming community buzz into lasting commercial performance by strengthening a brand’s foundations.

Recruiting at the Top

Investors and experts concur that lack of executive leadership is one of the main obstacles for unlocking growth past the $10 million revenue mark in the fashion industry.

Pivotal roles like the chief executive officer, chief financial officer and chief operating officer are natural complements to the skillsets typically found in creative founders. By recruiting executive skills, creative founders can prioritise the development of a vision and cultural positioning without sacrificing commercial discipline.

“[2024 is] a year to work on the foundations,” said Frederic Court, founder and managing partner of venture and growth investment firm Felix Capital, which invests in fashion labels Ami Paris and Anine Bing among other brands. “It’s a great year to hire people. There is a lot of instability in teams [so] it’s a great time to support talent and attract talent.”

According to Court, Ami Paris creative founder Alexandre Mattiussi brought on chief executive Nicolas Santi-Weil when Ami was generating around €1 million (approximately $1.09 million) in annual revenue. Court said this hire played a key role in the label’s successful scale journey. As of 2023, Ami Paris generates over €300 million (approximately $327 million) in annual revenue.

Represent, the British luxury streetwear label, found itself at a relative standstill until bringing on new chief executive Paul Spencer to complement the founding team in 2022.

“Before I hired my CEO . . . I felt like I was out of my depth when we were around £20 to £30 million, and everyone was working way more than what they needed to,” said co-founder George Heaton. “But when [Spencer] came in, he put a really strong team in place . . . [and we] were able to actually scale at a much faster rate than what we would have been before.”

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Setting Your Own Pace

In periods of slower economic activity, growing brands should put measures in place to protect their financial positions. To do so, several indie labels have eschewed the external financing route to focus solely on organic growth as a means of forcing discipline and cost management.

“We have great relationships with banks and debt financing. It was all about organic [growth] from the beginning,” said Emily Adams Bode Aujla, founder of the American luxury label Bode. “I wanted to make sure that we were always going back to my mission statement of what I wanted to create, and not have outside voices.”

This approach enables brands to dictate their own pace of growth and avoid burning out too quickly. Bode recounted that she knew it was the right time to open the brand’s first flagship based on natural demand indicators. “It was an intuition that it’s time. We had enough people coming to the [studio to shop for private appointments that,] if I could sell two more jackets, I could make rent,” she said.

Bode also leveraged fashion prizes as a key funding source to fuel a brand’s early growth. She won the CFDA’s Emerging Designer of the Year award in 2019, as well as CFDA Menswear Designer of the Year in 2021 and 2022. She was an LVMH prize finalist and Woolmark prize winner in 2019 and 2020 respectively. However, while the prize money was helpful in Bode’s early stages and empowered her to prioritise sustained organic growth, the amount of work and travel required to compete for these titles may render prize monies a less dependable funding source.

Brands that opt to take external financing can maintain a sustainable pace of growth by ensuring clear alignment with prospective investors on timelines, objectives and performance metrics.

“[Brand leaders] should not be afraid of asking where the money is coming from,” said Court. “They should not be afraid of defining success together [with investors], because if success for an entrepreneur is to run the business for 10 years before looking to liquidity and [the] investor is at five years, that’s going to be a problem.”

Regardless of the funding strategy, cash flow discipline is a key differentiator for the brands that scale successfully. Profitability is imperative, and in order to ensure a strong cash position, companies must pursue aggressive cost control. For some, this may mean pausing capital intensive expansion activities for the time being.

“The fashion industry as a whole is temporarily out of fashion as an asset class . . . organic growth and cost control is the only way forward,” said Stefano Martinetto, chief executive and co-founder of Tomorrow, a growth and development platform for fashion brands. In this environment, cultural heat can only take a label so far. “You can be very relevant and entirely broke. So it’s important to acknowledge the relevance is important as much as it translates into a financially sustainable model.”

Maintaining an Edge

For many investors, a clear DNA is a key ingredient for a brand’s staying power. This may mean revisiting specific values and narratives at regular stages in the growth journey.

Péter Baldaszti, chief executive of Budapest-based contemporary label Nanushka, recounted that the brand has been “soul searching [to define] who we are and what we stand for” amid today’s tough climate for indie labels. This enabled the company to refine its approach to expansion into other categories such as handbags and “gave us this beautiful foundation of… what a Nanushka bag should be, in terms of branding, shape, form, material, size,” he said. “We really needed to nail down that identity part to be able to deliver on these categories.”

In an industry where innovation is increasingly scarce, brands that can break through the homogeneity and commit to preserving the cultural relevance that gave them their start will stand out. “There must be something very, very specific because there’s so much noise in the world . . . you need to have a distinctive voice,” said David Belhassen, founder and managing partner of NEO Investment Partners, which has invested in luxury brands Victoria Beckham and Ami Paris among others. “The [brand] DNA is a differentiating factor.”

Without access to the free-flowing capital and cheap digital ads that characterised the 2010s, this focus on the fundamentals is now more important than ever. The brands that reach the $100 million revenue threshold will be those that manage to turn buzz into long-term business performance by combining cultural relevance with well-managed, well-timed commercial plays.

“It felt a little bit too easy to start [an independent label] for a period. That window of opportunity, I’m afraid, is gone for quite a long time now,” Martinetto said. “But I also think there’s a bit of justice in that. Funding and [enabling] a successful independent brand [to survive], it’s not a given; it’s one in a million or one in 10,000 or one in 100,000. And so be it, because the reward is so big.”

This article is part three of a series by BoF Insights that outlines today’s playbook to translate cultural heat into commercial success. Read part one and part two.

BoF Insights is The Business of Fashion’s in-house consultancy. We partner with leading fashion and beauty brands and investors to help them sustainably grow for the long term. Get in touch to find out how we can support your business.