UK: Setting up a new fashion business in Britain

Law ŕ la Mode Edition 12 - Winter 2013/14
Last Updated: 18 January 2014
Article by Ruth Hoy and Kokyee Ng

A legal and practical overview, including top tips from the British Fashion Council and NEWGEN MEN designer Diego Vanassibara

Setting up a fashion business is not just about having creative flair as a designer. In addition to being creative you need entrepreneurial skills, ambition, drive and commitment – not to mention financial backing, support, an understanding of the process and what it entails and a little bit of luck.

With that in mind, this article aims to give some guidance as to the key legal and practical issues to consider, as well some top tips from the BFC and NEWGEN MEN designer Diego Vanassibara.

  1. Do your research

Believe it or not, this is actually more fun than it sounds. Firstly you need to determine what product(s) you are selling and what your business concept is. For example, are you selling ethically produced goods? Why? It is worthwhile heading down to the British Library and looking at existing market research (such as the reports produced by Mintel) to ascertain what the current consumer trends are. You can never be too thorough and it is important to get the concept right.

Who is your target customer? By "target customer" we don't just mean the customer's age or gender. You need to really understand your customer's purchasing habits: for example, where do they shop? How much do they spend? How often? What do they buy? There is little point in selling something in the hope that your target customer will buy it. Engage with your target customer and do some market research to minimise your risk.

  1. Business structure and funding

You will need to determine your business structure and work out where your funding is coming from. There are lots of structures you can adopt depending on your situation but the most common are:

Sole trader: This means that you run the business yourself. Whilst you have complete control of the business and get to keep all the net profits, you also bear the costs yourself and have the risk of claims against your personally which means your personal assets may be at risk.

Private limited company: A company is a separate legal entity and the profits (or losses) are made by the company rather than you personally. A company is owned by shareholders and your risk is limited to the money that you have invested in the company (and any personal guarantee that you may have given). A company is incorporated through Companies House and a document known as the Articles of Association is put place which sets out the purpose of the company and how it is run. You might also need a Shareholders Agreement if there is more than one shareholder in the company.

Partnership: In a partnership you share the profits and costs (and therefore risk) with your fellow partners. The way in which the partnership is run is governed by what is known as a Partnership Agreement which sets out everyone's roles and responsibilities. You can limit your exposure by setting up a Limited Liability Partnership.

Unless you are fortunate enough to have family and friends who are able to loan you the capital required, most designers are reliant on bank loans or private equity investors when it comes to funding. Bank loans are self-explanatory and you are simply required to pay back the loan with interest. If you are relying on investors, it is likely they will want a share in your business so make sure you know how much of the business you are willing to give up and understand the role that the investor will play. For example, will they be a silent investor or will they want to have a say in how the business is run? When speaking to investors, ensure that you ask them to sign a Non-Disclosure Agreement ("NDA") to protect against them disclosing your confidential designs and information. It is also worthwhile having a look at the UK Business Angels Association's (BAA) website (http://www.ukbusinessangelsassociation.org.uk/) for information on early-stage investment in the UK, as well as investigating potential investment through Crowdfunding (i.e. when funds are collected through small contributions from a number of small parties to finance a venture). The BAA is the national trade association which represents angel and early stage investment in the UK and provides information and expertise on the angel market as well as a forum for facilitating interaction between investors.

In addition to bank loans and investment, you should find out if any grants, sponsorship or awards are available to you (for example through NEWGEN, CFE, the Business Growth Fund or the Regional Growth Fund).

  1. The business plan

A business plan sets out your vision in detail and should cover, amongst other things, what your business concept is, who your target customer is, who your competitors are, what you hope to achieve broken down into key milestones, how and when you will achieve each milestone, what funding and resources are required etc. Most designers see the business plan as a tool for funding – it is much more than that – it's a step by step plan of how you are going to achieve your goals.

  1. The brand and design methodology

Your brand: It is incredibly important to come up with a brand that distinguishes you and your products from those of your competitors. If your brand name is sufficiently distinctive to distinguish your goods from the goods of your competitors, then you might be able to register your brand name and/or logo as a trade mark. Having a trade mark registration enables you to stop others from using your trade mark without your permission. When registering a trade mark/logo, think about:

  • What goods and services the brand needs to cover . this should not just be your current products, but any goods and services you might offer under the brand in future.
  • Where in the world you need protection . think about protection in all countries where you will operate.

Your design process: You should think carefully about each stage of your design methodology. For example, will you be using any employees or freelancers to help design the products? If so, you will need to put in place relevant agreements. You should also think about whether your designs qualify for IP protection. There might be elements of your design that could be registered as a design or patent.

  1. Sell, sell, sell!

Last but not least, you need to decide how your product will reach your customers.

Supply and distribution: With respect to suppliers, manufacturers and distributors, in addition to putting in place an NDA to protect your IP and any confidential information, you will also need to consider the terms of the Supply, Manufacturing and Distribution agreements. Consider key issues for your business such as, what are the payment terms? Is the manufacturer happy to work with small volumes in the initial stages? What are the lead times?

Will you sell the goods online, in store or both? If you are selling online then you will need to set up a website and register your web address. You will also need to put in place various policies for online trade such as your Terms and Conditions, a Data Protection policy and Privacy policy. Consumers are protected by statute in a number of jurisdictions, so need to make sure that you understand and comply with consumer laws in all jurisdictions where you will be trading. If you intend to use social media as a form of marketing, you will also need to understand the Terms and Conditions that apply to your use of a particular website or application and actively manage your online reputation. Whilst social media is a quick, easy and affordable way to promote your brand, it is also a double-edged sword and can damage the brand if not monitored and managed properly.

David Watts, Designer Business Support Adviser, British Fashion Council

  1. In your opinion, what can the British government do to support up and coming designers?
DW: The government is beginning to grasp the importance and scale of the fashion industry in the UK, but there certainly could be additional support given to emerging designers in the form of funded free business mentoring aimed at fashion/creative and start-up initiatives in particularly with business structure, operations and access to finance.
  1. What is the most common problem that new designers face when starting up a business and what can a designer do to overcome that problem?
DW: The most common problem faced by new designers is finance and cash flow- they need cash in the bank. Unless designers get a sound basic knowledge of how their business operates, they will face untold problems for the outset. This involves real financial understanding – knowing how much money you are spending and how to cost your products correctly.
  1. What is the one piece of key advice that you would give to all new designers starting up a business?
DW: Understand your own industry and seek out advice and mentoring. Build relationships with buyers and retailers as well as industry insiders as they need to be aware of the business and your creative handwriting if expected to engage with the products.

Diego Vanassibara, men's footwear designer

  1. What do you think the British government can do to support up and coming designers?
DV: The government should ensure products such as footwear and clothing are included in trade negotiations between the EU and the US, and in the future Japan and China. The existing regime of import duties for footwear and clothing is making it unnecessarily difficult to grow in the global marketplace, especially in the aforementioned three giant markets. A second area of challenges is the lack of export finance solutions for SME's. There is a host of options for start-ups that cater for the domestic market that are not available to those exporting.
  1. What is the one piece of key advice that you would give to a new designer starting up a business (that you wish you yourself were given!)?
DV: I would encourage them to build a good network of contacts in the industry right from the very beginning. Nurturing some of those relationships can be very useful by the time they launch their businesses, or present a first collection or an idea.
  1. What should new designers prioritise in terms of expenditure when faced with a limited budget?
DV: It really depends on each brand. But the one thing that I think it would benefit all is to invest in the product, to ensure that there is a supply chain in place and that you can produce great samples and deliver amazing goods/

© DLA Piper

This publication is intended as a general overview and discussion of the subjects dealt with. It is not intended to be, and should not used as, a substitute for taking legal advice in any specific situation. DLA Piper Australia will accept no responsibility for any actions taken or not taken on the basis of this publication.


DLA Piper Australia is part of DLA Piper, a global law firm, operating through various separate and distinct legal entities. For further information, please refer to www.dlapiper.com

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