Last Updated Jul 29, 2010 1:24 PM EDT
When five of the 20 companies that stocked our collection went bankrupt, it was a problem. But when the rest of the boutiques we dealt with kept putting off payments, that's when I knew that we were about to face some difficult challenges.
If my company Indie Peace, a socially responsible and environmentally friendly apparel company, did not make quick and extreme changes, it wouldn't be long before we went out of business. I also realized that in the wake of the financial crisis, the lending climate made it much more difficult for small businesses to get loans. Raising money the traditional way -- getting a loan from a bank or investors -- wasn't a realistic option. So I did what I had to: I took drastic measures to make my company lean and mean so it could survive the catastrophe.
In 2009, after seeing our retailers struggling, and one of our major competitors, another socially responsible fashion collection, go out of business, we knew it was time to make changes so that Indie Peace didn't suffer the same fate.
In less than a month, I slashed operating costs by almost 80 percent. Indie Peace's monthly spending went from $25,000 to $2,000. It was painful, but I had to lay off five amazing employees, and we moved our office from a rented space to my basement.
This kind of downsizing isn't enjoyable for any business owner. It was like the ship was sinking, and I had to seal one of the doors and let a few people drown to save the whole crew. But as the CEO/CFO, I did everything I could to help my employees make the transition. I even gave one employee four months' notice; another was able to find a job very quickly. I was very transparent about our company's financial challenges from the beginning, so when I had to downsize, no one was surprised. Still, it was a truly horrible thing to have to do, as my employees were like family to me.
No payments, no business
After we cut costs and laid off the staff, I hustled to raise capital. I went on the road selling our collection out of the back of my car, and entered Indie Peace in a few business plan competitions. In a few months we had raised $45,000, including $20,000 from winning a national business plan competition run by Sage North America. That helped further insulate Indie Peace from harm.
And this time I did things differently. We once gave retailers 30-day terms -- they'd have 30 days to pay us for our clothing. That's what got us into trouble when one of our retailers went bankrupt before it could pay the $4,000 we were owed for a shipment of clothing. From there, the others had started falling like dominoes: Four other retailers went bankrupt, and the rest started defaulting on their payments.
One of the first things I did after restructuring the company was to redraw the contracts so that our vendors paid up front -- no more terms. We also only work with boutiques more than 24 months old, because they're less likely to suddenly go out of business. And we really focused on landing and developing our relationship with Nordstrom, which is currently our biggest client.
Small boutiques might give you street credibility, but at a certain point I realized that big clients tend to be more organized and professional, more likely to pay on time and less likely to go bankrupt. It's also a more efficient way of doing business: In one meeting with Nordstrom we can get our collection in eight of their stores. Or we can spend a bunch of time meeting with several small boutiques and only land one $1,500 order. We also launched an e-commerce site to allow us to sell directly to consumers and improve our margins per product.
Since I revamped the company in 2009, sales have more than tripled. Last year we had about $183,000 in revenue.
Living on the edge
I admit, I had to be a little bit crazy to try and pull this off. As a company owner you sometimes have to make terrifying decisions, and you don't know if they are going to pay off until much later. But that's what being an entrepreneur is about: fearlessness. Since my father died a few years ago, nothing really scares me. It gave me a wake-up call at a young age and made me think about what I want to accomplish in this life -- I don't want to have any regrets when I am older. But one thing's for sure: The entrepreneurial lifestyle is not for the faint of heart.
-- As told to Harper Willis
Indie Peace's clothing collection has been featured on television shows including The CW's "Vampire Diaries," and recently were worn by characters in the movie "Zombieland."