Busy designer should ask: Why sew much?
Lime-colored bubbles, loopy red swirls and chocolate-brown stripes jazz up the baby blankets, place mats, aprons and laptop bags created by Robyn Murgio of Murge Designs Inc. in Los Angeles.
Her modern sensibility has tapped into the growing demand for stylish, functional goods with a pop twist, attracting retailers such as Anthropologie and Barneys Japan. Her playful prints have been featured in magazines such as Real Simple and Martha Stewart Weddings and have starred on television shows, including “Scrubs” and “How I Met Your Mother.” Sales this year are expected to hit $125,000, a 56% increase over 2006. It would seem like a dream come true for an art history major who started out just wanting a decent duvet cover for her bed.
“There’s definitely a void in the marketplace for modern printed fabrics,” says Murgio, 32, who operates her one-woman business from a studio in her backyard.
But her potential fairy tale is marred by the fact that she’s not turning a profit.
The cost of keeping raw materials and completed items on hand so she can fill orders quickly has proved far higher than she expected.
“My business structure demands an enormous amount of inventory, both in fabric and finished goods,” says Murgio, who founded the business in March 2002. “Those costs are piling up, making it very hard for the company to get ahead.”
Murgio, who uses Southern California companies to print her fabrics and sew her products, has tried to create income by adding lines, including a collection of baby bedding and accessories last year. She took an entrepreneur training class at UCLA last fall and devised a business improvement plan.
At the same time, she created her first exclusive collection of fun fabrics for another company, a Web retailer of hip home products. Now, she wonders whether it makes more sense to add revenue by expanding that design service, which doesn’t entail high overhead or inventory costs, possibly at the expense of producing her own fabrics and products.
“I’m really attracted to spending more time creating; it’s my favorite part,” Murgio says. “But I feel like I need to figure out the viability before I jump in.”
Look long and hard before leaping, advises apparel expert Frank Kaufman, a partner and certified public accountant in the Irvine office of Moss Adams, an accounting and consulting firm.
He suggests that Murgio revisit her business plan with an eye toward improving cash flow, narrow her product lines to the most profitable -- the baby collection -- and consider eventually licensing her fabric designs. Though selling her designs to other companies may seem like a low-cost way to add revenue, in effect it is adding a second business venture to a company that is already strapped for resources, Kaufman says.
“You’re one person and, typically, building a business is seven days a week, plus,” he says.
Kaufman also warns of the many potential pitfalls in textile design that could sink Murgio’s plans to add design services. Knockoffs are extremely common, and it’s almost always far too expensive to pursue a remedy in court, he says.
Companies also are likely to want to pay Murge Designs a one-time design fee, which would cut her out of royalties.
And Murgio can’t count on building business by having the fabric printed for clients locally, as she did with the online retailer, Kaufman says. These days, many textile designs are done in Japan and the fabric is printed in China, he says. Murge Designs could have a tough time matching their prices.
He gives Murgio credit for steadily growing sales but emphasizes the importance of creating a positive cash flow. The most efficient way to turn on the crucial funds faucet would be to focus her efforts on her most profitable products, he says.
To do so, Kaufman advises, she needs to ask herself, “What low-hanging fruit can I get?”
The easiest pickings are likely to come from the popular baby collection, which Murgio says will account for about 80% of her sales this year. Baby goods make up a booming market, especially for stylish products with a nontraditional feel.
Murgio could trim or drop her other lines for now. She could also offer her baby line in fewer prints each season, Kaufman says. That could save her money in two ways. She wouldn’t have to carry so much inventory because she would carry fewer products. And she wouldn’t have to meet the minimum-order requirements on as many different prints as she does now, trimming her raw-material costs.
If Murgio identifies key baby accounts she wants to sign up, expands the opportunity for them to buy from her and develops a history of on-time delivery, she can expand her sales without the effort required to add entire product lines or enter a new business, such as fabric design.
“So everybody is making money, and as long as the goods end up selling, it’s almost like an annuity,” Kaufman says.
To be successful, Murgio might focus her creativity on the uniqueness of a select group of her prints each season rather than try to add too many products to the baby line and offer them in too many prints.
“You want to have nice new designs that are fresh, but if the product sells out, you want to train [customers] to understand that the design is now gone and the next thing is coming,” Kaufman says.
She’ll save money, including patternmaking costs, by keeping the design process for the baby garment or item consistent from season to season, he says.
“Try to be confident in the things that make you unique and ride on those and not make the business more complicated than it needs to be,” Kaufman says.
After she has passed the break-even point and is making a consistent profit, Murgio might be at the stage where she can think about licensing her designs to other manufacturers, such as makers of handbags or bedding, he says.
Murgio, who also sells her products at www.murgedesigns .com, says Kaufman’s recommendations aren’t all that surprising, adding that she appreciates an outside expert’s take on her business.
“It was a good reality check for me,” she says. “He kept saying again and again that ‘you as one person cannot run two businesses.’ I need to be reminded of that. I am really an ambitious person and I have this feeling I can do it all -- who’s going to stop me? But it’s actually not humanly possible.”
Being a creative type with a background of working at nonprofit institutions, she was also struck by Kaufman’s cut-and-dried approach to the business.
“He says, ‘If it’s not selling, don’t sell it,’ ” Murgio says. “And this idea that maybe I should work more on everything I’ve built before I just say, ‘Forget it,’ and move on, that for me was really enlightening.”
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(BEGIN TEXT OF INFOBOX)
Murge Designs
Business: Designs and manufactures modern collections of sewn goods for baby, home and accessories markets
Owner: Robyn Murgio
Founded: March 2002
Start-up funds: $20,000 from personal savings and family loans
2007 revenue: $125,000
(estimate)
Employees: none
Customers: Retailers such as Anthropologie, Barneys Japan, Neiman Marcus and This Little Piggy Wears Cotton and visitors to Murge Designs’ website
Goal: To design and sell beautiful, unique items with a modern sensibility
Problem: High inventory costs make it hard to earn a profit. Owner wants to cut costs and expand by designing fabrics for other sewn-product manufacturers, a service with little overhead cost.
Recommendations
Revisit business plan with a focus on how to boost cash flow
Reconsider plan to design fabrics for other companies
Narrow product line to focus on baby collection
Focus on existing and potential baby-line clients
Explore licensing designs to other companies
Meet the expert
Frank Kaufman is a partner and CPA in the Irvine office of accounting and consulting firm Moss Adams. He works with apparel companies on areas including strategic planning, benchmarking, systems enhancement, financing and mergers and acquisitions. He was previously in the Los Angeles office, where he was firmwide director of apparel.
