What fashion school doesn’t teach you
Together with Paul Smith’s Foundation, we ask industry mentors the practical questions young designers are often left to figure out alone.
The fashion industry loves to tell young designers to be original, resilient and entrepreneurial. It’s less good at explaining how any of that is supposed to work in real life. How do you build a brand while paying rent? Should you start as a sole trader or a limited company? When does VAT become useful rather than a terrifying admin stumbling block? How do you compete with labels that have enlisted dozens of influencers to push their product? Can production be ethical if you don’t have much money?
For Ask a Mentor, we have partnered with Paul Smith’s Foundation to open up some of that knowledge to a wider community of students, graduates, independent designers and emerging creative businesses. Founded to better the business skills of creative people, the Foundation runs in depth business mentoring programmes in fashion and art, connecting early career people with experienced industry figures who can offer the kind of practical and specific guidance that’s often difficult to access early in a career
Over the summer months, the questions asked by our community will be answered by Paul Smith’s Foundation mentors across finance, branding, communications, merchandising, production, law, and sustainability. This first instalment brings together Diana LoGuzzo, a global marketing and communications executive with over 20 years’ experience in fashion; Tamsin Blanchard, a journalist, author and educator whose work has long challenged fashion’s environmental and ethical complacency; Vikram Menon, a London-based chartered accountant and business consultant specialising in finance, tax and cash-flow support for emerging fashion designers and creative businesses; and Michelle Mahlke, a luxury business advisor and fractional CEO/COO with over 20 years’ experience helping creative businesses turn vision into commercial strategy. So, let’s get right to it.
Starting and running a brand
Asked by Johanna Boone: Tax-wise, how do you best start your own business on the side of doing a day job?
Vikram Menon: There is no right or wrong answer. The best structure depends on where you are with the brand, how serious the business is, and what your future plans look like. Some designers start as a sole trader, especially if they are testing the idea, taking on occasional work, or building the business slowly alongside a day job. This can be simpler to set up and manage at the beginning. However, a lot of designers are now choosing to set up as a limited company from the start. This is often because it feels more permanent and professional as a brand, especially if they are building towards wholesale, investment, collaborations, or long-term growth.
A limited company can also help separate the business from you personally, which can be useful as the brand grows. It may also make things cleaner if you plan to bring in partners, apply for funding, or build a business that feels more structured from day one. The key point is to choose the structure that fits your plans – not just what sounds more impressive. If you are serious about building the brand, starting as a limited company can make sense, but it does mean more admin, more filing requirements, and usually higher accountancy costs.
Asked by Natalie Jurjevic: How do you compete with influencer brands as a young designer?
Diana LoGuzzo: Establish your brand voice. Make clear decisions regarding what your brand stands for and use that lens to define everything: product, content, tone of voice, and so on. Then start creating your own community that is authentic to you and your brand. Build from your likes, interests, and communities. There will always be competition like incumbents, influencer brands, or private labels. Defining your brand, creating great product, and staying true to your authentic selves is the best way to compete.
Asked by B W Marks: In which ways could being VAT registered be worth it before meeting the £90k threshold?
Vikram Menon: You only have to register for VAT once your taxable turnover goes over the VAT threshold, which is currently £90,000. However, registering voluntarily before you reach that level can sometimes be worth considering. For example, it may make sense if your customers are mainly shops, retailers, or other VAT-registered businesses. In that case, charging VAT may not be such an issue, because they may be able to reclaim it.
It can also be useful if you have a lot of start-up costs or production costs where VAT is being charged to you. If you are VAT registered, you may be able to reclaim VAT on certain business expenses, which could help with cash flow. For a designer, this could include costs such as sampling, production, fabric, equipment, photography, packaging, studio costs, or other business expenses. Being VAT registered can also make the business appear more established, particularly if you are dealing with wholesale buyers or larger retailers.
That said, VAT registration is not always the right answer. If most of your customers are private individuals buying directly from your website or at events, adding VAT can make your prices feel more expensive unless you absorb some of the cost yourself. So, before registering voluntarily, it is important to think about who your customers are, what your pricing looks like, how much VAT you could reclaim, and whether the extra admin is worth it.
Asked by Christoph Ritter: By when should a fashion business in the UK be profitable?
Michelle Mahlke: It depends entirely on what you mean by profitable, and who’s asking. P&L profitability, or EBITDA if you’re talking to investors, is nice to have, but it becomes important a few years in, usually when you’re raising investment and your valuation is being calculated on multiples of turnover, sometimes adjusted for profitability. For most early-stage businesses, I would question whether that should be the primary focus.
Cash flow, or net cash-flow positivity, is important. Truly understanding your outgoings, your incomings, your margins, and the phasing of your costs is the most important discipline for a founder. Fashion, and most consumer categories, are cyclical: you’re paying for raw materials and production six to nine months before any revenue lands, so cash-flow modelling is essential.
A useful exercise: break your expenditure into three buckets – essential, ideal, and exceptional. Essential means truly essential to operate. Ideal might mean useful, but not critical. Exceptional could be a major VIP moment, a Pitti showcase, or a press campaign. Only spend on the last category if you can genuinely afford it, or if you have a sponsor or grant covering it. Always be looking for sponsors and grants.
The exception where P&L profitability does matter early is if you’re a founder-owner choosing to pay yourself in dividends rather than salary. There are tax efficiencies, but you have to be profitable to do it. For growing businesses, profit is often reinvested into staff, stores, new markets, collections, or category expansion, so most successful brands have peaks and troughs of profitability by design. Net cash-flow positivity is the metric that keeps the lights on. Focus there.
Asked by Muhammad: How do you aim for ROI [return on investment] in three years?
Michelle Mahlke: This is an unusual framing for fashion, and not one I get asked often. ROI is a useful metric when there’s a discrete investment: an investor puts £500k in, and you want to know what the forecasted return is and over what period. For specific moments like opening a store, launching a pop-up, or hiring a senior role, you can and should be clear: what value is this adding or generating, and by when?
But applied to a whole creative business over three years, ROI breaks down as a daily decision-making tool. It’s very easy in the age of data and e-commerce to fixate on paid-ad ROAS [Return on Ad Spend] or LTV/CAC [Lifetime Value vs. Customer Acquisition Cost] ratios and forget that consumer businesses live or die on desire. If you’re not creating desire – if you’re not offering something a customer actually wants, or that shifts how they see themselves – there isn’t really a business to optimise.
The risk of chasing a short ROI horizon is that you can end up with a commoditised product. And commoditised products are easy to undercut. Someone will always do it cheaper, with more hype, or with a bigger marketing budget. What protects you is the harder-to-measure emotional connection: brand, point of view, and the journey you take your customer on. That magic is what challenges assumptions, builds loyalty, and ultimately keeps the customer coming back.
A more useful version of this question might be: are you clear on what you’re trying to build, and is every decision – hires, collaborations, pop-ups, paid spend – moving you closer to that? If yes, you’re getting a return on the investment that matters. If you’re hiring or spending to tick a box because it’s “what fashion brands do”, you’re not.
Production, supply chain and operations
Asked by Godless Existence: How do we actually do ethical production without spending a fortune on it?
Tamsin Blanchard: My first thought is that if you can’t afford to produce ethically, you shouldn’t be producing. That might sound harsh, but turn the question around and ask yourself how you can possibly produce unethically just because you can’t afford to pay people a living wage, or invest in cheap materials that harm the planet, or, through “economies of scale”, make more stuff that can’t be repaired or recycled?
This doesn’t mean you have to spend a fortune to produce ethically. You simply have to operate within your means. If your business only makes enough money to pay yourself and to use found materials, then that’s the size you can ethically operate at. If you grow, then you can afford to pay someone else, and perhaps invest in different materials and start a supply chain working with people you know and trust. Ethical production isn’t something you pay extra for. It’s the moral compass you live by, it’s your values. Produce what you can within your means and in harmony with the planet.
Asked by Isobel Mccauley: How do you balance your own ethics towards production, waste, and consumption in fashion at large?
Tamsin Blanchard: Again, this is all about the decisions you make, thinking about your position in the world as a human being who lives within, and takes responsibility for being part of, a community and an ecosystem. If you are producing fashion, what is the life cycle of the product you’re making? Can it be repaired? Do you actively offer any services to ensure a long lifespan for the clothes you make? How do you minimise your own waste? How do you use your own scraps and offcuts? Do you reuse them in some way? Do you think creatively about how to use them the following season, perhaps, and reduce the amount of new textiles you use? Can you find a system where you produce on demand, so everything you make is spoken for and there is no excess inventory?
For small-scale businesses this is doable, but the bigger your business, the easier it is to lose control of volumes and waste. If you interact with the fashion industry as a consumer, you also have a responsibility to buy within your means, choose clothes you think you will wear a lot, whatever your budget, and look after what you have.
Asked by Naomi Huang: Where can we learn about supply chain and buying, including how to decide on how much product to buy?
Diana LoGuzzo: There are various ways for hired team members to learn supply chain and planning: certification studies, short-term classes, and new AI tools that can help with creating planning dashboards. You could also hire a short-term planning consultant.
Asked by Albain: What should merchandisers learn from big companies to make a difference in small ones?
Diana LoGuzzo: Merchandisers help to manage the right product at the right time for the right consumer. Below are some of the key principles that can be applied to a nascent business:
Create margin / price point architecture.
Build an optimal assortment / collection framework.
Focus on how to create bestsellers and roll them out to drive efficiency / volume.
If possible, implement some sort of data analysis reporting, including sell-in and sell-out.
Own the calendar when it comes to processes / key milestones.
Create product strategies with the retail calendar in mind.
Review different channels, markets, and customers, creating store tiers in the good / better / best categories.
Further resources
* Paul Smith’s Foundation: Meet the Mentors: Learn more about Paul Smith’s Foundation’s mentor network and the industry practitioners offering guidance across production, communication, brand-building and business development.
* GOV.UK: Set up as a sole trader: A practical step-by-step guide for anyone starting a business independently, including registering for tax, keeping records and understanding your responsibilities as a sole trader.
* GOV.UK: Register for VAT: Official guidance on VAT registration, including voluntary registration before reaching the £90,000 threshold and what responsibilities come with becoming VAT registered.
* GOV.UK: VAT thresholds: A clear breakdown of the current UK VAT registration threshold and when businesses are required to register.
* British Fashion Council: Institute of Positive Fashion: The British Fashion Council’s programme focused on reducing fashion’s climate and societal impact through changes to business models, working practices and industry collaboration.
* Institute of Positive Fashion: Resource Library: Reports, toolkits and webinars designed to help fashion businesses make more responsible decisions around sustainability, circularity and long-term impact.