Tamara Mellon was just out of rehab when she launched fashion brand Jimmy Choo.
She went from being a “functioning addict” to running a global brand, going through three private-equity deals, surviving a hostile takeover and finally helping sell Jimmy Choo for £525 million ($A767m).
Mellon tells all in her book, In My Shoes, and sets out 10 lessons for entrepreneurs:
Have a business plan but be prepared to be flexible
While recovering from a stint in rehab Mellon came up with the idea of producing a line of shoes with Jimmy Choo, a renowned couture cobbler who had designed shoes for Princess Diana among others.
Her business plan was simple although lacking in detail.
“Jimmy would design a line of exquisite shoes, and I would find a factory to make them and manage the sales and marketing,” she says.
“We would open stores and start a wholesale line to be carried in high-end stores all over the world, and we both would become incredibly rich.”
Things didn’t exactly go according to plan, but Mellon did achieve her dream of Jimmy Choo being carried in top stores around the world.
Be careful who you go into business with
Mellon chose Choo to found a business with because of his top reputation as a shoemaker and says “anyone who’d ever shopped in London knew about Jimmy Choo”.
The deal struck was that Choo would design the collection and retain his couture business.
Mellon and her father provided the start-up money, management and business expertise, with each party, Mellon and her father being one and Jimmy the other, owning a 50% stake.
But despite his reputation, Mellon claims Choo was not the creative genius she had hoped and she was forced to drive most of the design process.
“It dawned on me that Jimmy was a cobbler, and he really had no interest in becoming a designer,” Mellon says.
“I had set up with a ‘creative head’ who, in fact, had no creativity.”
Trust your instinct
Mellon stresses the importance of trusting her business and design instincts.
“I also had strong instincts, a certain entrepreneurial skill and an incredible work ethic,” she says.
“Almost every mistake I’ve made in business has come from not trusting myself. But now I know that if something doesn’t work for me, it’s not going to work for the customer.”
Mellon designed the first Jimmy Choo collections based on things that had caught her eye.
“The lovely part of it was that the things that struck me, and that I related to emotionally, other women related to as well,” Mellon says
Be prepared for failure
Jimmy Choo’s first collection of shoes was a failure but Mellon did not let that deter her from pursuing the business.
“The factory left them covered with black scuff marks, glue was visible along the seams, and the stitching was awful,” she says.
“They were so bad that we absolutely couldn’t use them.”
Instead Mellon learnt that she needed to pay attention to detail.
“In terms of manufacturing, this meant only the best components and an obsessive attention to detail,” she says.
“In terms of design it meant vintage ideas reconsidered, exotic fabrics and extras, and sex appeal that was also sophisticated and never cheap.”
Keep costs low and focus on cash flow
Mellon learnt the importance of cash flow for a fledging business at an early stage when Julie Townsend, a buyer from Saks in the United States, placed an order for 3000 pairs of Jimmy Choo shoes after she spotted Mellon exhibiting them in Paris.
“Suddenly we had the rarest of good fortunes for a start-up company: positive cash flow. Our sales were £250,000 that first year, with the shop rental costing us £15,000 and only one employee other than Sandra [Choi] and myself,” Mellon says.
Innovate
Mellon tried to innovate by creating products where she saw a gap in the market.
Jimmy Choo was one of the first brands to have a “house style” which provided basic shoes that were sold every season and never went on sale.
“When we started out, the shoe industry offered plenty of opportunity to innovate at a purely practical level,” Mellon says.
“Boots for women had always been too wide at the calf, for instance, and nobody had thought about improving that aspect of the fit. So I created a line of boots with the upper portion created very tight.”
Avoid legal feuds
In a lesson in what not to do, Mellon spent a good part of her time at Jimmy Choo embroiled in legal feuds with everyone from her business partner to her mother.
The trouble started with Choo himself, who was unhappy with the business structure and complained to his couture clients: “They stole my name; they’re ripping me off.”
Choo went on to sue Mellon and her father for 22 breaches of contract before entering into a deal to sell his share of the business.
“This feuding was not good for business,” Mellon says.
“We’d put enormous effort into building the brand, and internal fighting could tarnish the image of a product that was meant to be glamorous, sexy and fun.”
Beware of private equity investment
Private equity investment offered Mellon a solution to her disputes with co-founder Choo, but it also landed her with a new set of headaches.
“I was so desperate to get rid of Jimmy that I talked him into taking the deal. ‘How bad could it be?’ I said. Later, I could only blame myself,” she says.
Mellon says her first “painful lesson” in private equity investment was about having to relinquish control.
“The founder is no longer in charge, and the battle of ideas is always subordinate to the battle of egos,” she says.
“Private equity is like American politics: The endless campaigning, fund-raising, and positioning for the next contest is to the detriment of the job you’re actually being paid to do.”
Mellon also realised that “in private equity it’s all about the exit” with most private equity firms wanting to exit in two to three years.
The exit is the moment of truth
For Mellon, a sale of Jimmy Choo was “the moment of truth” for her as the founder.
“You’ve worked like a dog to build something from the ground up, often labouring for years without much compensation because, rather than pay yourself the going rate, you’re pouring ever cent back into the business,” she says.
“And no matter how successful the venture, extracting the value of the equity you’ve built up is dependent on multiple factors, most of which are beyond your control: the general state of the economy, the health of your particular industry, the short-term profitability of potential buyers.”
Be prepared to walk away
In the end Mellon sold out of her share in Jimmy Choo when the company was sold to Labelux for £525 million.
“Jimmy Choo meant everything to me, but now it was like a love affair in which your partner has cheated on you, physically abused you and run off with another woman,” she says.