How a model business unraveled

Posted: December 02, 2013

In the fashion world, Sarah Van Aken might not have the global recognition of, say, Nicole Miller or Kenneth Cole.

But in Philadelphia, Van Aken is the name behind a women's clothing brand with not only a devoted customer following but admiration from the sustainable-business community. Pioneer and courageous are words they use to describe her.

Since moving production from Bangladesh to 17th and Sansom Streets in 2009, her SA VA line has been hailed as one of the Philadelphia region's standout models of keeping it local, an inspiration behind efforts to boost the manufacturing and textile sectors here.

But in the last couple of weeks, the buzz about SA VA has been disheartening, prompted by the shocking revelation Van Aken made in a speech to the Alliance of Women Entrepreneurs Nov. 18:

"As I stand here tonight, I am on the precipice of an epic failure."

By that, Van Aken meant she was going out of business.

SA VA's design studio, which moved from Center City to Port Richmond in February, is essentially closed. The last of the equipment has been sold. The remaining five employees - down from 15 - will be gone by Dec. 22, when SA VA's boutique goes dark.

That will follow closeout sales Van Aken is counting on to help pay some bills, but the company's six investors will eat undisclosed losses, she said in an interview a few days after her speech.

The business, which at its peak had annual revenue of $500,000, never reached profitability, Van Aken said. Last year's losses were between $50,000 and $60,000.

This year's were expected to be "huge" because of a $200,000 investment to help fund a shift into the wholesale business - something SA VA's investors and advisers considered critical, she said.

But an additional $1 million was needed, and there wasn't the time - or the obvious prospects - for raising it before the business ran out of money, Van Aken said.

"I think we really miscalculated how challenging the market is."

Among the challenges:

Insufficient capital.

Having to source so many types of fabric and materials to satisfy changing styles.

Total vertical integration, in which every aspect of the product is done in the same facility - from design and manufacturing to marketing and selling. That's particularly tough with limited staff.

"I hope that our model can be used as a road map of what to do and what not to do," Van Aken wrote in a post-interview e-mail.

Unlike most small businesses, which typically fail in the first five years, Van Aken's lasted seven, though few were comfortable. There were two layoffs, "many times" when Van Aken didn't know how she was going to make payroll, and a planned strategic partnership with a large corporation that fell through, she said.

This time, she couldn't discern a path to survival.

"She's taken it as far as she can," said Wayne Zukin, owner of a real estate development company and an original and active investor in SA VA.

Philadelphia Industrial Development Corp. provided a $750,000 subordinated loan in 2009 to Van Aken and Zukin for acquisition of the 17th Street building that housed SA VA's offices and its cutting and pattern-making operations. (Zukin owns the Sansom Street building housing the store.) PIDC also guaranteed 50 percent of $110,000 in working capital financing by United Bank to SA VA.

Van Aken has assured both will be fully repaid, said Anne Bovaird Nevins, PIDC's senior vice president of marketing and business development.

"We remain very excited about what it is she is going to do next," Nevins said. "Sarah is a really talented and incredibly hardworking entrepreneur and has learned a lot from this venture that she's going to be able to take and translate into even greater success."

Zukin said SA VA had two primary survival needs: A large outlet for its clothing so revenue growth "could ramp up in a very big way," and a manufacturer interested in being a strategic partner that would not only invest but agree to do SA VA's costly small runs until the wholesaling side grew.

SA VA launched a wholesale line in 2012. Orders were secured, further burdening the company, which lacked the money for the required fabric, Van Aken said. That fall, sewing was outsourced to local factories; one-quarter of SA VA's staff was laid off to cut expenses.

Van Aken said her advisers stressed that the remedy was more wholesale business, redirecting her from what she considers her strength: designing, branding, and selling.

"I'm really clear on what I'm good at and what I'm inspired to do, and manufacturing isn't one of those things," she said.

So even though SA VA's store sales have been up 25 percent to 75 percent every month since March and the spring 2014 line "is the best work I've ever done," Van Aken said, she decided to pull the plug.

"It's just time," said the 37-year-old Fairmount resident, who wants to start a family, advise on building brands, and help promote community capital for entrepreneurs. "I want to have fun in business. Time to go do that."

The decision surprised even her closest associates.

"I thought things were going well," said Judy Wicks, the former restaurateur credited with helping launch the city's local-economy movement.

Wicks has served as an adviser to SA VA. That things were not going so well after all does not make SA VA a failure, she insisted.

"Sarah popularized the idea of making people think, 'If I buy this dress, I'm supporting local workers in Philadelphia,' " Wicks said. "She really educated women shoppers about thinking how purchases affect the environment and people."

That extended to the classrooms of Philadelphia University, where Van Aken has spoken to Natalie Nixon's classes and made SA VA accessible to students for school projects and internships.

"She's been an amazing local/regional entrepreneurship model," said Nixon, director of the strategic design MBA program.

Nixon lauded Van Aken's willingness to pivot over the years to build her business - from custom men's shirts inspired by a boyfriend who wore "crappy shirts made in China," to restaurant uniforms, to women's apparel, and, finally, the wholesale effort.

She attributed Van Aken's latest difficulties to the economy: "The story that she has is definitely fundable, especially when we're trying to build more entrepreneurial businesses. But I think it's a really difficult funding time."

Sharing that view is Leanne Krueger-Braneky, former head of the Sustainable Business Network of Greater Philadelphia and now director of fellowship and alumni for Business Alliance for Local Living Economies.

"Philadelphia desperately needs more sources of community capital, capital sources that can harness the financial wealth that exists within this region to support community-serving businesses and organizations, and keep this wealth recirculating for the benefit of the whole community," Krueger-Braneky said.


COMING MONDAY

An apparel success story: American Trench partners David Neill (left) and Jacob Hurwitz of the Main Line are expanding their business to include men's scarves.


dmastrull@phillynews.com

215-854-2466 @dmastrull

 

comments powered by Disqus
|
|
|
|
|