Fashion Mannuscript Feature Cover Story: Guiding The Fashion Industry

There are two fashion industries in the United States, says Harold West, managing partner of accounting and business advisory services firm Fineman West & Company LLP: the glamorous, high priced designer names, and the larger, quieter group of manufacturers that produce the garments sold in stores such as Ross Dress For Less, TJMaxx, Target and Walmart.

For these and other entrepreneurial firms, Fineman West, headquartered in Downtown Los Angeles, becomes an essential financial advisor as much as an accounting consultant. Previous and current clients include J Brand, Windsor Fashions, Not Your Daughter’s Jeans, Hudson Jeans, Robert Rodriguez, Bearpaw, YMI, Next Level Apparel and up-and-coming brands, such as Brock Collection and Hot as Hell.

“We call it main stream fashion or everyday style. That’s probably the bulk of the industry on the West Coast and probably the main concentration in the United States. But you don’t hear much about that segment of the industry. These are not the businesses that sell for major multiples. They are the businesses that make money year after year. It’s an industry that works differently from the so-called fashion industry,” West said.

Instead of elaborate offices to enhance the brand, these companies focus on profit.

“It’s easier to do than the other way,” he said. “You can make a profit and decisions are made to increase bottom lines, then using those profits to invest in other types of businesses such as real estate and build personal wealth.”

Unlike major designers, these companies are often family run for generations, and intend to remain that way.

“They become very wealthy, often wealthier that those with the famous names,” he said.

Fineman West helps with it all. The 35-person firm provides a full range of business management advisory, tax, and accounting and auditing services, working with their privately held clients on every level. That can include assisting with incorporation and getting systems in place, to assessing the data they’re compiling for financial reports. The apparel, manufacturing and jewelry industries account for some 60 percent of its client base. Clients range from start-ups to companies in the $250 million to $300 million range.

“We’re a boutique firm with Big 4 experience. Our professionals have tremendous backgrounds: Some have worked in private industry, others with the Big 4. We have a lot of expertise in our firm,” said Wendy On, a partner at the firm. “Many of our clients don’t think of us as just their CPA. We are an accounting firm, but they refer to us as their business advisor. Like any firm, we prepare financial projections and taxes, but what we really do is partner up with our clients to make any kind of business decisions, many in the starting phase.”

Interestingly, the first question Fineman West will ask an entrepreneur is his or her end goal: Will the founders want to remain a private entity, go public, or sell to another company?

The success stories of the firm’s clients are testaments that you do not need a large accounting firm to take your company public or to get acquired.

“We first ask about their exit strategy,” On said. “That will help us plan.”

From there, the firm will help the startup find the right attorney and funding resources, create financial statements that will help with initial financing, and set up books and records.

“We will make decisions with you about gross profits and inventory levels,” West continued. “We’ll make decisions with them about pricing. We will be involved with everything that happens financially, especially with a beginning company that doesn’t have the management with the experience to make these decisions.”

That’s typical of most start-ups, which are launched by creative designers, who are uninformed about the financial aspects of owning a company.

“We realized we could add a lot more value to the client. Instead of just taking data and preparing a tax return or financials, we provide insight and experience that are “Beyond the Numbers.” Many of our clients are growing businesses and reach a point where they need professional financial advice but cannot afford a full-time CFO or controller. That is why we started a CFO business a couple of years ago to help with the financial aspect of their business, while the owners focus on making money,” On said. “This way we can add even more value to the client.”

In a recent example, the firm was called on to assist a client who needed to make a financial presentation but unfortunately had struggled in 2016.

“He was concerned the bank might cut his credit off,” West related. “Communication is a big part of our industry, and often it’s about how you communicate information to the bank as opposed to giving them cold numbers. One of the best things we do is that we can explain things in a business way that makes sense to the bank but keeps the relationship with the client. That happens all the time, whether it’s because a client is losing money or because it is growing quickly.”

The firm has witnessed the industry evolving for decades.

“Some 40 or 50 years ago, the business advisors of the apparel industry in Los Angeles consisted of a couple of finance companies, some bankers, and a couple of law firms and accounting firms. It was a very small industry,” West said. “One of the partners in the firm became close to the garment industry when it was growing tremendously nationwide. Los Angeles became a hub. Now there are probably 25 accounting firms active in the industry. It’s evolved and grown up.”

Another industry shift the firm is accommodating is how manufacturers sell their product. It’s no longer just a case of selling to a retailer. Now apparel firms must consider opening their own retail stores, as well as selling through the internet, and even be prepared for international distribution. All require different structures and different types of knowledge. “From a retail standpoint it’s certainly a lot more difficult,” West said. “Previously, orders were placed well in advance of shipment. Today, with fast-fashion, the goods must get to the stores a lot quicker, you’re importing from China and South America, and goods are coming from around the world. You need that expertise.”

With just one office in Downtown Los Angeles, all partners can gather quickly to discuss client issues and make quick decisions. But as a member of The International Accounting Group, a worldwide alliance of accounting and law firms, Fineman West also can provide its clients access to resources of more than 290 other independent firms in North America, Europe, Asia Pacific, Latin America, Africa and the Middle East.

“We’ll monitor a client’s financial decisions as they grow their company,” he continued, especially as growth patterns have shifted and become more erratic as the industry. “We’re kind of a guide to the client about cash flow and planning. Often clients do projections about lines, but you’d be shocked at how few companies plan their cash flow. At the beginning, cash flow is like blood in a body. Without it you can’t grow.”

Fineman West can supply that structure and expertise, he said. That is an extension of the firm’s goal to go “Beyond the Numbers,” by expanding its services based on client demand.

“The thing we provide our clients is financial discipline they may not necessarily have as creative people,” West said. “Like any other industry, you may have a lot of employees and healthy sales, but health is based the bottom line. And often companies don’t spend a lot of time on the financials and planning that end of the business. That’s our strength for them.”