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Learn From Nasty Gal’s Mistakes

“I’m a creative. I’m a brand-builder. I’m a rainmaker. I’m a pretty good marketer, but that’s not something I want to do every day.” former Nasty Gal CEO, Sofia Amoruso

“Play to your strengths” and “know your limits” are phrases that get tossed around often. nasty gal's mistakesYoung entrepreneurs should do well to remember them, though, as their companies generate revenue and expand. The business owners with stars and dollar signs in their eyes may be well-intentioned, but their inexperience and impatience could be a disastrous combination.

Case-in-point: Nasty Gal Inc. filed for Chapter 11 bankruptcy in late 2016 and last week, its brand name and its intellectual property were acquired by UK-based competitor, Boohoo for $20 million. That may sound like a good deal for a used clothing company that started as an eBay retailer page, but it’s obviously not a successful ending for its employees or its investors.

The vintage clothing retailer started online in 2006 by Sofia Amoruso. The CEO was 22 years old at the time, and she wisely met a demand in the market for inexpensive, vintage clothing and was able to expand her shop beyond an eBay page. A devout customer base followed her as she formed Nasty Gal, hired employees, opened two California retail stores, and a Kentucky distribution center.

Insta-celebrity was achieved about three or four years ago, during a time when she should have been focused on the company’s success. Instead, she wrote a bestselling memoir, #GirlBoss, (the jury’s out on whether it’s actually a good read) and began developing a Netflix show based on it. This was a really bad time to go belly-up, because the show could’ve attracted a much broader customer base for Nasty Gal, and it’s probably the only reason Boohoo bought its IP.

The Inevitable Fall

The company peaked in 2014, when it reported $85 million in revenue. Around that time, all Amoruso’s extracurricular activities were in motion and that undoubtedly correlated to the business’s downward spiral. The vision was being blurred by an unfocused company leader. The sales were negatively affected, and ultimately, according to Dow Jones:

Within the company, turnover and layoffs across ranks weakened morale, former employees said. In 2015, Ms. Amoruso ceded her role as chief executive to former Lululemon executive vice president Sheree Waterson, who had joined Nasty Gal in 2014 as president and chief product officer…

Shoptalk retail analyst Sucharita Mulpuru said Ms. Amoruso should have handed over the reins sooner.

“You can be a fantastic designer and marketer and create a brand that resonates with people, but that doesn’t mean you can successfully manage the business part of your company,” she said.

The Takeaway

You might be able to effectively run a company from a small or virtual space, but if you’re not prepared for major expansion, hire someone with proven business sense to take the company to the next level. Don’t let your private endeavors or short attention-span take priority over your company’s success. If you cannot handle the daily activities of a company leader, find someone who can.

You can remain the face of your company without being the no. 1 person in charge. If your ego and shareholders allow it, stick around to guide the company along and more importantly, learn from the person you’ve hired to steer the ship. By co-piloting, you might learn enough to regain total control.

Contact Brinen & Associates to discuss a strategy for bringing aboard an officer who can help your company reach the next level of success.

 

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