Welcome to a special video post brought to you by American Express Canada. They have recently launched their Amex for Business Canada Facebook Page where you can access the latest news, information and resources for Canadian entrepreneurs.

I believe that the fastest and most effective way to build a business is to model the strategies of people who have already done what you’re trying to do. I call it Modeling the Masters.

Today, we’re going to look at how a Canadian entrepreneur went from getting arrested for bootlegging t-shirts to being the largest t-shirt manufacturing in the United States. This is the story of American Apparel founder Dov Charney and the top 3 lessons that you can learn from his success. 

Must Watch Video

“I knew I could do it differently, and I knew I could turn it around. And I knew there was a solution and there was no way, that kind of passion or can-do spirit; I said there’s no way I’m stopping now.” – Dov Charney

Dov Charney (born January 31, 1969) was born in Montreal, Canada to Jewish parents, but was sent to Wallingford, Connecticut to attend a prestigious prep school to control his behavior. Charney was a self-described hyperactive child and was frustrating his parents with his behavior. He would focus on just about everything else, but the school he was attending. While ignoring school work, he would find a money-making opportunity by purchasing t-shirts at a K-Mart and taking them across the border to Canada, where he would sell them for a profit.

Charney would then close a large order for t-shirts, but the order went south and he would eventually lose more than $100,000. This business disaster would make Charney quit the t-shirt business for a while and go to college. He found that the t-shirt business was calling him again so  he dropped out of Tufts University in his senior year to follow his passion. After moving to South Carolina, and getting a $10,000 loan from his father, Charney would start a new t-shirt business in 1989, American Apparel.

Today, American Apparel has over $500 million in revenue and over 11,000 employees. It’s the largest clothing manufacturer in the United States and has almost 300 locations worldwide. In 2004, Charney was named Ernst & Young’s Entrepreneur of the Year and he’s made quite a return for himself on that initial $10,000 startup loan!

Action Item #1: Narrow the Market

You can’t sell to everyone – successful entrepreneurs hone their offering around a specific target market and ignore the rest of the world. When you design for everyone, nobody ends up loving you. They might love pieces of what you do but it’s never perfect for them. When you design for a specific market you can make your product or service amazing for them, solve their problems, and forget about everyone else.

Charney knows who is buying his clothes and it’s a very specific market. He is tailoring his designs towards 20-somethings which means tighter and sexier clothes than the baby boomer generation before them were used to. It also means giving his clothes bright and bold colors. Charney identifies with his market, a group of people who are more socially-minded than their predecessors. To that end, he decided to market his company as not only brand-free, but also locally made and sweatshop free. As he sees it, Charney has connected with an emerging youth movement, a network of new hip youths that want cool clothes, but do not want to be walking advertisements for giant corporations. By narrowing his market, he has created the largest t-shirt manufacturer in the country.

According to Charney, “There’s the relaxed fit generation and then there’s the next generation, we like sexy at American Apparel… We don’t have branding on the shirts. It’s not a status symbol… I can’t wear any brand on my body – I just freak out.”

Action Item #2: Innovate, Don’t Exploit

Success depends on innovation. If you want to stand out and be different from your competitors you need to find innovative ways to separate yourself. Innovation takes many forms – it could be with your products or services, business practices, company culture, customer service, and the list goes on. If you don’t innovate you’ll risk being an average company that most people ignore and forget about.

American Apparel is about much more than clothes, or at least Charney hopes so. In creating the company of his dreams, Charney wanted to make sure that it stood for something, that it was selling a message along with its products. That message is that a company does not have to be exploitative to turn a profit. He makes sure his employees not only get a decent base wage, but can make more by working harder. Charney also implements several new t-shirts each month to keep his customers looking for new and creative t-shirts to wear. Not only are his employees happy, but his customers have several innovative choices when buying one of his t-shirts.

According to Charney, “We designed the rate in such a way that the average person should be able to make $100 a day, that’s our target. We want to pay more than the prevailing wages in Los Angeles, because we want to have the happiest work force we can have… What I’m going to prove, and I’m going to embarrass the entire establishment, is that sweatshops are more expensive in the end than vertically integrated manufacturing in Canada or the U.S… You see, those prisons in China are inefficient and the opportunity cost of offshore production is huge, because you can’t respond to market demands as quickly.”

Action Item #3: Efficiency is the Key

As entrepreneurs we tend to be time starved. There’s always much more that needs to be done and not enough time in the day to do it. Focus on what you do best and find ways to make everything else more efficient. It starts with eliminating tasks that are not really adding a lot of value to your business. Then automate as much as possible through technology. Finally you can delegate out the rest of the tasks that you don’t personally bring as much value to leaving only the high value, high enjoyment tasks for you to work on. You’ll grow your business and have much more fun in the process.

Before building American Apparel to what it is today, Charney had to file for bankruptcy. It was because his company was suffering from a lack of one thing: efficiency. His staff was all in their 20s, a wildly creative bunch when it came to graphics and design, but few knew the ins and outs of running a business. In response, Charney brought on Marty Bailey, an industry expert, who helped make efficiency American Apparel’s secret weapon against its competitors. One of his main strategies was to create what he calls “team manufacturing,” where groups of eight to ten people work on a single garment together, each performing a different task. Being more efficient during the manufacturing process allowed American Apparel to grow and Charney is determined to remain as efficient as possible.

According to Charney, “As a result of this system, we’re able to compete with China and kick ass the American way. It’s less expensive, for me, the way we do business, to manufacture here in the United States. There’s a high cost to going offshore… If you’re working with a supplier in China, you’ve got to work months in advance. If you’re working with your own factory, you can wake up one morning and say, hey, let’s make 10,000 tank tops today.”

True Story

Dov Charney was such a hyperactive child that his Canadian parents sent him to a prep school in Connecticut. There he would see many of his classmates selling t-shirts on school grounds. This gave Charney an idea of buying t-shirts from the local K-Mart and taking them across the border into Canada to sell for a profit which happened to be against the law.

During one of his bootlegging excursions he was arrested. “They took me down to Station 10, which doesn’t exist anymore, and after a couple of hours of me yelling, ‘Monsieur, monsieur!’ they let me out and gave me back my cash and my shirts,” recalls Charney. “So what did I do? Headed straight for the Cock ‘n Bull to try and unload the rest of them.” Even getting arrested did not deter Charney from selling his t-shirts.

Quotes

“America doesn’t need another faceless, institutional apparel company. They need an apparel company that gets it and does it right.”

“Look, I’m not that ethical, but you don’t have to be the most ethical person to know that slavery was wrong.”

“What I’m talking about is the exploitation of human potential instead of the exploitation of humanity.”

What Do You Think?

Can you narrow your market? Do you use innovative ways to market your business? Do you run your business as efficient as possible? Tell me what you think by leaving a message below.

Evan Carmichael

To learn more check out my list of Dov Charney articles. Also don’t forget to check out the Amex for Business Canada Page!