Wanted: 30 Believers.

The ‘No-Growth’ Business Model. How It Will Raise Funding?

In a Perfect World…

Every brand has seven communities to serve:

1. Customers.
2. Employees.
3. Shareholders.
4. Founders
5. Suppliers.
6. Local Town.
7. Planet Earth.

And, in a perfect world, they are given the same priority.

But, in the real world…the leadership of each brand must choose which community it wants to prioritise.

Therefore, one community must lose in order for another to win.

This is called business as usual.

For brands who are in pursuit of another way to do business, this is the challenge.

The uncomfortable truth is Doing the Right Thing makes it hard to do business — not impossible, just hard.

“I want to be low impact. But grow like crazy.”

This is the tension.

It is always there but rarely spoken about and never resolved.

And so, messages from brands are broadcast with the best intentions, yet the communities the business has prioritised to serve conflict with those low impact intentions. To the outside world, the brand is saying the right thing all the while increasing its footprint as it grows.

Hmmm.

In the perfect world, a brand business model seeks to serve all its communities. It almost never does. Even the brands that we love still have to prioritise which communities they have to focus on at the cost of others.

The elephant in the changing room is growth.

In short, this is what needs fixing.

1. Introduction.

A low impact brand has good intentions, but it is pulled in another direction by its need for growth.

By its nature, growth increases impact.

This is an unspoken truth known by the brand and the customer.

- Both are smart.
- Both know the truth.
- Both are silent.

The cost of success for this brand is to sugar-coat the mission.

The brand’s growth is down to its mission to lower its impact in the world. The quest for sustainability is a secular trend and will see an ever-increasing number of people connecting with the mission. If it gets its messaging right, this brand will experience high growth.

This leads to an increase in its footprint — what it stands against.

- The business model now becomes: Less bad to more people.

- Its success undermines its intention.

- Success means failure.

True sustainability needs a new growth model.

One not based on growth as we traditionally understand it. Currently, growth is only to do with selling more to more people. If growth is pegged to a production number that could never change, how would the brand grow then?

The brand would then have to find other non-traditional ways to grow.

- Influence.
- Innovation.
- It could pioneer and lead a no- growth movement.

The desire for its product may grow as a result, but not its production.

In short, you can scale influence without size.

2. Money.

We define success in terms of growth. The more people desire the brand, the more growth it enjoys. More growth equals more success. Investors fund brands that they think can grow. That is how it works. There must be an exit. It makes sense. And money. But what happens when there is no exit? In short, traditionally, no one will fund it. Therefore, we need a way to help fund these no-growth brands that provide a return without requiring the sale of the company. What is the no- exit funding model?

The solution we propose is not complex.

It is as simple as taking a loan from one part of your community (Your customers) and paying it back over an agreed timeframe with a fair interest rate on top. Every time you sell your product, you pay a little back. This we call ‘Future Funds Now.’ The only way for this to work is to be sensible about what can be paid back and by when. For example, at Hiut Denim, if this proposal goes ahead, we will peg production to 10,011 pairs of jeans a year.

Our aim is to raise £1.5 million from 30 customers. For our purposes, that is £50K from each customer.

If we assume that each year demand for all our production is taken up, and we pay back each customer 0.50p per jean, it will take us 10 years to pay back the principal sum to our customers. In the 11th year, we pay back the agreed interest.

Now, isn’t taking £15 (30 X 0.50p) off the margin of each pair of jeans to pay back a loan going to harm the margin needed to run the business? It’s a good question. The question can be asked another way.

Has the desire for the brand been increased because it is leading the no-growth movement? The supply has been pegged. But suddenly, you are in a category of one in the jeans market. The demand will go up. A waitlist will form. Why does this matter? You no longer have to discount to drive demand. You no longer lose margin. You stop pushing. Your achieved margin compensates for paying back the loan.

To achieve this, the story must be told to the world. A category of one gets attention. Less supply with increased demand is normally rectified with increased supply. That is not possible in a no-growth brand.

In short, to fix growth, you must fix money.

3. Time.

The solution we propose begins with a timeline of 10 years to pay the principal back. The 11th year is to pay a year of interest. This will make the loan at least comparable to a commercial loan. The assumption made here, and the key to the success, is that demand will increase because Hiut Denim will lead the no- growth movement.

The world’s press will write about it because it is trying to find the other way to do business with a new business model of pegging growth. Each jean will be numbered and timestamped on the blockchain. Each timestamp includes the previous timestamp in its hash, forming a chain. Each jean will carry a number for the customer to see. The countdown on the website will give the world a real-time countdown of production left for the year. Each year will be given a different colour so over time, people can find out what year, what week, what hour and who their jeans were made by.

The likelihood that demand will increase is realistic, and production being pegged to 10,011 will lead to a waitlist. The waitlist allows you to have a predictable business as costs and demand will be known. The waitlist will take away the need for discounts to increase sales. The business will always achieve its margin. It will minimise waste as it only makes what people have ordered.

In short, it no longer predicts; it knows.

4. Influence.

To implement this way of running a no-growth business, non- traditional ways of growth must be pursued. Most businesses spend their marketing to increase demand or ensure it does not go away.

As a category of one, leading the world toward a no-growth movement, creating a waitlist seems somewhat achievable.

In the future, the waitlist may be many years long. If successful, the need to push demand is reduced. The time saved allows the team to turn their attention to innovation.

The factory becomes a working test bed for unique ways to lower impact.

For example, that could be from minimising waste, using unique methods to increase getting the fit right or making visible the energy consumption of washing your jeans in real-time. The factory becomes an incubator of ideas as a by-product of its quest to make the lowest-impact jeans.

If any innovations show meaningful results, they will be patented. This will then be made available for others to use. Brands with over $50 million in sales will pay a license fee and below that threshold will be allowed to use it for free.

Innovation is hard and fraught with failure. The upside is that when you find a new, better way that no one else has done, you lead the world.

Risks must be taken. Failures endured. New ways found.

In short, the innovator must innovate.

5. Community.

The steps to build an engaged and influential community are as follows:

1. The mission is to find another way to do business that allows humans to stay living on Planet Earth.

2. In short, let’s not fuck Planet Earth up.

3. The supply of jeans is forever limited to 10,011 pairs.

4. Accept that our customers will be few, but their influence can be huge.

5. To lead the no-growth brand movement and represent another way to do business.

6. We aim to inspire the next generation of customers.

Investors always consider the highest growth brand to be the correct way. What if the brand in most demand can’t grow? What if it wanted to scale its influence in the world, not the amount of product that goes to landfill? What if this way was still a business, not just something that worked on a PowerPoint presentation? What if a no- growth brand could sustain itself, could even thrive? What then?

In that case, there will be a new business model available to those who place staying on planet earth as a higher priority than some.

All this works in theory, but the strength of the community will be the ultimate deciding factor.

The no-growth brand must become a movement that a small, passionate community want, more than anything, to change how business is done on Planet Earth. From trying this way of doing business… we learn. And, then we lead.

In short, the strength of the community is determined by its mission.

6. Incentives.

This is a loan on future sales, to be paid back with the sale of each pair of jeans plus interest. The aim is to raise £1.5 million from 30 believers.

Each believer will loan £50,000 over a fixed payback period of 11–10 years to repay the principal. The eleventh is to pay the interest on the loan.

The interest rate will be nominally above market rates to reward the believers for the long-term belief and the inherent risk attached.

The founders will place all their voting shares into an escrow account held by independent lawyers until the loan is repaid. If, for any reason, there is a default on the loan, the shares will be distributed equally amongst the believers.

The founders will take a nominal salary for the duration of the loan, with no salary increase until the loan and its interest is repaid. They will not be eligible for any dividend until the loan is paid back, plus interest.

The loan repayments will be paid every quarter on an agreed schedule. Each believer will be paid equally based on the sales from that quarter. Adjustments will be made each quarter based on the returns from the previous quarter and will be deducted from the sum for the next quarter.

The incentive is both financial and to show the world that a no- growth business can be profitable. Plus, this way of doing business can attract funding. And it can scale its influence to inspire other brands to find another way to do business.

The capped production of 10,011 pairs of jeans will create scarcity once the story attracts world attention.
A waitlist to have an allocation will form. It will not happen from day one.

The repayment per pair will be set at 0.50p per pair. The repayment figure can be adjusted upward in the initial years when the wait list is still being formed.

This incentive will help encourage the business to tell its story, so it connects with customers. It keeps the business incentivised to be a good communicator. The 11-year payback period is fixed.

In short, no-growth brands must attract funding; it is a business, not a charity.

7. Voice.

The world must know the business is here. And why.

Success will be showing the other way works. As paid-for marketing will be beyond our means, we must find other ways to get attention.

We will become an advocate for those who want to find the other way. We will need to put our thesis out to the world consistently. We will use digital channels to share our point of view.

The key thing here is to be consistent.

- With our message.
- With regular cadence.
- Play the long game.

Know that, at the start, attention will be small.

We can take heart from an acorn. It knows it will become a big, mighty oak. But when you look at it, and if you didn’t already know the story, you would lack certainty that this is possible. To have planted the first acorn without knowing the end result required faith. To plant the second, knowing what can happen requires just patience.

In terms of no-growth brands, we are planting the acorn without knowing that the mighty oak is possible. To take that analogy even further, the voice is our way of watering the acorn.

The voice cannot be shallow. We must have innovations to talk about. We must have proof that this thing works.

In short, we must tell the world our story. And, why it matters.

8. A simple business model that sustains itself.

With a capped production, we will know the cost of production. We will understand what costs the business can afford for a team and what it can pay everyone.

A waitlist makes the business predictable in terms of costs and margins. It will always have to cut its cloth accordingly. Hiut Denim must be sustainable.

Any upside from licensing its innovation will always be an exceptional bonus. Our business must stand on its own two feet.

If our voice on digital platforms grows and we collaborate with other like-minded brands, these must be to promote breakthrough lower-impact technology.

These must pay their way and cannot risk the main business’s cash flow. Again, profit from these will also be considered exceptional bonuses.

If deemed sensible, these bonus funds could be used to increase loan repayments to our 30 believers.

In short, we must show there is another way to do business. And it works.

9. How will this money be used?

There are three areas that will be our focus:

1. Team.

We need to make 3 key hires:

General Manager.

This person will be the driver of the business. Keep the business fiscally responsible. Stay focused on the mission. Set the direction for the focus on innovation.

Community Manager.

To help tell our story to the world. To keep us consistent in our thesis and frequency.

Product Innovations Manager.

To help us lead the world in lowering our impact. This can be in how we make it. How we measure it? How we make our impact transparent to our customer.

These key hires will work with our founders to drive the business to be the most influential small maker in the world.

The founders want to help coach the new team to steer the brand to help it become one of the most influential small makers in the world. At times, we will need to be braver than we feel we dare. The role of the founders is to give the team confidence to try new ways. The risks are always higher when you are going into the unknown. It will also be the job of the founders to know when to get out of the way.

2. Innovation.

From how we make, to what we make, to how we work to where we work. Each year, we will pick an area of focus. We place small bets on the future. Most will fail. One, maybe two, will succeed. And it will be more than enough.

3. Debt.

The debt incurred when we moved factory needs to be paid off or reduced. The new team will have to decide on this. We need to protect our new funding to push us forward but also reduce our debt so there is a balance to be had here.

In short, we are three key hires away from a team that can change things.

10. Calculations.

To those who are serious about helping to fund this business- changing project, the first step is to email us to say that you would like to know more information about the nitty and gritty of how this works. Without your expression of interest, we can’t share details of it with you.

So yeah, first-step, tell us you’d like to know more.

Our accountant and bookkeeper have prepared a set of simple but transparent figures that will help you make an informed decision either way.

Our timeframe is to have received all expressions of interest by April 1st.

We will then send out the information pacts and seek to close the offer by May 1st.

It will give everyone time to seek advice from their accountants and advisors to make an informed decision.

If, come May 1st, the round of funding is oversubscribed, we are still working on a plan for this.

If, come May 1st, the round of funding is not fully subscribed, we will extend the timeline by another month.

The hope is that the 30 believers will also play a part in giving us their advice, wisdom and ideas of what they think we could and should be doing.

Ten years is a long timeframe in business cycles, but it provides time to try and make a difference.

Success is, of course, the repayment of capital, but that we did also make a change.

In short, we must find a new way and bring the treasure back for others.

11. Conclusion.

We have proposed a new business model without relying on growth.

We started with the same need as every business, which is to say, how do we fund this? We proposed a simple loan system that borrows from future production to solve this.

We will have to find 30 believers.

If they were motivated solely by financial returns, this would not be attractive to them. But a low-risk loan with a market rate interest return plus the chance to help fund a new business model that has the potential to start a no-growth movement can be appealing to different thinkers.

We will cap our future production at 10,011 pairs of jeans. This figure is what we have determined allows us to be a small, sustainable maker of jeans.

The more innovation we bring to the jeans and branded goods business, the more attention the company will attract. And the longer the wait list will grow.

Where this business will differ from others is that, at this point, it cannot increase production.

The proof of the business model is that it can sustain itself and repay its funding loan. Plus, its work practices, products, and innovations start to make an impact far greater than the size of its business.

Rather than the constraints of the business stopping it from growing its scale, it finds other ways to grow. We will scale influence by becoming an example of the other way.

In short, a splinter is small, but it can stop a giant.

“Once upon a time, you were the first of a generation. And everything ahead of you was possible.”

We are not looking for traditional investors, but if you have a long timeframe and understand the mission to be the lowest impact maker in the world, and for the world, lets have a chat. Drop us an email at believers@hiutdenim.co.uk