So you want to start a business?
Read this first.
Fundamentals of Business: What Every Entrepreneur Should Master
When people first work with us, their first reaction is often surprise. We’ll hear things like: “This is one of the best decks I’ve ever seen,” or “I didn’t realize your team thought about the business this strategically.”
I get it. If you only looked at our social media, you’d assume we’re just a fun, punchy lifestyle brand that knows how to make TikToks go viral. What you don’t see immediately is the discipline underneath—how much of 1987 is built on hard business fundamentals, not just creative instincts.
That discipline comes from my MBA at UC Berkeley, where I was trained to think in frameworks. But it’s also come from living through the very real (and sometimes painful) cycles of growing a business. So, this post is written for the person who has thought about starting a business but feels paralyzed because they “don’t know the basics.”
Here are the essentials—the things that kept me afloat in the early days and still guide every major decision we make.
1. Minimal Viable Product (MVP)
Definition: The MVP is the most pared-down version of a product that lets you test an idea and learn from customers with the least possible investment (Eric Ries, Lean Startup).
In practice: For us, it was a single set: the Back Bay. We shot it, built a bare-bones Squarespace site, and dropped a few TikToks. It sold out. That single moment validated demand and gave us the confidence to keep going.
I always tell friends with business ideas: you don’t need the full company on day one. Test the idea *first* then build it. A friend of mine wanted to launch a floral business. My advice was: do a pop-up inside a bakery, bring just enough bouquets for one day, and see if people actually buy. They did. That was all the validation she needed to take the next step.
2. Supply and Demand
Definition: The law of supply and demand describes the relationship between how much producers are willing to sell and how much consumers are willing to buy at a given price. The market balances at the point where they meet.
In practice:
At scale, efficiency is the dream: supply matches demand perfectly, no excess, no stockouts.
But fashion isn’t just about efficiency. Scarcity itself can be strategy. Hermès doesn’t want every customer to walk out with a Birkin—it wants people waiting, wanting. That perceived scarcity is part of the brand’s value.
We’ve played on both sides. Pre-orders, which we’ve tested, are as close as you get to efficiency: customers commit, you produce exactly that number of units. But we also run limited drops that lean into the fear of missing out. Both are tools—it depends on the strategy.
PICTURED: OUR MOST RECENT VIRAL PRE-ORDER
3. Cost of Goods Sold (COGS)
Definition (formal): COGS are the direct costs of producing goods—raw materials, factory labor, and manufacturing overhead (GAAP/IFRS standards).
Important distinction: Fulfillment labor, last-mile shipping, packaging, marketing, and Shopify fees are not technically COGS. They fall under SG&A (Selling, General, and Administrative).
Founder’s lens: Here’s the thing, though—when you’re running a small business, you do lump all of those costs together in your head. I call this “fully loaded unit economics.” If you don’t account for what it really costs to get one hoodie from concept to customer’s doorstep, you’ll underprice and run into trouble.
Why does this matter? If you don’t fully understand what goes into producing your product—the hidden costs, the incremental expenses, the countless little details—you’ll miss the mark on pricing. It’s easy to get caught up in the day-to-day and lose sight of the bigger picture: profitability. Keep a close watch on where your money is actually going, then set your prices with intention.
In the early stages, you won’t benefit from economies of scale (when costs drop as production volume rises). That’s why transparency matters. Bring your customer behind the scenes—show them the craftsmanship, the thought, and the investment that go into each piece. When you communicate the “why” behind your pricing, it transforms from a number on a tag into a reflection of value.
4. Gross Margin
Definition: Gross margin = (Revenue – COGS) ÷ Revenue.
It’s the percentage of sales left after covering production costs.
In practice: Apparel brands aim for 50–70% gross margin. But here’s where new founders get tripped up: you still have to pay for marketing, fulfillment, and overhead out of what’s left. Doubling your unit cost is almost never enough.
General Example (note this is *not*1987’s data, rather a general example):
Let’s say a company sells a crewneck for $120. The cost to produce it (COGS) is $45.
So, their gross margin is 62.5%. That means for every $120 sale, $75 is left after covering production costs. Out of that $75, they still need to pay for marketing, fulfillment, overhead, and hopefully—profit.
5. Fixed vs. Variable Costs
Definition:
Fixed costs stay constant regardless of production (rent, salaries, insurance).
Variable costs change with output (fabric, trims, packaging).
In practice: Keeping fixed costs low saved us in the early days. No five-year retail leases, no big payroll. We stayed flexible so that most of our money went into variable costs (inventory). If a launch sold, we had the fuel to grow.
Back then, we had the early-adopter advantage on TikTok—before it evolved into today’s advertising giant. Views were being handed out in abundance, which meant our advertising costs were essentially zero. Every dollar went into inventory, and with demand far exceeding supply, we scaled quickly even as a self-funded brand. I did realize how rare and valuable that window of opportunity was, which is why I chose not to take a salary for the first couple of years and instead reinvested everything back into the business.
Tip: If your business launch happens to align with the rise of a new social platform, thank your lucky stars. In those early days, you can often capture massive reach—and a lot of views—for free.
6. Cash Flow Management
Definition: Cash flow is the net movement of money into and out of the business during a period. It measures liquidity—whether you can actually pay your bills—not just profit on paper.
In practice: Apparel cash flow is brutally “lumpy.” You pay out for fabric, labor, and freight months before you ever see a dollar back. Then, when the product sells out, all your money is tied up in the next production run.
I used to “snowball” launches—reinvesting almost every dollar into bigger runs. It fueled growth, but also meant living constantly on the edge of running out of cash. That’s the reality for many young businesses—not a lack of demand, but a liquidity squeeze.
7. Working Capital
Definition: Working capital = Current Assets – Current Liabilities. It’s the cushion that allows a company to run day-to-day operations without seizing up.
In practice: You can be “successful” on paper but fail if your working capital is negative—too much money stuck in inventory, while bills come due. Managing this is what keeps a business alive between launches.
Example (general):
Imagine a brand has $80,000 in current assets (cash in the bank + inventory + accounts receivable) but $100,000 in current liabilities (upcoming bills, loan payments, vendor invoices). On paper, they might look strong with lots of inventory, but in reality they’re short $20,000 in working capital. If they can’t quickly turn that inventory into cash, they risk not being able to pay their bills—despite “success” showing up in sales or assets.
8. Timing and Platform Strategy
Definition: First-mover advantage occurs when entering a market early provides disproportionate benefits.
In practice: For us, TikTok was that advantage. Early adopters got huge organic reach before the platform shifted to a paid-ad model. Launching then wasn’t luck—it was timing. Every founder should be scanning for those windows of opportunity.
Closing
From the outside, 1987 looks like a brand built on culture and design. But beneath the surface, it’s scaffolding: MVP testing, supply-demand management, cost discipline, margin control, cash flow vigilance, and timing.
If you’ve ever thought about starting a business but felt like you “don’t know the basics,” I hope this helps. These are the basics. They’re not glamorous—but they’re the reason we’re still here.
Let us know if you like the business content or prefer more lifestyle posts
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Jennifer DeAngelis McNamara
CEO & FOUNDER
1987
https://shop1987.com