Ep. 63: Making It Work: How to Build a Business with a Small Budget

00:00:01

Andrea Marquez: You've got your idea and you're ready to start your business but there's one thing holding you back, money. It might seem like a hurdle, but sometimes starting with a smaller budget than you anticipated can actually be beneficial.

00:00:15

Caroline Castrillon: In terms of increasing your chances of success, it's not really about the money because you can blow through a big budget very quickly. It's more about how you manage it, and so I always encourage people to start with a smaller budget and go lean because then you're going in with less risk and then as you make money, you could just put it back into the business and it's a slower growth process, but it's a much more stable way to go.

00:00:45

Andrea Marquez: That's Caroline Castrillon, a career coach and founder of the Corporate Escape Artist, and today she'll be talking to us about starting a business with a smaller budget. Hi. I am your host, Andrea Marquez, and This Is Small Business, a podcast brought to you by Amazon.  

Today, we'll get into how to start a business with a small budget. One business owner who went down the scrappy route and came out on top is Alice Kim, the founder of Elizabeth Mott, a Korean beauty brand. Before she bootstrapped her business along with her husband, Vira, Alice was in New York. Both Alice and Vira, who at the time was her boyfriend, had the entrepreneurial drive, but they didn't act on it until the 2008 recession.

00:01:36

Alice Kim: I think sometimes crisis or world events will kick you into that. We were in New York during the 2008 recession, so we're like kick the can down the road in the corporation, so it really ignited for us to start our business. Then we're like, “ Okay. It's now or never.” We wanted to own our own brand, do it the way we wanted to do it.

00:01:58

Andrea Marquez: At the time, Alice was working on her first business, Elizabeth Mott.

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Alice Kim: 2010, this is before social media, before K- beauty, Korean beauty was a thing. So I brought back beauty products from Korea that I thought were very high performing, that were not really available at the time in the US. So we did both quit our jobs, not at the same time, but relatively close. I went first because I made less money, so maybe within a six- month span and we went all in.

00:02:27

Andrea Marquez: But Alice and her husband went into this with a plan. They needed a fallback just in case things didn't work out.

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Alice Kim: So we gave us a year. We've started the first six months in New York where we live in Soho, but the burn rate was really fast. You know in New York, things are extremely expensive. So we're like, “ Okay. We need to conserve the money.”

00:02:48

Andrea Marquez: So Alice decided to move to Hawaii where her husband Vira is from. They stayed with her in- laws and continued working on their business.

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Alice Kim: And we really just saved and saved. We just did what we could to save money. We were young. I was much younger than two. We had the energy and the stamina to just keep going.

00:03:08

Andrea Marquez: Even though moving to Hawaii elevated some other financial burden, it brought on another challenge.

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Alice Kim: If we wanted to live and operate the business in Hawaii, we couldn't ship here because it's just too expensive and shipping out just didn't make any sense. So in the beginning, make those contacts, try to cash in those referrals. Like anybody that you know. We borrowed space in the mainland, in la, I knew some people who had warehouses where we could store our stuff, and I think that really helped the business because you have inventory you need to pay for rent as cheap as you can get it, so being able to find storage and logistics. Now we use a third party logistics, but that took a lot of our, I think efforts and time in the beginning trying to set that up.

00:03:52

Andrea Marquez: That's one way to be scrappy with your business. Build a network that can help you out. We always hear that relationships and connections are everything in business, so it's great to see an example of what that would look like when you're starting out and developing connections also helped Alice in manufacturing.

00:04:10

Alice Kim: You could try things in small batches, try to negotiate. If somebody's like, “It's a $50,000 investment to do this.” Nothing's in stone. Try to find someone that'll give it to you for half or half of half or just say, “ I'm good for this.” We're all people. You just need to find someone who will understand your vision and just give you a little bit of a break in the beginning. And I've definitely had so many of those people that are so memorable and really help the business get to where it is today. I think a lot of people talk about mentors, as like these people who are very experienced and give you all this advice and wisdom. I see mentors also as those people who gave you a chance in the beginning.

00:04:50

Andrea Marquez: Building those contexts is so important and I want to take a few steps back and talk about research and development. How could you do that on a small budget?

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Alice Kim: I think that a lot of sampling, a lot of trying out your competitors. I mean really the old- fashioned way. Now there's a lot of AI tools too. You can get data based off of bestsellers, things like that. Those are very important and very helpful. I think it's great that those exist and so figuring out what are people buying and just getting inside the heads of consumers and then just being really curious.

00:05:28

Andrea Marquez: Figuring out your target audience is essential. Caroline Castrillon, young career coach and founder of the Corporate Escape Artist says that not understanding your target audience is one of the biggest mistakes she thinks entrepreneurs make when they're starting their first business.

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Caroline Castrillon: It's tempting when you're starting a business to want to serve everyone all the time, but it's actually a better practice to narrow down your audience. So the more narrow your audience is, the easier it's going to be to find those people wherever they are so that you can market to them and then ultimately sell your product. So that's a big common fear in the beginning for entrepreneurs. When I was starting a coaching business, just general career coaching, instead of getting more specific in terms of corporate professionals that want to make the leap to entrepreneurship, but it's easier to find those people. It's also easier to do market research before you launch and really get to know your audience.

00:06:28

Andrea Marquez: Market research doesn't need to break the bank. Here are a few budget friendlier, but effective ways you can understand your customer and test your products. One, get in front of your customers.

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Caroline Castrillon: It gives you an opportunity to A, sell, and B, get real- time feedback on your product and what they like, what they don't like, what they'd like to see in the future, those type of things.

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Andrea Marquez: You can do that by going to farmer's markets or conferences. Two, consider doing pre- sales.

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Caroline Castrillon: So pre- selling is a great way to test because you don't need to have any inventory or even a product developed. You can put up a launch page, you can promote it, market it, get feedback on it, and then just tell people it's coming in the future and gauge what kind of interest you're going to get. If there's not a lot of interest, then you know that you might need to move on to a different idea or get feedback to see what these people do want to hear about. And then there's always surveys. You can survey people easily.

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Andrea Marquez: Three, leverage your friends and family.

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Caroline Castrillon: That's like a built- in source of feedback. Even though they may or may not be your target audience depending on the product or service, it's still a good way to get feedback

00:07:42

Andrea Marquez: Four, use social media.

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Caroline Castrillon: You can use it from a listening standpoint just to get a sense about what people are talking about out there, what they'd like to see and they don't like, and then asking your followers what they like and don't like.

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Andrea Marquez: And five, look at what your competitors are doing, which is something Alice also talked about.

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Caroline Castrillon: See if there's similar products or services out there, people that are going to be targeting the people that you're going to be targeting so that you get a sense of who else is out there, how are they marketing themselves, what are their price points? You might even be able to get some ideas about how you'd like to approach your business.

00:08:21

Andrea Marquez: Another thing that helped Alice and her husband is going at it together.

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Alice Kim: World husband and wife team where there's two of us. So it really might be a little easier than if you were a solopreneur, you had a partner that's not your spouse or whatnot.

00:08:34

Andrea Marquez: But if you're going at it alone, make sure you have a good support system.

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Caroline Castrillon: You really have to have people around you that believe in you more than you believe in yourself sometimes because there are a lot of ups and downs. It's not a straight line. There's good days and bad days, but the passion is what keeps you going, but also the people around you that believe in you.

00:08:53

Andrea Marquez: So as long as you have passion and support system, having a smaller budget doesn't necessarily mean you can't continue to grow.

00:09:01

Alice Kim: Saving the money, bootstrapping, being scrappy, just allowed us to buy more time to stay in the game because in the beginning you don't have those big wins, you don't have these huge pos and orders and all these reviews or whatnot. So I think being able to buy the time, so you make those contacts or you meet those buyers or whatnot, that was important for us and so we decided to just keep our head down and play as long as we could. And for us that was not using money and just being able to bear it through until we had some traction. And you feel that momentum.

I think most entrepreneurs are like, “ It was a viral this or I had a press mention or an influencer picked it up, a celebrity or something.” You can feel when it has that momentum, you can feel the demand. You're a small team or yourself will know all the orders you have to fill or figuring out the next steps in your supply chain. So those are exciting problems to solve because then you're like, “This thing is moving.” It may not be taking fire, but you're like, “Okay. This is something.”

00:10:05

Andrea Marquez: And one of these moments where Alice felt the momentum was 10 years ago, around a week before her wedding day.

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Alice Kim: So we have had a mascara, it's called, It's So Big. I remember we did a IPSY, I don't know if you're familiar with that beauty subscription box, but you don't have that marketing resource. So for hundreds of thousands of people to look at your product at the same time is very, very powerful and to convert as well for customers. So I remember we did this sampling campaign, I think it was like 150, 000 customers, and then all of a sudden we saw 2 orders, 5 orders, 10 orders, and then we're like, “Okay. We can manage this.” It was like maybe 100 at the end of the day, something like that.

And then I think we were getting married that week, and I know we were for sure because I remember I was in my dress just packing the last 10 orders. I was like, “I'm just going to tape up the bottom so that…" We didn't have staff, I had family members. I'm like, “The auntie can come in later and fill these, but I'm just going to do these.” And I remember both of us, he was in his tux, I was in my dress and we were just taping up boxes, but that was so fun. I mean it was just definitely one of those things you don't forget and that's the momentum where you're like, “Okay. I'm fine in my wedding dress, taping up boxes and filling these orders.”

00:11:22

Andrea Marquez: I love that story and it's so clear to me that Alice is focused on the journey and the process, which Caroline says is important to avoid burning out.

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Caroline Castrillon: If you focus too much on the end goal, you're not going to enjoy the process as they say, “ It's about the journey, not the end destination,” because once you get to that end goal, you have to have a new goal. And then burnout. It's really easy to burnout as an entrepreneur, especially starting out because you are so passionate, you're going to want to work 24/ 7, but you're going to have to temper that with wellness activities just to make sure that you don't burn out because if you do, then it's going to be difficult to continue to grow the business and to think clearly in ways that will help you get to that next level.

00:12:12

Andrea Marquez: Alice, knowing what you know now, do you think there's anything you would've done differently?

00:12:18

Alice Kim: We were not as aggressive on the advertisements. I think especially as a D2C company, that could have grown us a little faster. We were so focused on the product and getting the product right. I think still that is the most important, but I think a little bit more on ads, more information on ad agencies and just that relationship, influencer strategies, things like that to get the message out. We were not as prepared or strategic in those ways, so I would've invested the dollars and the time.

I think a lot of times people say it's not just money, especially if you're a small, small, so two of you or you're a solopreneur. I think that the time aspect is just as important if not more, because it's like how much of your day do you spend on this? If you have families and you have to take care of stuff, we were doing this 10 hours a day, two of us, so that's 20 hours. So that's a combined force that we were able to do, but time is your biggest resource and I would've split up my time a little bit more, so it wasn't only focused on the product side.

00:13:19

Andrea Marquez: And prioritizing is something that Caroline says is really important when you're just starting out, especially if you have a limited budget.

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Caroline Castrillon: Obviously you're going to have limited resources, so you're going to have to wear a lot of different hats and you're going to have to be really good at prioritizing because you can't do everything all at once. The thing I like to highlight for people is you got to remember of the non- sexy line items.  

People when they think of business expenses, they think of marketing and advertising and agencies and logos and branding, all that pretty design stuff. But you got to think about health insurance, if you aren't getting that through some other means. Taxes, it's not just what you make, but it's what you have left over. So you have to budget that in.  

And if you're going to incorporate it's like an LLC or something like that, you might have some incorporation fees, maybe some legal costs, website expense. So putting up a website, chances are you're going to need one. It's important to remember those other line items and try to keep your costs low.

00:14:33

Andrea Marquez: We covered so much today, but if there's one thing you should be taking away from this episode, it's this.

00:14:39

Alice Kim: Buying enough time is really the best, maybe advice that I could give because you have to figure things out. What you think when you start is your company is probably not even 50% true. So it's a constant editing process of what you thought you were going to be doing or what you thought people would love or what you thought could put you into retirement is not going to put you into retirement. So I think that having the drive is the first thing.  

Grit, tenacity, all those things that you got to keep going. Mentally just keep going. It's so much harder than when I worked in my day job. If you don't like being uncomfortable, don't do it. It's so much of your own blood, sweat and tears. But I think the reward is this, yes, financial freedom in the end, but it's that personal freedom. For me, it's being able to express myself creatively through the products and giving people what I think is different and unique and innovative from somewhere else, like Korea, for example, or Hawaii.

00:15:34

Andrea Marquez: Money is a topic a lot of people shy away from, but Caroline and Alice dove into how you can see success with a smaller budget. We covered a lot in this episode. If you missed anything, don't worry, we've taken notes for you. You can find them at www. smallbusiness. amazon/ podcasts.  

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That's it for this episode of This Is Small Business, brought to You by Amazon. Until next time, I'm your host, Andrea Marquez. Hasta luego, and thanks for listening. This Is Small Business is brought to you by Amazon with technical and story production by JAR Audio.