IT’S FUCKING HARD TO START A SMALL BUSINESS IF YOU’RE BROKE

This really goes without saying, I know. But do you know? I’m one of the few that doesn’t seem to believe that innovation and lifestyle control should be left to the privileged few that can swing a “small” loan of a million dollars. The kind of person that goes into business for themselves is already a little different. They have to be a little insane.

Or, as Tony Robins said: “If you got into business, and you’re in it right now. I love and respect you like a brother or sister, and I KNOW you’re a crazy bitch just like me. You have to be. Who gets in a sport where the longer you play, the more likely you die? You’re a gladiator if you’re in business. A gladiator goes out there and a gladiator knows that everytime they go out there they can die and the longer I stay in the game the more likely I’ll die, but every day they go out to win. That takes an incredible psychology. But in that psychology, you bump into limits and that’s what you gotta shift. And if you’re psychology is solved, you gotta see what skills you’re missing….I may have the best Ideas in the world, but they’re going to die on my lips unless I can figure out how to market them. The world is so competitive, if you’re a commodity, if you’re a race to the lowest price, you will be out of business in the next 2-5 years. You have to have something that separates you from everybody else on earth and until you find that something, you will be stressed and you will be struggling. But everybody has it and everybody can create it. That’s my expertise. My companies, I started from zero, now do more than $5 Billion annually”

So we’ve established that we’re crazy. In fact, we’ve built an entire brand around being crazy (look at this blog, our Crazy B!tch Magazine, Makeup for Crazy B!tches and Alternative Clothing boxes Sub/Cult Boxes & Crazy Kids Boxes). We get called crazy because of our ambition, and we get called bitches because of our passion. That’s okay, we embrace the name because we believe in empowerment through self expression. We choose to be a voice for underrepresented individuals and ideas. That’s the point though. Entrepreneurship is a compulsion and it advances society forward.

Depending on where in the country or world you live, you will encounter different view points on entrepreneurship. Some people might think that small business doesn’t have a big impact, but nothing is further from the truth.

Allow this article pulled from Crazy Bitch Magazine’s most recent issue to explain:

 

 

 

 

 

 

 

 

So, now that it’s clear how big of a deal small business is to everyone, what’s the problem?

The problem is that while entrepreneurship and self employment is actually becoming the more reliable and viable option over employment, there are barriers, (much like similar barriers to substantial gainful employment that exist,) that impact those of a low income background more significantly.

I’m’a let my man Robert Kiyosaki explain the differences between employment and self employment and entrepreneurship and why for many, entrepreneurship is the most stable and predictable choice for earning a living.

Now, let’s look at the numbers. The true cause of poverty is not a lack of money. < According to this Big Think article, a big factor is the lack of social relationships that comes along with an impoverished background that is a barrier for many, and that makes sense.

“Dr C. Nicole Mason was born in Los Angeles, raised by a beautiful but volatile 16-year-old single mother. Early on, she learned to navigate between an unpredictable home life and school where she excelled. Having figured out the college application process by eavesdropping on the few white kids in her predominantly Black and Latino school, and along with the help of a high school counselor, Mason eventually boarded a plane for Howard University, alone and with $200 in her pocket.

Mason found a path out of poverty – something that only 4% of America’s impoverished population are able to do. An alarming majority will never rise into the middle class, and so it seems that in the US, if you’re born poor, you stay poor. And no one is being very honest about this invisible caste system.

Mason is a vocal advocate against the presumption that the poor are poor simply because they don’t help themselves enough. “[In college] we heard a lot of things about welfare queens, people living off the system, not wanting to work, women being lazy, having multiple children. And that really wasn’t the reality for the women who were actually impoverished.” Mason found that the policies were detached from reality, and in fact the barriers built into the system (some intended to motivate people) – such as time limits, additional child penalties, and few provisions for childcare – were ineffective and suppressed social mobility. “What was excluded from that policy was a clear pathway out of poverty, like education,” she says.

When people think of poverty they think in terms of money and material resources, but a large part of being poor is suffering from a lack of social connections and networks, and living in a low-income area with no infrastructure that enables the leap up to the middle class.

If institutions and leaders want to support and elevate poor communities, Mason argues that they need to provide better infrastructure (like libraries, parks, good grocery stores, and hospitals) as well as bridging programs both within the community and, very importantly, outside of it, so people can get in contact with people outside of their normal social network. “We just need to be honest about what it really takes for everybody to have a fair shot at the American Dream,” she says.”

Dr. C. Nicole Mason’s new book is Born Bright: A Young Girl’s Journey from Nothing to Something in America.

Lack of access to family resources that many young adults rely on as a fall-back while building themselves up and getting through college often comes with a lack of education about and/or access to credit.

Bad Credit is Expensive, Many People in America Have Bad Credit, Many at No Fault of their Own

For car loans, someone with a credit score of between 680 and 739 will likely pay 4.5% APR on their loans, compared to only 3.2% for people with scores above the 740 threshold. Meanwhile, people with sub-680 scores can pay anywhere from 6.5% to 12.9% APR for the same loan.

Over the course of a five-year loan for $10,000, that 4.5% interest rate results in an extra $5.85/month on the monthly payment and about $351 more over the life of the loan.

That may not be too huge a difference, but for people at the top end of the subprime auto loan market will pay an additional $46/month, which adds up to an additional $2760 over the five years.

This might be of little concern to you, if you have great credit, but sub-680 auto loans make up nearly half of new car loans, so that means there are a lot of people out there paying oodles of extra interest.

When it comes to credit cards, the difference is even more pronounced. Card holders with scores above 720 pay 12.9% APR on average, but those with scores ranging from 660 to 719 pay 17.1%. For people with scores between 620 and 659, that average is 20.3%.

So if you have two people each paying down a $5,000 credit card bill at $150/month, the person with 12.9% APR pays $1,235 in interest while the person with 20.3% APR will pay almost double that — $2,421 — in interest.

Not everyone comes from a wealthy, educated family with a safety net to build on and do things the “right” way.

There are 2 main reasons that those who come from a wealthy background have an advantage over those who come from a background of poverty. First, Those that come from a wealthier background tend to have some level of a safety net of support (even if their parents don’t pay their bills). Second, they tend to have better attitudes about money and wealth building than their poorer counterparts because their parents inevitably have better attitudes about money than the poor parents do. Robert Kiyosaki has made a killing on his book Rich Dad/Poor Dad which explains exactly this (and teaches people that didn’t have wealthy parents growing up how to think about money in a better way).

As a young adult supporting yourself though employment, you’re single and probably scraping by with little extra on an entry level income. If you blow a tire on the side of the road, assuming you have a stable history, it’s probably not a big deal. You might have a jack and spare or donut and you limp home or to a tire shop and get a new tire. You might even call AAA, or your parents to come help depending on your situation. It’s not going to ruin your life.

If you come from a low income background and your tire blows on the side of the highway it could send your life up in flames. It’s often a luxury for those of a low income background to be able to afford enough extra in their budget to pay for contingency items like a spare tire, or donut or even AAA membership. Often times when people are struggling to pay their utilities and going without food for the day to make sure the power stays on, it’s just not an option. Survival for the next day is just more important than planning for worst case scenarios or things that might happened that haven’t yet. If you don’t have the money in your budget for a spare tire (I know for many years I didn’t, I didn’t even have car insurance a lot BECAUSE it came down to paying insurance or gas to get to work and work meant that I had a roof over my head because if I lost that too, I had no family to turn to that I could move in with as a worst case scenario, this is reality for a lot of people) then you can’t afford to have your car towed either and it gets impounded because you left in on the highway. If you are like a lot of low income people, you live in areas that have poor access to public transportation so even if you can continue going to work it might be 6 months down the road before you can afford to get a new tire on that vehicle or you might need to take out a payday loan and start that vicious cycle of each paycheck being gone before you get it and paying extremely high interest on your own money each week. If you can’t afford to get a tire right away and the car does get impounded (has happened to me) then you will probably owe the impound lot more than $2000 after only the first 2 weeks. That’s likely more than you paid for the car in the first place and far more than its worth. It’s also likely around the time you get paid next and have any remote chance of affording to fix it and it’s already too late. Now you have to figure out how to keep getting to your job without transportation and on top of that figure out what windfall might come your way so that you can get another cheap car. I’ve known many individuals who have to wait until tax time to replace their vehicles and have lost jobs, kids, and watched their lives go up in flames over expenses that could be easily afforded if someone in their lives could have loaned them $50-100. An individual with a better credit score might have been able to save money for an emergency fund easier than someone who is paying for everyday debt like a car loan or mortgage, or they may just get a line of credit through a car repair shop and make a small monthly payment on any large unexpected repairs.

It’s more common than you think.

Medical bills and Student Loans make up the largest percentage of debt claimed in Bankruptcy. We aren’t talking about consumer debt, we are talking about life debt. Debt to live, and student loans can’t be discharged in bankruptcy under most circumstances.

Nearly 70% of bachelor’s degree recipients leave school with debt, according to the White House, and that could have major consequences for the economy. Research indicates that the $1.2 trillion in student loan debt may be preventing Americans,from making the kinds of big purchases that drive economic growth, like house and cars, and reaching other milestones, such as having the ability to save for retirement or move out of mom and dad’s basement.

Over the past few decades a variety of factors coalesced to make student debt an almost-universal American experience. For one, state investment in higher education dwindled and colleges made up the difference by raising tuition. At the same time, financial aid hasn’t kept up with tuition growth. In the 1980s, the maximum Pell Grant — the money the federal money gives to low-income students to attend college — covered more than half the cost of a four-year public school, according to The Institute for College Access and Success, a think tank focused on college affordability. Now, it covers less than one-third the cost. 

A college degree has also become more necessary than ever to compete in today’s workforce at the same time that Americans’ wages have remained stagnant. That means more students are going to school with less money to pay for it, resulting in an uptick in student debt.

The boom in for-profit college enrollment during the Great Recession has also served to boost aggregate levels of student debt and student loan defaults. For-profit colleges have come under scrutiny from lawmakers and consumer advocates who accuse them of using inflated job placement and graduation rates to lure students into enrolling and taking on loans.

A September study published by the Brookings Institution found that a large share of the growth in the number of students struggling to pay off their loans over the past several years is tied to students borrowing to go to for-profit schools and to a smaller extent two-year community college.

Other, factors likely also play a role in the growth of student debt. Many have blamed the uptick in college costs and therefore student debt on administrative bloat, the idea that colleges are spending more on nonacademic staff and facilities. In addition, many 17-year-olds likely don’t understand what owing tens of thousands of dollars in loans will mean after they graduate.

“What a lot of students don’t understand is that student debt is an investment in your future,” John Petellier, the head of the Center for Financial Literacy and one of the panelists, said in a separate interview. “A perfect example of what I think is missing at a lot of high schools is one of the key topics in financial literacy, understanding the connection between career and income.” A better sense of that relationship could help students make more informed decisions about whether a college or career path is worth the debt, he said. 

Even though we’ve gotten to the point where a large share of Americans have a personal connection to student debt, the experience is felt differently by different people. For one, though it might seem counterintuitive, borrowers with smaller debts are actually more likely to struggle with their student loans than borrowers with large balances. 

That’s because a small debt may be a sign that the borrower didn’t complete school or obtained a low-level degree that’s relatively meaningless in the job market. Borrowers with high levels of debt are more likely to have taken on loans to attend graduate school that will pay off in the labor market, allowing them to earn enough to pay off their loans. Just 3% of borrowers with a graduate degree defaulted on their student debts, according to the Federal Reserve Board of Governors. 

Borrowers’ experience with debt also varies by race and gender. African-American borrowers are more likely to take on loans for college and tend to borrow more, largely because the historical gap in wealth between black and white households means that black students have fewer resources to draw to pay for school. And because women earn less than men on average, they have less money to draw from to pay back their student loans.

Stagnant wage growth also plays a role.

Student loans can also have different consequences depending on age. While the debts may prevent younger borrowers from buying a home, a car or reaching other economic milestones, older borrowers are at risk of losing their retirement benefits. About 36,000 Americans lost a portion of their Social Security check in 2013 due to an unpaid federal student loan, according to the Government Accountability Office. –http://www.marketwatch.com/story/americas-growing-student-loan-debt-crisis-2016-01-15

Many states did not expand Medicaid leaving LARGE gaps in eligibility and coverage while the Affordable Care Act continues to fall short on its promises. Many working class American’s lost their Health Insurance plans or their plans costs sky rocketed. Many who were formerly uninsured or underinsured, even if they are now covered, have unpaid bills from before. Often times, for lower income Americans, paying the fine for not carrying insurance or having it deducted from your tax refund is far cheaper than paying for insurance.

Overall, about a quarter (26 percent) of U.S. adults ages 18-64 say they or someone in their household had problems paying or an inability to pay medical bills in the past 12 months. Though certain groups are more likely than others to report such problems, the survey finds that people from all walks of life can and do experience difficulty paying medical bills.

Insurance status has a strong association with medical bill difficulties, with over half (53 percent) of the uninsured saying they had problems paying household medical bills in the past year. However, as previous surveys have shown, insurance is not a panacea against these problems. Roughly one in five of those with health insurance through an employer (19 percent), Medicaid (18 percent), or purchased on their own (22 percent) also report problems paying medical bills. In fact, overall among all people with household medical bill problems, more than six in ten (62 percent) say the person who incurred the bills was covered by health insurance, while a third (34 percent) say that person was uninsured. Among those with private insurance (either through an employer or self-purchased), their plan’s deductible makes a difference in ability to afford health care bills, with those in higher deductible plans more likely to report medical bill problems than those in plans with lower deductibles1 (26 percent versus 15 percent).

Not surprisingly, problems paying medical bills are also more common among those with lower or moderate incomes. Just under four in ten (37 percent) of those with annual household incomes below $50,000 report experiencing such problems, compared with about a quarter (26 percent) of those with moderate incomes between $50,000 and $100,000, and 14 percent of those in the highest income category.2 Those with poorer health status and greater health needs are also more likely to report facing medical bill problems. This is true among those who say they have a disability that prevents them from participating fully in daily activities (47 percent report problems versus 22 percent of those without such a disability), among those who rate their own health as fair or poor (45 percent versus 22 percent of those in excellent, very good, or good health), and among those who say they’re receiving regular or ongoing medical treatment for a chronic condition (34 percent versus 23 percent of those who are not receiving such treatment). –http://kff.org/report-section/the-burden-of-medical-debt-section-1-who-has-medical-bill-problems-and-what-are-the-contributing-factors/

Another project we are working on and hoping to launch later this year or early next year is cosign.us, it would help address the issue of credit and accessibility to it using alternative lending and alternative vetting solutions. Though in the interim, this needs to be addressed. Also, we cannot do this alone and that’s where you come in.

There’s a large disconnect between small business owners and consumers, many of whom work “normal jobs”. It takes all kinds and there’s definitely not a one size-fits-all approach to life or career. All I’m getting at is that a lot of the struggles that small business owners face, especially when they are starting out, are invisible and difficult to explain to others. I think that we can all benefit from more transparency and understanding, and it can benefit both all of us and the economy at large to support small business owners whenever possible.

Angela Krout, owner of Mojo Mama‘s metaphysical store in Independence, MO, guru at www.mojomastery.online & editor in chief of Good Mojo Magazine wrote this article over on our money making blog about some of the pitfalls to avoid when starting a small business. It’s good advice. She’s had a crazy cool life and has a lot of experience. She has faced a lot of the same hurdles we are talking about. She had to bodily remove someone from her store a few weeks ago and in response, had to turn to the crowdfunding to try and get security for the shop. A lot of people think that if you have your own business, you must be well off and you must have access to a large line of credit. The cost of implementing a security system can really break the budget of a small business that’s growing or only making x amount of profit per month, if you can achieve funding it at all. She’s run out of space at the shop and wants to be able to accommodate the demands  her customers have for space, both for events and merchandise. But that takes a large investment or credit, which is often hard to get for small businesses, even with better credit and collateral. The only business loan she could find locally was for $2000 and she had to put up her personal vehicle as collateral.

With access to investors and access to enough money, many small businesses would grow much faster. Like ours. We’ve been working on our makeup line for 7 years. We began formulation and testing in 2011. We officially launched in 2014. We started making small amounts of profit in 2015 and it really took off and we filed a profit on our taxes in 2016. But only recently, have we been able to put in amounts over $1000 towards the business. We started out with only $200 investment and blew through that in testing and formulation, it took us months to come up with another couple hundred. We barely had $10 to scrape together at the end of the month. Maybe. At the time, we were struggling in a large household with multiple incomes to make ends meet facing one disaster after the next. Water main breaking, no heat in the home, car breaking down, no car, not enough vehicles for the people involved. We come from a deep level of poverty that most people never manage to make it out of. We are only just now finally starting to make money from our business. It’s been a long and arduous process. Definitely, very worth it, but from time to time, it’s frustrating, because we still encounter people who expect our production quality to rival that of Sephora or Ulta.

Bitch, please.

We are up front that our makeup is handmade. It’s high quality, it’s highly pigmented and now recently, after pouring about $2000 into our business all at once finally this year, we have a small press and the proper supplies, that the pressed pigments themselves are as smooth as butter and sure as fuck look like something from Ulta. Our packaging is improving, but we are still working on it. We started out hand folding boxes years ago. Those were a hot mess. It’s a process. (You can read more about our mission and the ideology behind our makeup line here.)  We are also really focused on safety and are completely open and transparent about all of the ingredients we use, why they work and why we use them. We even follow the EU’s much stricter standards than the FDA’s to make sure everything we put in our makeup is above par.  I have a friend, Kimberly, who owns her own makeup line also, Too High Cosmetics (or THC) who still faces some of these struggles. Sometimes, she gets backed up on orders and customers get mad, or they get mad that she’s not pumping out the same packaging as big box stores. She’s already making a profit 6 months in and this is quickly becoming her primary income source, but she also put nearly $6000 in during her first 3 months in business. For a lot of people, that kind of initial investment is way out of reach. It certainly was for us. We still don’t have that much to drop into it and we are still growing. From Kimberly, “My mother bought me a starter kit for Younique. I spent three months busting my ass to reach a point if success. I took the $500 I had left from my profits and used it to make my first 12 colors. I then reinvested every single penny I made right back into the business. Most people can’t do that but as a stay at home mom I was determined to make it work, my husband covered the bills and I cut out off of my extra expenses. I dedicated every single spare moment I had to researching cosmetic chemistry and breaking down the formulas of products I was Interested in creating. I don’t sleep much but I love my job. Entrepreneurship is not for the weak of heart. Passion is what fuels my art and gets me out of bed even if it felt like I’d just laid down.” These issues, coupled with the lean startup methodology or “bootstrapping” that many entrepreneurial communities and gurus push out of necessity, leave a lot of room for error and can sometimes trap startups in incrementally small growth rates.

Kimberly and I, together, have also founded Indie Cosmetic Makers Association. It’s a consumer advocate association formed based on the four ideals of Safety, Quality, Standards, and Education. Our goal is educate consumers on cosmetics ingredients and safety and to train indie brands on safe practices and cosmetics chemistry so we can help them over some of the expensive learning curve that we had to go through to get to where we are now. Join our Facebook Group, Saving Face Academy, to learn more.

To pump out a minimum viable product often means to do the cheapest thing or the best thing you can afford to get something to the market quickly and get feedback directly from your customers to improve and then re-release your product repeatedly using this sort of testing to make sure your product sells before you put too much money into it. That’s something that is really hard to do with makeup, but a lot of customers do it. We do it with pre-orders: design a product, put it out there, promote it and get a feel for the demand, then use the money from pre-orders to actually fill the orders. Because otherwise, we only have the one product made up and usually need to buy bulk supplies to fill a bunch more. Other indie companies have done the same with nothing but a 3d rendered image, pre-sold without ever creating an actual product, then taken that image to a lab and had them make it and fill the pre-orders while stocking up for another run since the market for it is proven. There are pit falls to this process. Mistakes are made, unfortunately. It’s almost inevitable when you have 2 people (or even 1) with finite resources trying to grow and scale a business. Sure, one day we can hire employees, but there’s quite a leap between “We don’t have enough hours in the day.” to “Let’s open a factory,” or even “hire our first part time helper.” Friends and family can help fill in the gap. They can be your early adopters and brand ambassadors. They can help you make products when you get behind, assuming their schedules and skills allow it. This goes back to that social connections thing though and the gap and lack that low income people frequently have in that department.

Angela travels to network, source for, and grow her business. She has friends who can sometimes keep the shop open for her while she’s gone, but she doesn’t make enough yet to hire employees, so the shop sometimes has to be closed if she’s gone or if she’s sick. Her friends and network want to help, but they have lives too. This can slow growth. Kimberly’s husband works full time and she has a toddler. She doesn’t always have childcare and, while she’s making money, it’s not enough for her husband to quit his day job yet. They’ve both proven that they can make money with what they’re doing, they’ve both proven it’s scalable. However, it takes money and time to grow and the patience of our customers, to whom we would be nothing and we are forever grateful for. Sometimes, oftentimes, we can’t ship as fast as Anastasia Beverly Hills or Jeffree Star. Sometimes, we have to offer our palettes made to order and we run out of supplies. We always do our best to communicate up front, offer freebies, extras, incentives, and do whatever we can to make our customers happy. Sometimes it’s not enough and we lose money, have to send refunds and deal with angry customers who expect us to run like a big business, when it’s just the 2 of us and we’ve slept barely 8 hours in 4 days from trying to catch up on orders and we are still behind. The mathematic reality of it is that there’s not enough support for small businesses. The social reality of it is, that most people do not see the struggle that goes on behind the doors. I wouldn’t trade it for the world. I love what I do. I’m also tired and relentless, online 24 hours a day for customer service purposes and don’t know how to disconnect enough to spend enough time with my own family. I love supporting other small businesses and artists because I know the struggle and there’s solidarity in what they do too!  The point of this post is to offer a small glimpse into my world. The world of other ambitious and struggling entrepreneurs. We are always happy to receive feedback! We love hearing from you and we are constantly working to improve. We really have come a long way.

 

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Posted in Chasing Hollywood, Rachel.

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