A rewards business credit card allowed founders Carey Clahan and Sydney Rainin-Smith to make mistakes and pivot quickly during the launch of their bottled margarita business.
“We just wanted someone to make an authentic-tasting bottled margarita, but when no one else did, we decided to fill that gap!,” says Clahan.
Having never created a bottled cocktail brand before, however, Clahan and Rainin-Smith had to start from scratch. They developed a delicious recipe, secured a trustworthy co-packer and nearly everything was in place.
That is, except for an essential ingredient: A bulk tequila that met their taste and quality standards. They sought out a distiller in Mexico that could produce a special type of tequila that fit the taste profile they were after.
This international business component added yet another layer of complication to the process, but their perseverance and dedication to perfection paid off. In precisely one year and a day, the company went from concept to store shelves.
Now, six years later, Laughing Glass Cocktails has added to the brand by including two new flavor extensions to its classic lime: Pomegranate and Firecracker, which is flavored with ancho chili and pineapple. Approximately 1,000 stores in California carry the brand. It also has a growing presence in Nevada and has just taken off in Texas and Florida. More states are on the agenda for 2019.
So, how do credit products fit into the business? Clahan explains.
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How did you pay for all the expenses that went into launching the company? Were there any hiccups along the way?
Both Sydney and I had excellent credit scores before we started our business, and this helped us dramatically when we started to open accounts. It enabled us to access credit cards and lines of credit. These credit products are crucial to starting a business. We knew borrowing could get dangerous fast, though, so we made sure we didn’t go too far over our skis!
That doesn’t mean we didn’t make mistakes; we did make a few. It is pretty much impossible not to make some because, as any entrepreneur will tell you, it takes mistakes to teach lessons. Each entrepreneur needs to learn through every step of the business’s expansion. But the nice thing about being a startup is that you can pivot very quickly. If you have spent too much money or are moving in the wrong direction, the corrections can happen almost immediately. That’s why it’s so important to be aware of your books at all times.
How are credit cards helping you and your business become successful – and which do you have?
They allow us some flexibility with our purchasing power. Particularly as a company that has to put out a lot of money upfront, credit cards are critical. We needed credit cards all along to get us going and to keep us going.
We started with the Chase Ink Business Preferred Credit Card and now we often use the Chase debit card that also has a credit feature. It helps us pay close attention to cash flow, which is the hardest part of running small business. We typically charge our marketing expenses and some warehousing expenses.
The Chase card has a rewards program and we use the rewards to purchase things for the business, such as air travel and hotel stays. Every once in a while, we use them for independent contractors.
It’s important for us to stay organized with our accounts, so we use Quicken accounting software. That doesn’t mean we always pay our credit card bill to zero. We generally do keep a running balance as we are continuing to expand the business. Every so often we are able to pay our entire balance, which always feels great.
What lessons have you learned about borrowing money along the way, and how would you advise other small-business owners?
We have learned that when it comes to borrowing money, having a well-thought-out plan for how to use the incoming funds is the only way to grow and expand your business in a responsible way. The little things for a business quickly add up, especially one that’s just starting out. You have to learn to decide what to spend money on and to plan for times when it’s not coming in.
Our first winter was hard because our product is seasonal. Having to reign in charging is an important lesson. Sit down and really concentrate on when to use credit cards. We have to ask ourselves how long it’s going to take to pay what we charge back, and then plan for it. This helps us make decisions on a rational level, not an emotional one.
Our other advice to other entrepreneurs would be to spend some time cleaning up your credit so you can access working capital at a better rate. Also, early in your business, start building on your credit score and creating even better borrowing opportunities for yourself. Try to focus on paying off each months’ bill before charging more to a credit card, especially in the early stages of the business. As you make each step in your growth, you can then use your credit cards to help make that leap to the next level.