Erica Sandberg is a prominent personal finance authority and author of “Expecting Money: The Essential Financial Plan for New and Growing Families.” She writes “Small Business Credit Profiles,” a weekly column featuring small business owners’ journey with credit and credit cards for CreditCards.com.
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In the past, prepackaged margaritas
have been overly sweet and fake-tasting, a problem that Carey Clahan and her friend, Sydney Rainin-Smith, chose to rectify. In
2012 they launched Laughing Glass Cocktails, headquartered in San Anselmo, California.
“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
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.
See related: Small Business Profile: Center for Aesthetic Medicine
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
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.