When Derek Fagerstrom was growing up, creative young people wanted to do anything but go into business: They wanted to start a band, write a screenplay, or paint murals. But the world has changed. "We’re seeing a totally different approach to business," says Fagerstrom, who is now 39. "People no longer think of business as the antithesis of art, but as an opportunity to express their vision."
Over the past two decades, Fagerstrom has started a range of small businesses together with his wife, Lauren Smith, based on their shared passions and hobbies. Among many other ventures, they opened a San Francisco store called The Curiosity Shoppe, where they curated the work of their artist friends; launched a live event series called Pop-Up Magazine; and rehabilitated a quaint movie theater in Russian River, California. Fagerstrom considers these projects his creative contribution to the world.
There was a time when the term small business conjured up images of local hardware stores, family-owned diners, and independent bookshops on Main Streets. But small businesses have been transformed over the last two decades, largely because of the digital revolution. "The Internet has created infinite possibilities," YouTube star Michelle Phan tells Fast Company. "You can create content and products for a niche market, but niche is no longer small anymore—that word can now mean tens of millions of people on the web. We’re living through a digital revolution where people around the world can build new businesses in ways that were not possible 10 or 20 years ago."
On Etsy, an artist can make a living selling throw pillows screen-printed with hand-drawn armadillos. With Shopify, a social entrepreneur can turn his store into a national e-commerce phenomenon without knowing a lick of code. On YouTube, a star like Phan can make a living appying her makeup skills to tutorial videos. For Fagerstrom, social media offers a way to locate people who are interested in the experiences he carefully curates according to a particular aesthetic, then drive them to his brick-and-mortar businesses.
Thanks to online platforms, it is now possible for anyone to transform a passion and hobby into a lucrative career. But that does not mean it is always an easy process. Running a business inevitably leads to challenges and tricky decisions. We spoke to six people who are rocking their small businesses. They’ve offered insights about how to create fulfilling lives doing the things they love.
When Sara Charles graduated from college in 2007, she was disappointed to discover that doing graphic design work for large corporations did not fulfill her every creative longing. She needed another outlet, so she started doodling in her spare time, creating large prints of art inspired by nature: owls, armadillos, and wolves; trees and flowers; and elaborate geometric patterns.
Fortunately for Charles, she started doodling just when Etsy came into its own, providing a platform for artists and craftspeople like her to sell their products. Charles set up an online storefront and customers started trickling in. Soon she was getting requests for new categories of products like throw pillows or T-shirts screen-printed with her patterns, and she was happy to oblige. Charles noticed that Etsy buyers were willing to pay a premium for items that were labor intensive and involved skill. "Etsy attracts people who understand the value and the work that goes into handmade products," Charles says. "They want to get something unique and special, but there is also this desire to support someone who is doing what they love." In her first few years, her Etsy store lined her wallet with a few extra thousand dollars of pocket money a year.
Charles remembers the moment she was able to transform her hobby into a full-time career. It happened in 2012, when Etsy invited her to become a featured seller, putting her store on the site’s homepage for five days, which drove thousands of new orders. "It was massive exposure," Charles remembers. "It kicked off my career and put my store on the map." Overnight, she was able to stop doing freelance graphic design work and focus entirely on creating products and selling them online.
News about her store started spreading organically, keeping her busy fulfilling orders. Today, Charles is able to pay herself a handsome annual salary—more than she made in any previous job—with money left over to invest in new equipment. But while her business is thriving, Charles has no plans to take over the fashion world. "When you start to grow, you have bigger overheads: You have staff, you need to rent bigger space," she says. "I’m in the sweet spot where I am at my capacity, but I am making great margins and paying myself well."
By staying small, Charles is able to focus on designing new prints, which is what she really enjoys doing, rather than worrying about things like hiring, managing payroll, and finding real estate. And if she were to take on more costs, Charles would have to make creative compromises: She might have to tone down her quirky, idiosyncratic style to appeal to more mainstream audiences. So, for now, Charles is very happy as a one-person Etsy operation.
For entrepreneurs dreaming big, it is possible to navigate some of the challenges of scaling up. For instance, to keep the work pleasurable as you grow, it is a good idea to automate or outsource tasks you don’t enjoy. This was something that Griffin Thall, 28, and his business partner, Paul Goodman, 26, discovered as they transformed their social enterprise, a simple bracelet business, into a national phenomenon.
Thall and Goodman, San Diego surfer dudes, are not the kind of guys you would immediately peg as the next big players in women’s fashion. But this year they made the Forbes 30 Under 30 list in the retail category. They started their business in 2012, when the two of them went on a graduation trip to Costa Rica. While hanging out on the beach, they noticed artisans selling pretty hand-braided bracelets. They decided to buy 400 of them, to both support these craftspeople and sell the accessories at a profit to their classmates and friends back in the U.S., to help cover the cost of their trip.
"It was a super-short-term goal," Thall remembers. "But it was our first real job out of college, so we threw ourselves into it." These new business partners liked the idea of building a business by helping communities in Costa Rica, and they tried to capture this feeling by naming their company Pura Vida, which means "pure life" in Spanish.
Back in the U.S. with their bracelets in tow, they began by working the San Diego sorority circuit; the sisters took to these colorful fashion accessories like bees to honey. They sparked a trend among college women, who happened to be very good at sharing pictures of their new bracelets on social media. The founders set up a simple WordPress site to start selling their products online. They even partnered with local boutiques, selling bracelets at wholesale prices. Before long, Pura Vida bracelets were flying off the shelves; Thall had to get in touch with a craftsman in Costa Rica to see if he could send over hundreds more.
Then, celebrities started being photographed wearing Pura Vida bracelets; they had apparently stumbled across the products in L.A. stores and taken a liking to them. "We saw Robert Downey Jr., David Beckham, Rihanna, Rachel Bilson wearing them in magazines," Thall says. "We were just as surprised as anyone else by this." This led to a massive spike in orders, peaking at over 100,000 bracelets a month. Goodman and Thall realized they had to scale up fast if they were going to keep up with demand. Their first move was to transfer their online shop to Shopify, a platform designed to handle large volumes of sales. They also worked with their vendor in Costa Rica to develop bigger operations so they could access a regular inventory of bracelets to sell. Without a business school degree or even that much industry experience, Pura Vida’s founders are now bringing in between $10 million and $12 million a year in revenue.
In the process of growing the business, Thall’s biggest insight was that it was incredibly important to outsource tasks he found unpleasant or difficult. Thall identified the things he loves most about his work—developing products and creating growth strategies—and he finds ways to outsource other tasks. The brand currently has 14 staff members working in San Diego who specialize in things like inventory management and human resources, which are aspects of the business Thall did not feel equipped to handle himself. "It’s easy for a passion project to quickly turn into just another job if you are forced to perform tasks you don’t enjoy every day," Thall says.
Pura Vida also relies on technology to automate and simplify difficult tasks. Rather than designing the website in-house, Thall relied on Shopify. Rather than handling their own customer service, they hired a company called Metaverse Mod Squad that hosts a web chat service for customers browsing the site. "It’s a question of whether you want to spend your days walking up and down the street making sales, or whether you want to hire someone to go do sales," Thall says. "It’s about whether you want to learn all the tech skills you need from scratch or hire an agency to help you. We’ve chosen to focus on doing what we really enjoy, and I think this is why we still love managing our business."
When you launch your own business, one of the earliest challenges is managing your startup costs when you don't yet know how big your customer base is or how big your inventory needs to be, if you're selling products.
For Annie Lin, who recently left a marketing position to start her own business, a solution to this problem arrived in the form of a subscription business from which customers purchase a product on a recurring basis, rather than on a one-off basis. Over the last five years, subscription boxes have become wildly popular in the U.S.: There are currently an estimated 10,000 such subscriptions available on the market. While consumers are drawn to subscriptions because they like receiving a monthly or quarterly delivery of curated products in the mail, this model is also a boon to small business owners because it allows them to accurately assess how much inventory they need each month.
A year ago, a platform called Cratejoy launched to cater specifically to subscription businesses by offering tools for monthly auto-renewals, managing customer addresses, and creating shipping labels for boxes. According to Amir Elaguizy, Cratejoy’s founder and CEO, half of Cratejoy’s 1,000 users are first-time business owners. "These are people who aspire to be their own boss," he says. "They come to the site not necessarily knowing that much about business, but leave knowing about revenue churn and retained profits."
This was a big draw for Lin, who had never owned a business before. Her dream was to own a shop that provided curated products to mothers and babies. But rather than launching a brick-and-mortar store or even an online store, she decided to use Cratejoy to create a subscription called A Little Bundle that delivers $49 monthly shipments of products to moms and their little ones. Since she launched her business over a year ago, she has developed a base of around 500 subscribers, which has been a magic number for her. "Below 500 subscribers, it’s hard for me to maintain inventory or manage my cash flow," she says. "But with 500 subscribers, my business suddenly becomes sustainable. You don’t need to be as big as Birchbox or a Barkbox to be successful." Given that her profit margins are currently between 30% and 40%, she is now able to live comfortably on her earnings.
Michelle Phan was one of the first people to use YouTube as a business platform. In 2007, when YouTube was still in its infancy, Phan had the foresight to see that the platform could become the next big medium for entertainment, so she started uploading makeup tutorial videos. At the time, this was a relatively new concept: Women could go to beauty counters to learn about makeup, but they didn’t have many tools with which to practice these skills when they were back at home.
She began her career on YouTube not knowing exactly where her channel would take her, but she didn’t leave her career entirely to chance. "I studied the media landscape and I felt that YouTube would have its time to shine," she says. "Ten years ago, when people thought the Internet was the Wild West, I saw that millennials were already consuming content on YouTube and I realized that I should be building influence here." Phan worked hard to consistently upload high-quality videos, but at the time, there was still no way for her to immediately monetize the content—so even though she knew YouTube had business potential, the videos were still very much a side project for her. "It was primarily a hobby; it was a platform for me to express myself, much like Instagram is now a way for users to express themselves," she says.
A few months later, YouTube launched its partners program, allowing users to receive a share of ad revenue generated on the platform. This fundamentally changed the game for Phan. She suddenly had more motivation to grow her follower base and increase her influence, but this took time and effort. Even though she was still in school at the time and also working other part-time jobs, she devoted every spare moment to developing content for her channel. This work paid off big-time: She began amassing millions of YouTube subscribers, which made her attractive to companies that wanted to leverage her audience and star power. In 2010, Lancôme asked Phan to become the brand’s official video makeup artist. In 2013, L'Oréal launched a line of products called Em in partnership with her. And, of course, she was generating a hefty income from the YouTube partner program.
But while Phan has seen great success on YouTube, she has been very deliberate about creating multiple revenue streams. She has launched her own company called Ipsy, which offers monthly subscriptions of beauty products, as well as her own YouTube multichannel network called FAWN. She has also written a book. "Platforms come and go," Phan says. "But content is king. I knew that if I built up a powerful audience, I could drive them anywhere. I’m on Twitter, Facebook, Snapchat, and Instagram; whatever new platforms come up, I’ll be on them too and create content that works in that format."
Phan continues to evaluate the new platforms that emerge, finding ways to leverage them, and she is also keen to build a diverse portfolio of companies, so she is always evolving as a businesswoman.
Ten years ago, Franklin Leonard created The Black List, an annual publication featuring the most popular screenplays in Hollywood that have not yet been produced. Until that point, Leonard’s career had taken diverse paths, from serving on political campaigns to management consulting. But when he began to explore the world of film production, quickly working his way up through the ranks at Universal Pictures, he found there was a massive unmet need to connect brilliant but unknown screenwriters with producers. "I wanted to create an eHarmony for people who write movies and people who make movies," he says with a laugh. "I wanted to find a way to make this process more meritocratic and efficient than the industry has historically done it."
He started by circulating screenplays over email in a PDF format—but two years ago, he built an interface that allowed screenwriters to upload their work; Hollywood executives could then read the scripts and rate them. Since then, The Black List has been his full-time job. The site generates revenues from the people who want their scripts to be read and from those who are evaluating them. "This has become a profitable business," Leonard explains. The platform has seen results. Right now, among other success stories, an HBO movie and a Fox project are currently in production based on material discovered on The Black List.
But Leonard is now expanding beyond the web platform he created: He’s interested in podcasting. Living in Los Angeles, Leonard has spent hours stuck in traffic with only podcasts to keep him sane, and it occurred to him that listeners might enjoy hearing dramatized versions of scripts from The Black List. Over the past few months, he’s worked closely with podcasting network Midroll Media to develop and produce a weekly show called The Black List Table Reads, which is performed by well-known actors. The first episode went live on April 16.
Creating a podcast takes a lot of time and effort: Leonard currently spends a quarter to a third of his time working on his show. "Doing the podcast takes more time for us than it does for most, I think, because we have to cast the readings and do extensive production work on them afterward," Leonard says. The monetary payoff isn’t immediately evident. In some ways, his podcasting initiative is a long-term investment. Over time, he hopes to grow his podcast audience and draw attention to The Black List. It is also possible that with a large listener base, advertising revenues will start rolling in.
Though the podcast isn't yet rolling in profits, Leonard believes that not every aspect of your business needs to have an immediate financial benefit; sometimes it is more important to doggedly pursue one’s creative vision. "I tend not to be motivated by cash," he says. "I really believe that if we nail the mission, the money will follow." Right now, his goal for the podcast is simply to create enjoyable entertainment that showcases great writing and draws attention to the writers who produced the work.
Sometimes pursuing your passion means creating a fantastic product and having faith that the finances will eventually sort themselves out.
This brings us back to Derek Fagerstrom, who has built several businesses with his wife, Lauren Smith. Unlike the other business owners featured in this story, Fagerstrom’s work has taken place offline, in the physical world of brick-and-mortar shops, movie theaters, and live-event venues. When you build companies in the real world, the risks are often higher due to higher costs and overhead.
In 2007, for instance, the couple opened a store on Valencia Street in San Francisco called The Curiosity Shoppe, where they curated art and housewares created by artists and designers. Given the sky-high rents in the Bay Area, balancing the books at the end of the month was inevitably stressful—but Fagerstrom and Smith made a concerted effort not to let financial anxiety get in the way of their artistic vision. "We are creative people and we’re always interested in doing things led by curiosity, creativity, and collaboration," Fagerstrom says. "The dollars were a concern, but they were very much tertiary to doing something that we thought would be fun and cool. I guess that makes us bad businesspeople."
One way that they alleviate their financial burdens is always having multiple streams of income and revenue. Fagerstrom sometimes thinks of himself as a plate spinner at a circus: He has always balanced multiple jobs simultaneously. While running The Curiosity Shoppe, he was also working at ReadyMade, a now defunct publication focused on do-it-yourself projects, as well as Francis Ford Coppola’s literary magazine, Zoetrope. "It is a miracle to survive solely on a business that is based on passion," Fagerstrom explains. "There have certainly been people who have done this, but in our case, I have always had a source of income to make sure that we can always pay our rent."
While it helps that Fagerstrom has only taken jobs that he enjoys, it is still hard work to do so many things at the same time. Some days, Fagerstrom tells me, are exhilarating, but other days are tough. "Anybody who has juggled several different jobs knows that it is always work, no matter how you spin it," he says. "It’s a different kind of exhaustion, even when you love everything you are doing. You wake up every morning scrambling to prioritize your day."
Fagerstrom believes that it is good to be prepared for difficult moments. In those dark times, it helps to remember what a privilege it is to be creating a business based on your ideals and your creative vision.
And those difficult moments really can be worth it. Fagerstrom's theater, which he is incredibly passionate about, is thriving. It's been a lot of effort, and taken a lot of personal sacrifice, but he's making his dream come true.
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