How two childhood friends started a $ 5 million jewelry business

Tal Masica, 30, and Zeke Araki, 31, could have gone the conventional route and pursued business careers after college and beyond. But what really excited them was the idea of ​​starting their own business. So in 2015, childhood friends teamed up to form Pavoi, a Miami-based company that sells fast fashion jewelry, priced at $ 10 to $ 100, on Amazon. The majority of coins sell for less than $ 15.

To start the business, Masica had to live at home with her parents for the first six months and each of the partners ran a side business to pay the bills. It was not easy. “It took discipline and a willingness to give up a lot of things, until the business took off,” says Masica. Still, they managed to stay focused on their long-term vision for their startup and where they thought it might be in three years.

“What drove us into this business was freedom,” Masica explains. ” I do not have a desk. I was able to spend four months in Europe with friends. I don’t know how many people have complete freedom like us.

Their bet calculated on Pavoi paid, and last year their self-funded business generated over $ 5 million in revenue through various channels and turned a profit. Now that the business is established, Masica has plenty of time for her recreational passion.–kite surfing–while Araki goes to the gym.

In this column, I often write about $ 1 million from sole proprietorships and partnerships. I rarely get the chance to present those who broke $ 5 million.

It is because they are so rare. Correct 316 non-employer businesses (the name given by the government to businesses with no employees except owners) reported $ 5 million in 2016, the most recent year for which data is available.

For context, there were 36,161 employer-less businesses that generated revenue of $ 2.49 million and 2,074 that brought in $ 2.9-4.9 million in the same year.

And even these are outliers among the roughly 25 million employer-less businesses in the United States in 2016. The average revenue for these businesses was $ 47,153.

Masica and Araki can teach any entrepreneur valuable lessons in running a hyper-efficient, ultralight business. Here’s how they got away with it.

Respect what you know. Masica and Araki both grew up around jewelry. Araki’s father ran jewelry stores in the Washington, DC area, while Masica’s father was a local jeweler, selling engagement rings.

Although neither of their fathers had any e-commerce experience or were involved in Pavoi, the partners learned a lot about the osmosis industry as they grew up. “It made a bit of sense to us,” Masica explains. “It wasn’t a completely foreign object.” It gave them a good start.

The fact that Araki had started another similar business called Flytime, a watch seller on Amazon, in 2010 was also in their favor. Its turnover had grown to seven figures.

Due to Araki’s background in the watches category, he had been asked to sell quality jewelry on Amazon, the column that

Pavoi’s goods come under the giant e-commerce site. Fine jewelry is a closed category on the platform, which means you must be vetted and approved to become a seller. “They try to control the quality there,” Araki explains.

Invest in your future. Realizing that they needed around $ 40,000 to buy stocks and not wanting to turn to investors, Masica and Araki each saved $ 20,000. Later, they used the majority of their savings, along with a loan, to finance the growth of the business. “You can’t grow without cash to fund your inventory,” Masica says.

Masica, who had started his career with a private equity firm, had been fortunate enough to receive a substantial dividend from a fund in which he had invested. He used a large portion of the after-tax payment for his seed funding. Araki used his income from Flytime to invest in Pavoi.

The money they gave was useful to them. It turned out that they couldn’t get any salary from the business for the next two years because they got it started. Araki had to live off Flytime’s income, while Masica made engagement rings for private clients. “Maybe I’ll do 20 trades a year and earn enough to get by throughout the year,” Masica says.

Fortunately, they had kept the overhead costs low. Both work remotely from their homes. “Our minimal operational footprint allows us to sell more affordably and deliver value to any consumer,” said Masica.

Divide and conquer. With only two people on their team, Masica and Araki realized that they could only build a successful business if they each used their strengths. “A lot of this has to do with extremely efficient operation,” explains Masica.

Araki had a lot of experience writing Amazon ads so he took care of that part of the business. When they started, organic search results were more important on Amazon than paid results, so that was key.

“Sponsored products weren’t what they are today,” Masica says. “We relied a lot on optimizing our Amazon listing.”

Masica’s strength was in operations, so he managed this part of the business, automating it as much as possible using tools like inventory management software and A / B testing sites. such as PickFu.

They outsourced mundane office work to contracted virtual assistants. This allowed them to focus on higher added value activities such as business strategy and income generation.

Find a way to stand out. Although fine jewelry is a closed category on Amazon, there was a lot of competition, so the founders of Pavoi knew they had to differentiate themselves. “We focused on price and quality,” says Araki. “You are competing with millions of other products. “

Their first product was a set of freshwater cultured pearl earrings with sterling silver stems that sold for $ 13 to $ 50 a pair, depending on their size. At a specialty retail store, similar earrings typically sell for between $ 100 and $ 500, he says. In order to charge competitive prices, they flew overseas and looked for factories and suppliers who would work with them at the right price, and then bought the earrings by volume.

Keep an eye on the future. With Amazon constantly changing the way it does things, the founders of Pavoi are doing the same. “It’s a constant battle over what to do,” Masica says. “We have budgeted a significant amount of money to continue R&D for the products. Meanwhile, the company is currently developing proprietary inventory management and analysis software to increase its benefits.

Never stop learning. The two owners of Pavoi are avid podcast listeners and readers. Masica’s recommendations for podcasts: The Tim Ferriss Show, The Joe Rogan experience, How i built this on NPR, Masters of Ladder with Reid Hoffman and the Y-Combinator Podcast. As for the books, he was inspired Principles by Ray Dalio, books by Tony Robbins and those by NIKE founder Phil Knight Shoe dog.

“I turn to podcasts and audiobooks to keep learning about new things and things that interest me so that I have more expertise as I grow older,” says Masica.

His advice to other entrepreneurs who want to start a solo business or a high income partnership?

“It’s never as easy as it looks,” Masica says. “It will always take hard work and courage. You have to give up a lot of your comfort to get there, but it’s worth it. “