MBA Startups: A Skin Care Junkie Follows His Passion
After graduating from Georgetown University with an honors degree in accounting and finance in 2006, Neil Agarwal spent several years working in various analytical and strategic roles at Citibank and Live Nation before being admitted to UCLA Anderson’s class of 2012. Coming from one of the nation’s top business schools, Neil’s prospects for a promising corporate career were bright. But he wanted something that Corporate America could not offer. He wanted to go into business for himself.
Neil is one half of a two-person team that recently acquired exclusive North American rights to Logical Skincare’s Recipe for Men line of products. Launched in June of 2012, Neil’s company–Logical Skincare LLC–has been featured in several national periodicals including Men’s Health, Style Magazine, and Esquire Magazine among others.
Even before I began business school at Anderson, my brother-in-law and I had discussed the idea of starting a company together. We were both men’s skincare junkies who knew that would be our niche of choice. Originally, we thought we would develop our own line; however, our research on the industry revealed some things that influenced us to pursue a slightly different path.
First, neither of us had any knowledge of chemical formulations, which is a critical skill set to have on your team if you want to build a cosmetics company from the ground up. We also realized that executing our original plan would require a great deal of time and capital and expose us to a fair amount of risk that we wished to avoid.
Not only would we have the product’s formulation to worry about, but we’d need to file legal paperwork to secure its exclusivity. We would also need to develop packaging and perform extensive clinical testing to ensure the product’s quality and safety. After that, we would still need to invest in marketing and distribution, essentially “eating” those costs until sales gained enough momentum to turn a consistent profit.
My brother-in-law, who is based in New York, works a full-time corporate job while working in the business part time. I work the business full time from my home in California. He initially discovered Formula for Men while travelling across Europe for his full time job. He immediately fell in love with the product, finding that its quality and results surpassed that of the tons of similar products he had tried and used in the past.
After trying the product for myself, I found that I agreed with his sentiments about it. We contacted the owners and eventually secured exclusive North American rights to distribute it in December of 2011. Our negotiation period lasted for eight months; during which time, we conducted our own focus group testing to eliminate our dependency on anyone else’s data or claims.
Funding is a huge concern for anyone looking to start a company. You really have to know what to expect based on your business model. Oftentimes when people think of launching a company out of business school, they have venture capital funding in mind. For many, however, that is a romanticized expectation that might lead to disappointment.
One common characteristic of a traditional business model like cosmetics is that it is much more capital intensive than say, a tech startup that builds smart phone apps. The owners of such a business are more likely to need to seek out traditional funding options (i.e. banks or SBA loans) to get off the ground—or get into a positive cash flow before looking for outside capital. We are currently self funding and plan to seek outside investors in about a year from now.
Another possible impediment to starting a venture after business school is debt. In fact, the loan burden carried by the average MBA graduate is the primary reason why many who desire to pursue this path right of out of school do not. Many more of us would start businesses if the debt were not so overly burdensome.
I am fortunate in that I don’t really have big loans to pay back for my MBA. It also helps that I have a wife who works full time. But there are sacrifices that come along even with that. Anyone who is looking to live “high on the hog” and/or start a family and begin buying big homes and cars right out of b-school might want to go ahead and take that job at McKinsey.