This Founder Launched a Line of Toys Inspired by Her Indian Heritage (and Mindy Kaling Is a Fan)

December 14, 2021
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You asked for more content around business finances, so we’re delivering. Welcome to Money Matters where we give you an inside look at the pocketbooks of CEOs and entrepreneurs. In this series, you’ll learn what successful women in business spend on office spaces and employee salaries, how they knew it was time to hire someone to manage their finances, and their best advice for talking about money. Below, we chat with Avani Modi Sarkar, the co-founder of Modi Toys. Read on to learn more about what motivated Sarkar and her brother, Viral Modi, to launch a toy company inspired by their Indian culturehow they self-funded with business with $25,000 of seed capital from their savings, and why she recommends focusing on your loyal customers (opposed to seeking out new ones).

You launched Modi Toys without any background in retail, which is so impressive. Can you tell us about your career background and what you were doing professionally before launching Modi Toys?

I spent 15 years in corporate America on the B2B marketing side. I started off in the financial services sector for large enterprises, then transitioned to the technology sector for startups, and eventually ended up in the corporate travel industry, where I was eventually laid off due to COVID. Although B2C marketing is a completely different beast, there were some transferable skills such as email marketing and website development. 

What I learned from switching jobs a number of times throughout my career is that you will always learn on the job. No one is ever 100% qualified for an opportunity, but you are capable of growing into the role. That’s the same mentality I had in becoming an entrepreneur and entering a brand new industry. Many of the female entrepreneurs I know have followed a similar career path, in which their corporate job seldom matched their subsequent small business.   

Can you tell us about the “lightbulb moment” for Modi Toys? What inspired you to start your business and pursue this path?

I still remember that exact “lightbulb moment” when the idea for our mantra-singing plush Baby Ganesh came up: I was 38 weeks pregnant—as was my brother’s wife. My brother had just returned home empty-handed from another failed shopping trip. He was in search of an ideal “birthday gift” for his daughter who was due right alongside my daughter. As soon as he walked in, he said, “Why isn’t there a plush toy out there that looks like Ganesh instead of a regular elephant? And one that sings mantras when you squeeze its belly, instead of nursery rhymes?”

My brother/co-founder, Viral, and I immigrated to New Jersey from India with our family when I was eight years old. Having spent a considerable part of our childhood in India, my siblings and I grew up with a deep sense of connection to our heritage. Our parents’ upbringing only further helped nurture our love and appreciation for our culture.   

When we both became parents ourselves in January 2017, we quickly realized how clueless we were about ensuring our children felt just as connected to their Indian roots as we were growing up. As working full-time parents, we wanted a simple solution that could be found in toys. What we needed was a fun, simple, and meaningful toy that would introduce our newborn daughters to their rich heritage. Surely, these must exist with the abundance of toys in the market, right? 

Nope. 

Surprisingly, we couldn’t find toys reflective of our identity—those that went beyond addressing gender and ethnicity.  As it turns out, toys that represented our race, culture, and faith, simply didn’t exist, despite the growing segment of the Indian population in the U.S. over the past 10 years. Taking a page out of our immigrant, entrepreneurial parents’ book, we decided to “just figure it out” and make the toys ourselves. 

Image: Courtesy of Avani Modi Sarkar

When you launched Modi Toys in 2018 with the musical Baby Ganesh collection, you sold out immediately, which clearly demonstrated a high demand for your products. What has been the biggest challenge in scaling so rapidly, and what advice can you share for fellow small business owners on how to scale quickly and sustainably?

The biggest challenge in scaling so rapidly has been keeping up with new systems we have to implement to manage inventory, training new hires, and managing customer inquiries. We’ve also been quickly outgrowing our office space, which started out in our parents’ basement and is now located in a 500-square-foot room in the basement level of an office building. 

My advice would be to outsource the parts of your business that can be systemized and don’t require your personal touch. As your business grows, so will your responsibilities. Learn to delegate so you can continue taking on more and continue saying “yes” to more opportunities.

Mindy Kaling gave Modi Toys a shoutout to her six million followers on Instagram, which, of course, helped increase awareness around the brand. How have you created a buzz around your business, and how has your digital marketing strategy evolved as the business has grown? 

I’ve always been a believer in the power of word-of-mouth marketing. In fact, I generated nearly the same amount in revenue the month Mindy Kaling promoted us, as I did the month when I ran a viral marketing campaign, which resulted in increased engagement to our Instagram and website. A shoutout from a celebrity like Mindy Kaling may be equivalent to a shoutout from one hundred “regular” moms. 

As our business has grown, I’ve begun relying on paid social media to complement our organic reach. Similarly, while I’ve continued fostering relationships with content creators, I’ve also been exploring paid influencer partnerships. Thanks to the analytics available, I’m able to easily assess which paid efforts have a positive ROI.   

What percentage of your budget goes toward marketing and do you see a return on that investment? 

We didn’t spend any money on marketing for the first year of our business. I then began experimenting with Facebook and Google ads on my own for about a year. And then I finally brought on a digital agency to optimize and manage our social media ads, and also migrated our site from Wix to Shopify. 

While not all of the ads we run have the desired customer acquisition cost (CAC) or cost per acquisition (CPA), we take each metric as an opportunity to test out other variables including the audience, the creative, and the budget. I currently spend about 4% of our revenue on marketing, which is below the industry average of 5-10%. 

How did you fund Modi Toys? What were the challenges and what would you change? Would you recommend that route to other entrepreneurs? 

My brother and I funded Modi Toys with a seed capital of $25,000 from our personal savings. It was a small enough amount that we felt comfortable risking if the business failed but big enough to allow us to test the waters. We’ve bootstrapped the business ever since. And because we’ve been profitable since day one, we have not had to seek outside capital yet. 

Of course, there are pros and cons to every financial route you take, but one challenge we’ve faced in being self-funded is that all our decisions have been conservative—whether it’s the amount of inventory we purchase, or the salary we forego. We have taken a bank loan for a nominal amount when it was needed.  

Image: Unnati Vashi Umarvadia Courtesy of Avani Modi Sarkar

What was your first big expense as a business owner and how should small business owners prepare for that now?

Purchasing inventory and paying for freight have always been our biggest expenses, and will continue to remain so as we increase our purchase volumes. The best way to prepare for that is to ensure profitability from the beginning. When you’re able to invest your profits back into the business, it suggests a healthy cash flow. The best way to prepare is by ensuring you have a good product launch plan so that inventory moves as quickly as possible, so you can recoup your costs. 

What are your top three largest expenses every month?

Digital ads, payroll, and fees for digital and PR agencies

Do you pay yourself, and if so, how did you know what to pay yourself?

This Q4 will be the first time my brother and I will be drawing a salary from the business! My ultimate goal has been to surpass the six-figure salary I had in my corporate job. Our CFO, who happens to be our dad, helped us calculate the recommended amount. After excluding marketing and operating expenses, inventory, payroll (for our staff), etc., he suggested an amount that roughly equated to about 10% of our revenue.   

Would you recommend other small business owners pay themselves? 

It depends! If you are single and responsible for supporting yourself financially, you should absolutely pay yourself. However, if you are married, then it depends on your spouse’s income and family’s needs. When my husband and I got married, we were a double-income household with no kids. Five years into our marriage, we are now a single-income household with three kids. Our financial circumstances have changed dramatically, so when it comes to entrepreneurship and marriage, it’s a conversation (and a calculation) to have with your partner.

How did you know you were ready to hire and what advice can you share on preparing for this stage of your business? 

When I found out I was expecting baby number three, I realized I was going to need to put an “out of office” plan in action, even though I didn’t anticipate taking a proper maternity leave. In order to avoid becoming a bottleneck, I decided to begin delegating some of my responsibilities. 

My advice to anyone preparing to hire is to first try to do the work that you would be outsourcing. It’s important to have a basic understanding of what you’re paying others to do so you can 1) determine whether the time you would have to invest yourself is worth it, and 2) ask the right questions when seeking candidates or agencies to fill this role. 

What are some of the tools you use to stay on top of your business financials? What do you recommend for small business owners on a budget?

It’s not so much of a tool as it is a system: Do you know what your monthly average expenses are? Do you know what your average monthly revenue is? Is your revenue at least triple the amount of your expenses? If not, what are some ways you can either reduce expenses or increase revenue? I always like to focus on increasing revenue rather than cutting costs. In order to increase revenue, I look at three levers I can pull: 1) increase average order value, 2) increase number of orders, or 3) increase conversion rate. 

Image: Courtesy of Avani Modi Sarkar

Where do you think is the most important area for a business owner to focus their financial energy on and why?

It is far easier to retain a customer than to acquire a customer so focus on ways to increase customer loyalty, how to get them to shop with you more frequently and spend more each time. Do you have a rewards program? If not, set one up. Do you know what your retention rate is? Do you know what compels your repeat customers to buy from you? Use these reasons to convert more existing customers into repeat customers.   

Do you think women should talk about money and business more? 

Absolutely. Because we typically see such few women in financial savvy positions, we are conditioned to think there’s room for only some of us to make it “to the top.” But in fact, the more openly we discuss things, whether it’s something as specific as, “how much is a brand paying an influencer for a sponsored post,” or “how much do you spend on your digital ads monthly?” Or something as high-level as, “was this campaign you ran profitable?” We can empower women by giving them access to information they may not otherwise have, and enabling them to make decisions (or even negotiate) from a place of power. 

What money mistakes have you made and learned from along the way?

I’ve made several money mistakes along the way including:

– Not understanding which key metrics I should be evaluating to measure the success of my digital campaigns. 

– Underpricing some of our products.

– Underpaying an intern, where they felt demotivated to work.

– Purchasing bulk inventory in a new category without realizing an alternative option would’ve allowed me to purchase individual units on-demand. 

What is your best piece of financial advice for new entrepreneurs?

Know where to invest and where to cut corners. For example, unless you have a legal background, hire a lawyer for all your legal needs. But perhaps you don’t need a professional photographer for your product photoshoot. Just learn the basics of photography and take high-resolution photos on your camera or phone and use special editing tools. Entrepreneurship forces you to wear many hats on any given day; your job is to figure out which ones are worth wearing.

Featured image: Nina Pandya Photography Courtesy of Avani Modi Sarkar

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