Advice Line with Isaac Larian of MGA Entertainment

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2:03Hello and welcome to the advice line on how I built this lab. I'm Guy Raz. This is the place where we help try to solve your business challenges. Each week, I'm joined by a legendary founder, a former guest on the show who will help me try to help you. And if you're building something and you need advice, give us a call and you just might be the next guest on the show. Our number is 1-800-433-1298. Send us a one-minute message that tells us about your business and the issues or questions that you'd like help with. You can also send us a voice memo at hibt at id.wondery.com. And make sure to tell us how to reach you.

2:44And also, don't forget to sign up for my newsletter. It's full of insights and ideas from the world's greatest entrepreneurs. You can sign up for free at gyros.com. And we'll put all this info in the podcast description. All right, let's get to it. Joining me today is Isaac Larian, founder and CEO of MGA Entertainment, the toy company behind Bratz Dolls and LOL Surprise. Isaac, welcome back to the show. Thank you, Guy. Thanks for having me again. It's great to have you back on. So we first had you on in 2024, and you told us the amazing story about how you moved from Iran to the U.S. when you were just 17 years old.

3:23You had a couple hundred bucks. You spoke almost no English. And then you would go on to build one of the largest privately owned toy companies in the world. It is an amazing story. And if you guys haven't heard this one, you've got to check it out. We'll put a link to it in the podcast description. Before we bring on our callers today, I want to ask you a couple questions. And first and foremost, I want to talk to you about something that I know is top of mind for you because you've been all over the media talking about it, and that's tariffs. Obviously, a lot of what you do is imported. You make dolls, toys for kids, and this is your business.

3:59Yes, Guy. Tariffs are basically tax in the toy industries, tax on children. And these tariffs are not going to be paid by the toy companies or any company. They're not going to be paid by retailers. They're going to be paid by the consumers. MGA owns the largest toy factory in America, in Hudson, Ohio. We employ 700 workers. Wow. And you cannot make everything in America. Right. You've got to import components and parts. That's right. Yeah. Right. Yeah, exactly. And Milton Friedman said this 40, 50 years ago. He used the pencil as an example where the wood is made in America, the lead is made in South Africa, the eraser is made somewhere else.

4:53So that's the way it is. Yeah. And so it sounds like what you're saying, Isaac, is that in principle, you're not opposed to targeted tariffs, let's say on steel or energy or other things. But it's on consumer products like toys where obviously you have an interest in it. It's really hurting your business and hurting the industry. Yeah, it is. And I think there has to be a moderation. Yeah. All right. Well, let's turn to some other issues now, because I know that you have had some major viral hit toys, right? Beyond Bratz. Yes. Yes. Lal Surprise, for example. I'm sure a lot of our callers today are going to be curious, you know, to know if there's any secrets or insights that you can share.

5:40Like, how do you get a product to go viral? Is there a formula that you have? How do you make a product really break out into the mainstream? Yeah, that's a great question. I think innovation is the mother of all successes. and, you know, first of all, I want to take a step back. In order to be successful as an entrepreneur, you must embrace failure. And for every success that we have had, we have had 10 failures. I love that. I love that. So you have to embrace failure. So the first thing is to have that mindset. I'm going to try, I'm going to fail, and I'm going to try again, I'm going to fail, I'm going to try again, until one hit, the chances are it will hit.

6:32We have a record of that. Once you have a great product, then you have great marketing teams who market the product. And marketing in toys changes every day. I mean, there was a time when we put Bratz on the Nickelodeon, And that's how it became successful. Yes, I remember that story you told me, yeah. Yeah, and today, no more Nickelodeon. It was YouTube. Now YouTube has gone to TikTok. God knows what's going to come next. So you got to be on the lookout for it all the time and change. Be a chameleon. All right, Isaac, you ready for our first caller? Yes, please. All right, let's bring him on.

7:14Welcome to the advice line. You're on with Isaac Larian, founder of MGA Entertainment. Heyman, please tell us your name, where you're calling from, and just one line about your business, please. Hi, Guy. Hi, Isaac. My name is Megan, and I'm calling from Hendersonville, Tennessee. My company is T is for Taught, and we create learn and play kits for kids ages three to six. Nice. We ship these educational kits all over the country, and our kits are designed to support early learning through play-based, hands-on activities. Welcome to the show, Megan. Thanks for calling. So, T is for Taught. So this is a subscription box, basically, for three to six-year-olds?

7:51Yes, it is. And they're thematic or they're based around different themes each month? They get a box? Exactly, yes. Every single month, there's a new educational theme. There's about 12 activities in every single kit. So, for instance, for June's kit, we have ice cream scientist, and the kids actually get to become an ice cream scientist. There's math, there's fine motor skills, a lot of play-based education. 90 % of a child's brain is developed by the age of five. So we want to make learning fun and we want to give them a strong foundation before they start kindergarten. When did you found the business?

8:30It was actually back in 2020, the day before I had my second son. And tell me the inspiration, the idea behind it. Why did you want to do this business? Yeah, so prior to being a stay-at-home mom, I was a teacher, a kindergarten teacher in Nashville, Tennessee for close to a decade. And when 2020 came, I decided this was a great time for me to stay home with my two boys. And I wanted to start a business that was always in the back of my mind. And by the time my kids started school, I wanted this to be a full-fledged business. So that's where we're at now. My second sign is about to start kindergarten.

9:07Wow. Okay. Awesome. And what's your question for us? Yeah. So with TS for Todd, we built something that parents and kids really love, but how do I break through the noise and get real traction with PR brand visibility without having to hire a full service PR agency? I've tried some DIY outreach and influencer gifting with very limited success. So I'm looking for an effective budget-friendly approach. All right. Still lots of questions for you, Megan. I want to bring in Isaac, Larry, and Isaac. Before we answer Megan's questions, any questions for her? No, that's a great niche, Megan. And if you tweak it and do it right, I think it will become a major, major success.

9:48I have five grandchildren and my daughter-in-law, and everybody's talking about having toys that bring learning, safe learning to their kids before they go to kindergarten. So it's a great niche. Thank you. Megan, out of curiosity, I mean, it's a, as you say, it's, you know, you are small, you don't have a huge marketing budget. How are you doing? I mean, is the business sustainable yet? Are you profitable? Are you, is it, you know, overall, how are things doing? So we are cash flow positive. Everything is being, we don't have any investors or anything. We've grown 250 % from 23 to 24, and we're well into the six figures on track for next year to do seven figures.

10:34Wow. So you're, that's great. Well, congrats on that. So your issue is how do you get more visibility? And I would say, I mean, let's just, we're talking to Isaac, who's a toy expert. I also have a line of toys with my, I do a kids podcast called Wow in the world and we we sell our toys or science kits basically so isaac we're not competing against you we're selling like like volcanoes kits and stuff um but we're going after you isaac no we sell them at you know through amazon and and at target and walmart and um so it's tough right it's really tough to break i mean isaac mentioned this that i think is really critical is you've got to have like several failures before you get a hit um and so you know there's a challenge how do you get people to not only become aware of it, but interested in it?

11:22I wonder what kind of things have you done so far that you've tried that don't seem to have worked? So what has worked has been meta ads. And honestly, I've tried to do some gifting on influencers. Honestly, there's been no traction with that one. The only thing that's really working is just meta ads. So that's about all we've been able to accomplish. I've reached out. lot I've done, a lot of PR as far as like, there's been, you know, a lot of emails sent, but not much has I've gotten from it. Isaac, let's say you're doing seven,$800 ,000 in sales a year. What, how much of that would you, and that's not your profit, right?

12:02That's your sales. How much of that would you devote to marketing? Yeah, it's a great question. So before I answer that, I need to know what kind of margins you're making because you need to have enough money for marketing if you sell something too cheap then you have no marketing and it's a vicious cycle so is it 60 70 percent what's your gross margin uh we're making about 40 percent off of every kit at the moment and that's including cac and some other stuff as well because customer acquisition Okay. And what price are you selling them at? They start at$38.95 and they go to$42.95 and then the individual kits are$48.

12:44Okay. My first advice for you is raise prices. There is no difference between$38 and$49. So trust me, nothing will change. Actually, sometimes psychologically, when you sell something a little bit more expensive, you sell more of them because people think, oh, that's a great thing. That will give you more marketing muscle. And then I am not a fan of PR agencies. You got to do it on your own. You got to think outside the box. I would, meta is fine, but you got to go to TikTok for your product. The core customer, who do you think is your core customer? Moms. Moms, yeah. I disagree. You see, it's not.

13:30It's the grandparents. It's the gift givers. So you need to start marketing to grandparents. Once you start marketing to grandparents, because they want to take care of their gift givers, they want to take care of their children or grandchildren, and they have a lot more disposable income. So I think I would change and market to grandparents. And you can look them up and see there are different group, grandparents groups. out there and you should start marketing to them. As far as the influencers are concerned, they get overwhelmed with everything and they like free things and they get them and they don't do much with it.

14:17So it has to be really viral. I mean, somebody has to get by actually not a famous parent should buy one of your products and they talk about it on social media. Once they do that, you get a big break. I love that idea because it really does kind of force you, I think, Megan, to think more deeply about pushing this towards that specific audience. I mean, it's worth trying out, you know, your own sort of videos where it's specifically designed for grandparents. Just try that. I mean, in addition to, you know, videos for moms, because you are thinking about people like you buying it, right? Which we all do.

15:02We're all like, oh, people like me are going to buy this. But actually, I think Isaac's on to something. I think that's exactly right, Isaac. It's that it's grandparents sending this to their grandkids as a subscription, knowing that, you know, they're going to help make their grandkids smarter. Yes, exactly. That's great advice. And Megan, when you do the videos, you got to think outside the box. I mean, the biggest happiness for anyone, you have two kids, you see it, is a laughter of a child. Nothing replaces that. So you got to shoot videos where kids are just on their own playing with your product and then edit that and put that down.

15:42That's how it becomes viral. Okay. That's awesome advice. Thank you so much. Yeah, I love it. The brand is called T is for Todd. Megan Foster, thank you for calling in. Good luck. Thank you. I'm a huge fan. Thank you so much. I really appreciate it. Thank you. Thank you. Good luck. Thank you. Thank you. Isaac, how much of your disposable income do you spend on your grandkids? Oh, God. If I could and my kids will let me, I will spend all of it on them. Because they are, you know, I say grandkids are much better than children. Yeah. I joke and I say God gives the grandkids as a reward for not killing your children when they were growing up.

16:28We're going to take a quick break, but when we come back, another caller, another question, and another round of advice. I'm Guy Raz. Stick around. You're listening to The Advice Line on how I built this lab.

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20:14Welcome back to the advice line on how I built this lab. I'm Guy Raz, and my guest today is Isaac Larian, founder and CEO of the toy company MGA Entertainment. We are taking your calls, and let's bring in our next caller. Hello. Hi, Guy. I'm Isaac. My name is Libby Mochan, and I'm calling in from New York City. I am the co-founder of Fulton. Fulton is a modern brand of arch support. We offer comfortable, supportive, and sustainable insoles that mold to your arch to provide customized support and relieve pain at a fraction of the price of custom orthotics. Cool. So these are insoles that are designed to relieve, to help with arch support, which I love because I wear Birkenstock shoes.

20:54I wear Birkenstock slippers. I'm wearing Birkenstock slippers right now because of the arch support, that cork that you get with a Birkenstock. I'm a big fan of arch support. Yeah. These are also made of cork. Oh, cool. A lot of people have collapsed arches. And so tell me how you came up with this idea, because it seems like a category ripe for disruption. Yeah, that's exactly right. I mean, I was I was experiencing back pain. I was treating it very reactively, doing things like taking painkillers and getting massages. And then I went to a chiropractor and he explained to me that those shoes don't have proper arch support and that causes misalignment and pain throughout your body, not just in your feet, but also in your knees, your hips and your back.

21:36But the custom orthotics that he was offering were$500. And at the time, my health insurance didn't cover it. It just felt like a very high price point to pay for what, to me, was just an achy back. So instead, I went to the drugstore and I found myself looking at this wall of brands of insoles. The Dr. Scholl's and the SuperSoul's and whatever they're called, SuperSpeed or whatever. Very confusing. All these words I didn't know and also materials that were more like gels and foams that didn't really provide support, more just cushioning. I thought there must be something else out there. And yeah, there wasn't.

22:10So I decided to build it. Wow, that's awesome. And so these are made out of cork now, your insoles. They're hard. They're not like gel. Yeah, the base of them is cork, which is a great material. It molds to your feet as you walk, similar to Birkenstocks, and it's incredibly sustainable. It's actually the bark of a tree. And then we line it with a layer of natural foam. and then on top is a layer of vegan leather that's made of cactus. So totally sustainable. They're actually carbon negative to manufacture. And they have a sort of a combination of comfort and support with the cork and bee foam.

22:46Tell us a little bit about how the business is doing so far. You launched in 2021, you said? Yeah, we launched in 2021. Last year we did high seven figures and we've been growing really quickly. It's been a great process. I've been working on it full time and I have been working on it full time since we launched. But yeah, with this growth comes some growing pains. Yes. All right. So what's your question for us today? Yeah. So Fulton has grown very quickly over the last few years, but we're now feeling the effects of this growth on our resources and on our cash flow. Given the current macro instability, the tariffs, and also our lack of resources, how should we think about growth moving forward?

23:25All right. Isaac Larian, insoles, cool, cool category. Lots of growth, but now there's the growing pains. Right. Are you making your product in the USA? Where are you making them? They're manufactured in Portugal. That's where most of the world's cork is harvested. Oh, good. So you only pay 10 % duty. For now, yeah. Yes. Don't say it too loud. I don't think he will change that. so so yeah so that's that's the good news and how much money you think you're going to need to grow your business well i think that's a good question it depends on how quickly we decide to grow um if we sort of want to stay in like single digits or low double digits growth we could probably grow without like raising any capital but if we wanted to grow significantly i think that would require more capital.

24:16We are planning on launching into a new category, which is like slippers for at home. So we are considering either doing like a pre-order to help with cash flow or alternatively could try and raise capital. But honestly, that's something that we want to avoid. So you've not raised anything yet. It's been entirely self-funded. No, no, we did a small like angel and friends and family round when we first launched, but have not raised since we're not venture backed. How big is this market? I think it's about 1.5 billion. So we have less than 1 % of it. So there's definitely a lot of opportunity, we believe.

24:53Yeah. So I am against giving a portion of my company to some stranger unless it's absolutely needed. That partner should bring something to the table. And that is not just the money. Maybe they have operation experience. Maybe they have distribution and retail experience. And it's a tough market now, but there are people who are lending or investing. If you have a great business plan, I would do a great business plan. I would show that this is an industry that's$1.5 billion. I've been growing double digit for the past few years. And that's where the sky is. And then look for investors. You should have that in order to do this.

25:44But again, I would hire what I call a partner with somebody who can bring something else to the market. I mean, do you want to sell this to mass retailers? I think potentially. I mean, so far we've been focused really on our direct-to-consumer channel because that's what we know best and has been growing so quickly. But I definitely see an opportunity to get into Target and differentiate because that's the first place that I went when I was looking for insoles. Yeah. Yeah. Target is best for it. But if you're going to invest with somebody, find somebody who can get you into Target. Somebody who has experience to do that because they have 2 ,000 stores and all of a sudden you put two feet to one feet section.

26:29It eclipses direct to marketing. But you have to have a niche in your packaging and your product to not get lost in the clutter of other products. Yeah, you know, while Isaac, while we've been talking, I've been looking at your site, Libby, and I went ahead and I while we're talking, I ordered a pair of the classic insoles because they look really cool. And there is a big opportunity here. Who in terms of the person you're going after? Are you going after people who are just walking and going to work? Or are you also targeting, you know, athletes and runners, for example? Yeah, I mean, we do both.

27:08I mean, I think we sort of say anyone with pain is a great market. I'd say a lot of our customers are people who work for many hours of the day on their feet. So that could be a doctor or a professor or a bartender. And then, yeah, of course, people who are very active will often develop more issues related to unsupportive shoes. You know, Isaac, they're also doing something really interesting here. I think you're doing a lot of things right. So when I went to the checkout while we were talking, it offered me another deal. And then I said, no, I don't want – and then it offered me another deal.