Counter question: do your really want to build your own distribution, or would a stripped down version of an existing distribution suffice? For example, SuSE is several GB in size if you look at the installation media, but it can be installed in as little as several hundred MB if you know what you're doing, and skip graphical goodies. Same goes for other distributions, and I know that Debian, for example, can easily be fit inside of 250 - 300 MB.
If you really, really want your own distribution either choose any distribution you're comfortable with and check if they provide a customization service. For openSuSE there's
KIWI, and
Reconstructor for Debian/Ubuntu.* Or, if you want to be independent, start with an
LFS build.
* No, I do not have any experiences with any of these services. They turned up with a quick search.