by If you want to build a Subscription Box Business which can completely change your life for the better take a look at this post.
My favourite thing about the Subscription Box Business Model is the financial security and freedom it can give you.
Once you crack this business model it can completely change your life for the better.
I remember when we first started BusterBox one of the main goals was to be able to leave our jobs and work in the business full time.
This was always a big dream of mine as I didn’t want to work at a normal job for my whole life.
It took just under 12 months for us to achieve that goal and move into our first office and warehouse..
This was an unbelievable feeling at the time. It was very satisfying to wake up every morning and know I was working 100% for myself.
The next big goal we wanted to achieve was to fully replace the salaries we used to have in our old jobs.
At the start, we just took the bare minimum from BusterBox. So we could pay our bills while dedicating enough time to the business to get it to a good level with high recurring revenue.
It’s great working for yourself, but at some point, though you will need to start earning a nice salary from your company so you can have a good standard of living.
This took another bit of time, but eventually we managed to do this and then surpass the amount we used to earn. (I now earn a lot more from my Subscription Box than I ever did in any previous job I worked in)
The next big thing for us was to actually build a team so we could spend our time working on the business and not in the business..
This was very important because the last thing anybody wants to do is build a prison when creating a company..
The only way you can achieve this is by hiring the correct people to help you.
This took us a bit of time to get the correct people in but now we have a great time which allows us to scale faster.
I have been thinking about it a lot recently and the stuff I just covered is essential for any Subscription Box Owner. This is the bare minimum you need to achieve in your business so it is a Success
Obviously some people want to scale to hundreds of thousands of subscribers and have a big exit, but before you get to that point you need to get the essential stuff dialled in.
Let me break these points down a bit further.
1. Healthy Salary
This is something which I believe every single business owner deserves and is actually essential. You have taking a lot of risks setting up your business and put yourself under a lot of stress so the minimum thing you need in return from your business is a healthy salary.
When you first start your business it is perfectly normal to work without any salary for a period of time. I would recommend you keep your job at this point and work on your business in the evenings and the weekends.
Then when you see your business is starting to build up momentum and cash flow you can quit your job.
During this period you may not be generating enough from your business to fully replace your old salary but you should have cash saved up to help you for a few months.
When you get to this point you have decided to go all in on your business and you should focus on it 100% and do everything in your power to get it to the level where it fully replaces your salary.
I fully believe every single person who has any kind of positive traction in their subscription box can get to this point with the right strategy and effort.
You just have to understand the maths and not underestimate the amount of consistent effort that it will take.
2. Freedom
At some point in your subscription box business, you will want to achieve a level of freedom. Obviously. When you are starting out hard work is a requirement and you will need to dedicate a lot of your time if you want to get anywhere.
I am afraid there is no way around that, but eventually the idea is to get your freedom back, earn more money and have a much better quality of life.
I think this is a pretty fair trade off? You sacrifice a period of time and focus 100% on your business to ensure you have a much better future.
The only way you will be able to achieve this though is by having your business in a position where you can afford to hire a team to help out with tasks.
The good news is it isn’t that difficult to hire people to take over some key tasks which take up a lot of time.
The 2 main areas which need to be covered as soon as possible are the following.
· Fulfilment
· Customer Service
These are the big time sinks in most Subscription Box Businesses. When you are starting out it is important you do the customer service yourself to connect with your customers and ensure processes are put in place.
This isn’t sustainable though. As you grow this will eat more and more into your productive hours and will start Affecting the overall performance of your company.
Customer service is not a hard role to fill. You can hire VAs that can do a great job. You just have to ensure you interview them correctly and provide them with good training and support so they can do the job to a high standard.
Then, once your business gets bigger you will be in a position to hire more help which can help with some other tasks.
It is down to you as a business owner to understand what areas you need help with. This will be different for everyone.
Here’s some suggestions.
· Paid Traffic
· Sourcing Products
· Finances
· Social media
· Content creation
· Data Analyst
· Graphic design
I think most people will agree if you get paid well and you have the freedom to spend time with your family you have a pretty good life and that’s what you should strive for as a minimum in your business.
Now to get to this point in your business, you need to have a plan and you need to know at what point this will be possible for you.
The Plan To Reverse Engineer Your Dream Business
I am a big fan of reverse engineering things because in my mind it lays out a path that you can follow to achieve your goal. If you have been running your Subscription Box for a while and feel like you aren’t making any progress this is the point you should stop, do this exercise and reassess things. You will then have the clarity you need to get to this point.
Like I have said so many times in the past the entire game is based on maths and if you can get the numbers to work in your favour everything will be a million times easier.
The first thing you need to do is work out exactly how much profit you need to generate on a monthly basis to pay for everything.
I will show you an example from a fantasy Subscription Box Company, I just made up.
Let’s call them BasketBall Box
Here’s their monthly costs
1. Software costs – $600 PM
2. Warehouse Cost – $800 PM
3. Salary – $8000 PM
4. Staff Salary – $4000 PM
5. Other Expenses. $1500 PM
This company in question needs to generate $14,900 per month in gross profit to stay in business.
Now let’s take a look at their COGS and Subscription Metrics to understand how big the business needs to be to give the founder a great life.
The average revenue per user across all accounts is $50 per month. This is the total amount they earn on average across every subscription product they offer. (To get this information in your business, you will need some additional metric software like chartmogul, baremetrics, profitwell etc.)
The gross margin of BasketBall Box is 50%
This means they earn $25 gross profit on each box. (This is after everything is paid. Cardboard, shipping, products, payment gateways etc)
To generate $14,900 in gross profit each month they only need 596 active subscribers. When you put it into perspective that really isn’t a lot at all.
The only issue is we haven’t factored in churn or marketing costs, so let’s add these in and see how it looks.
BasketBall Box has an average churn rate of 10% each month and their CPA to get a new customer is $20.
This means out of the 596 customers they need they are losing around 60 customers a month and it is costing them $1200 per month to replace them (60 x $20)
So let’s factor that into the costs we just worked out.
To generate enough money to cover all the bills and their marketing costs they need around 644 active subscribers.
Honestly think about that. 644 people is all this business needs so the founder has a really good life.
644 x $25 = $16,100 gross profit generated each month
The founder will earn a $8000 salary per month. There is other employees in the business to help out and everything is paid for.
644 is not a lot of subscribers and it is 100% possible for this business to get these people signed up pretty quickly. BasketBall is very popular and the market is big enough to support this business.
As this business grows the founder will be able to increase their salary, hire more help, bank profit for the business and reinvest more money in marketing which will help them grow even quicker.
Just imagine BasketBall Box with 2,000 active subscribers?
They would be generating $50,000 per month in gross profit
2,000 subscribers may seem like a lot, but honestly once you get the marketing sorted it is not that many people.
If you want to really turn your Subscription Box into something that can completely change your life I urge you to do the exact same exercise that I just did in your business.
Once you understand the maths you will then have some clarity about the steps you need to take.
You can then take a look at my blog to learn exactly what you need to do to get the customers signed up to make your plan a reality.
I want everybody in this group to build an unbelievable Subscription Box businesses that changes their lives for the better.
If you have any questions about this or Subscription Boxes in general, please let me know below. Have a great day.
