by If you want to build a Subscription Box Business which is sustainable and has the potential of earning massive profits this post will help you.
There has never been a better time in history to build a full time income working from home. The one good thing to come out of the last year is it has sent e-commerce sales through the roof.
The Subscription Box model has really benefited because of this. We are in a unique position where the demand for our boxes has risen rapidly and we should be able to acquire customers much easier then even 12 months ago.
If you then provide those customers with an unbelievable experience you should be able to build a loyal subscriber base quicker and cheaper than ever before.
I have already witnessed this first hand over the last few months. The sales in my own business have increased rapidly along with plenty of other Subscription Boxes I work with.
There are some people I work with who have built 6 figure Subscription Box businesses in a matter of months. That is completely crazy and it just goes to show the potential that is there.
Now the important thing to remember is if you really want to scale up and build a very successful subscription box business you need to have solid foundations in place. If your foundations aren’t solid you will not be able to build a sustainable business and you will run into trouble.
How To Determine If Your Subscription Box Business Is Sustainable?
If you are only starting out and you are trying to brainstorm a niche this is going to be very helpful for you as it will save you time and money going down the wrong path. If you have been running a while and you have been struggling to get traction and have a high churn rate this post will also be helpful as it may help you tweak your model.
Take a look at these questions and do your best to answer them. You may not know every answer straight away but you should be working towards them.
1. Who is your customer and where will you find them?
This is such a simple question but a lot of people don’t think about it when they set up a subscription box business. You need to know who your customer is and you need to understand how you are going to find them. This will play a massive part in how quickly you can grow your subscription box business.
This is where picking your niche becomes really important. If it’s a case where you are not going with a mass market niche you need to have a plan in place to find your ideal customer. Having a really tight niche is great as you can build a passionate subscriber base but you have to know how to reach these customers. Otherwise it could end up being very expensive and take a long time to build up a subscriber base.
This means instead of relying on paid advertising at the start you take some time to do some research first. You should connect with your ideal customers first and build up some data so you understand how to market to them. Normally Facebook groups or forums can be a good place to do this.
2. Why would they buy your box?
This is another very simple question, but a lot of the time it can’t be properly answered. You need to know exactly what your value proposition is and why your ideal customer would buy from you? Think about it logically for a second why would somebody buy your box instead of going out and purchasing these products individually?
If you are solving a problem making sure you are communicating that in your messaging. If you are not solving a problem, why would somebody buy your box? In my experience if you can solve a real problem, it is much easier to sell your product, but for subscription boxes that is not always the case. Your ideal customer may purchase for a different reason, but you should fully understand what that reason actually is and position that at the centre of your marketing efforts.
3. How long would somebody sign up to such a service?
This is one of the most important pieces of the puzzle. How long is somebody realistically going to sign up to your service for? If it is a case where you have a business where somebody is only going to subscribe for a few months on average it will not work. The clue here is the actual name of the business model “Subscription Box” it isn’t much of a Subscription if everybody is cancelling every 2 months.
You should be aiming to keep people signed up for 10 months minimum so the financials around the business make sense and you can actually build a profitable business. Retention really is key and you should have this in mind from the very start. If you can get this right, it is half the battle and you will be able to build a really good business.
4. How much is somebody willing to pay month on month?
This is another critical piece of the puzzle. Pricing is extremely important in any business and it can play a massive part in determining how successful your subscription box can be. A lot of the time new subscription box owners are asking what kind of gross margin they should be aiming for? The Gross margin on a per box basis is obviously important, but you need to be looking at the bigger picture.
The bigger picture is your LTV Gross margin – E.G how much you make in total on each customer over the lifetime of their subscription.
If you don’t get your pricing right and it leads to high churn that is going to be a problem in your business. You should do a full price analysis of your market to determine how much you should charge for your subscription.
The key here is to price your box in a way where people will continue to pay for it month on month. You don’t want the vast majority of customers to feel like it is very expensive after a couple of months and cancel.
I can’t emphasise how important this is. You should then continue to price test throughout the lifetime of your business to figure out what is the benchmark to ensure maximum profit, high conversion and low churn as this can change over time.
5. Is the market big enough to sustain your business?
Let’s think about it logically for a minute. Imagine you have 1000 subscribers and your monthly churn rate is 10%. This means you need to get 100 new subscribers signed up per month just to stay exactly where you are. If you have 10,000 subscribers and your churn rate is 10% you need to acquire 1000 new subscribers per month just to stay exactly where you are.
Even with a 10% monthly churn rate you can see how quickly you need to acquire new subscribers as you scale up. You should keep this in mind when picking your niche. You don’t want to put yourself in a position where you will burn through a market quickly and will struggle to find new customers.
The key lesson here is the niche you pick should match up to your goals.
I will give you an example maybe it won’t be possible to build a $10 million dollar business if your niche is extremely narrow and there isn’t enough people in the market to sustain that growth.
You should spend sometime going over these 5 questions and doing your best to answer them. Trust me, if you can provide real answers which are supported by data for each question it will make things so much easier for you. It will help put you in a position where you can actually build a sustainable and profitable business. I hope this article has been helpful.
If you have any questions about this or anything about subscription boxes in general please post below. Have a good day.
