How To Start A Subscription Box Business Step By Step
When I was 21, my partner and I started a subscription box business as a side project. Within several months we were doing $10,000+ in monthly revenue, which wasn't all that bad for a side project. The brand sparked some interest, and someone offered to buy us out the very first year. We decided to sell the business because it started to take a lot of our time and the profits weren't as good compared to our service business that was doing over a million in revenue annually at the time.
With all that being said, if this were our first business, we would have kept growing it. We would have had more time, and the industry we were in had a lot of potential.
Before we get into what products you can sell using this business model, let's talk about what a subscription box business is. A subscription box business is a recurring model that customers sign up for. When a customer signs up for your services, you send them a box every month or two filled with the products you are selling. Here are examples of what you can be selling:
Pet toys and food (this was my industry)
Toys for kids
Pretty much anything that someone needs often
Lets quickly take a look at some of the pros and cons of starting a subscription box business:
Pros of starting a subscription box business
Low costs (under $1,000) when launching a successful pre-launch campaign
Easy to scale
Unlimited income potential
My favorite, recurring revenue (sell a client once, and they will be paying every month)
Can all be done online and from home
Cons of starting a subscription box business
Hard time finding manufacturers and products
You must search for products every month
It takes a long time for products to come in when ordering overseas
It will take less time for products to come in when purchasing locally; however, pricing will most likely be higher
If you decided that this is the business for you, let's gets started.
Pick an industry that you'd like to start in and find your suppliers. Start building relationships with them and get to know pricing. Understand how long it will take for your products to arrive and how much shipping costs will be. This will help you price your services. Here is the best website I used to find all suppliers:
If you can find one company that has a fantastic catalog, save them. Using the same supplier will save you a lot of time and headaches.
When I started, we had one seller who supplied us with all the dog toys. They were quick, reliable, and reasonably priced. Finding dog treats varied each month. We had a different supplier every month and finding that new supplier each month took a lot of time.
Once you have your suppliers, gather samples. If the supplier is serious and has a good reputation, they will send you samples for free, and at most will ask to cover shipping. Gather your product samples and have them ready 8+ weeks before a box is ready for shipment.
Once you've found all of your products, you will need to price your box. Make it competitive unless your product is unique, and no one else is selling it. Aim to make a minimum $10 profit per box (this should include the cost and shipment of the box). Once you settle on a price, that will be the price people will be paying for each month, which means all products in the future will need to fit within the same budget. Here are the things to consider when pricing your box:
The box itself plus accessories (stickers, bubble wrap)
Items in your box
Postage and shipping cost
Transaction and platform fees
You don't have to worry about acquisition costs because we will show you how to acquire customers for free or at a very low price. Later once you have recurring customers, the $10 profit margin will be more than enough to cover advertisements and other fees. More on marketing later.
Have an idea of your end goal. This is important because the preparation will be different, and you'll want to prepare everything accordingly. For example, understand if your end goal is to sell to dogs forever or if you're going to make separate boxes to cats and other pets down the line. Knowing your vision is essential, and you'll see why below.
Find a short, memorable, and easy to pronounce name for your company. Also, make sure that the name you go with is available when buying a domain. For example, when you look at all the companies, I'm part of; Sassy Egg, King of Maids, BookingKoala, SalesHangry, 1PRCNT, they all had those domains open:
Having the same domain as your name will make your company look more professional. When buying your domain or seeing if your name is open, you can use:
Also, when picking your name make sure that it fits your vision. If you're selling to dogs, you may go with a name such as 'A Box For Dogs.' However, this becomes a problem if you decide to expand your service to cats for example.
Due to the name, everyone will automatically assume you only offer a box for dogs and changing your name later is a big deal. Many of those who remember your name may no longer recognize you. It's important to set everything to align with your vision.
You'll need to find a good logo for your business. Make it look professional and relevant to whatever it is that you are selling. Good logos are memorable and simple. If you need help making a logo, you can visit Fiverr.
You will need a website to sell your items online, and making a website on your own is extremely easy. All you need to do is sign up for a service that gives you all the tools you need to build a subscription box site yourself in only a few hours. These services are also very affordable, saving you thousands of dollars by avoiding expensive developers and designers.
Cratejoy is a fantastic service and the biggest in its industry. They offer all the tools that you need to start and scale your subscription box business. I used them when I started, and I always recommend them. Not only will they give you a software with tools to help with shipping, but they will also get clients for you through their marketplace (more on that below).
Don't overthink pricing because over time this may and most likely will change. For now, give yourself enough room for profits as mentioned above and roll with it. Your goal will be to make sure your churn rate is under 5%, and people are not canceling their subscription. It will be essential to give your customers exactly what they want, so they stick month-to-month. That is how your business will grow. Later you can work on decreasing your churn rate even more but at first gather customers and gather data.
Once you start to gain clients regularly, you can begin to optimize your site to increase conversions, sales, and decrease churn. Click here to see a list of tools that will help you with that when that time comes.
When you start, make sure to register your business online.
LegalZoom is a service that will help you register your business online. Provide them with some information, and they will file in the necessary paperwork on your behalf. Once the process is complete, they will send you legal paperwork stating that you are an official business.
On top of that, LegalZoom also offers other services you may use in the future. I used them a few times when I started because they provide legal advice for a very affordable price.
Make sure that you are prepared with a desktop or a laptop. If your budget is tight, invest in a keyboard for your tablet if you have one. This doesn't have to be an expensive purchase. See what offers you can find on Amazon - click here to view offers.
Working on a larger screen is much more comfortable. I can't imagine starting out on a phone or a tablet. On top of that, a lot of the services that you will be using are not mobile compatible. Be well prepared.
Focus on establishing a brand the moment you start your subscription box business. People trust brands and building trust in the first few years should be your primary focus. Don't stress over profits; focus on your online image. Sell at break-even if that means more reviews, more testimonials, more publicity for your company. Offer coupons to get people to sign up until you have customers coming in organically, and your reputation online is superb.
Marketing is where things usually go wrong. If you have little to no money, don't go starting with paid ads, nor should you go out and hire a marketing company that offers services for $250 a month. It will end bad nine out of ten times.
There will be three main parts to get a subscription box business going.
Part 1: Pre-launch (the most important part)
A successful pre-launch will validate your idea, and it will fund your first box if not future ones as well. The point of a pre-launch is to gather an audience in any way that you can. That audience will be ready to buy your product the moment you push your website live.
The best way to build an audience is by either collecting an email or building up your Instagram account. Keep in mind that there is no one way of doing this, so be creative and set up your campaign. When we did this, we gathered close to 30,000 emails, and on the first day of our launch, we had about 50 paying customers. The great part about an audience is that you can advertise to those people throughout the year for free. Overtime more of that audience will start paying for your services.
Have a start date and end date of your campaign. Do the prep work and have all of your promoters ready to spread the word about your pre-launch. Take them to either a landing page where they can opt-in or have them like your Instagram profile for updates. Keep sending content daily if possible to keep the users interested and engaged up until you launch. We failed to do that part when we started; instead, we sent one email right before we launched, resulting in very low engagement.
This is an excellent service that will allow you to collect an email. If I were to do it all over again, I would push my promoters to have the users like my company IG account, and in my bio, I would have a link to the signup page. It is much easier to post content on your IG account daily, keeping users engaged.
To find promoters, I would use the method below (part 3). Send a free box to influencers and have them review it in front of their audience. This will build your reputation, get you followers, and you'll get feedback. With that feedback, you'll be able to improve your box before the first shipment is sent out.
Part 2: Marketplace
Once you've launched your business and your pre-launch was successful, sign up for the marketplace that Cratejoy offers. They take a small percentage per customer, and they get you customers using their own efforts. It will be the easiest way to get future customers.
Part 3: Influencers
Your focus should be to build up your brand and reputation. Continue to send out free samples to influencers and have them review your product. Eventually, you will start to gain traction if you haven't already, and profits will begin to show. Keep repeating the same process until you see $5,000 in profit per month. Once you hit that goal, you should now start experimenting with your marketing ideas.
To find influencers, you will manually search for them. Don't pay any fees if they ask. This is a numbers game so send a free box for a review to anyone who agrees. Before sending a box, make sure that you are both on the same page, especially during the pre-launch stage. If you're an influencer yourself with an engaged audience, use that to your benefit.
I'd also recommend checking out a blog post I wrote on how to sell more stuff - click here.
If you ever are thinking about hiring a marketing company, I'd also encourage you to read this post - click here.
Always remember the fundamentals
Bookmark this entire guide and come back to it whenever you are confused about something. These are the fundamentals of building a big brand on a low budget, and you will never want to forget them. Fundamentals will get you to the big leagues.
Look at it this way; in basketball, there is a proper way of shooting a basketball. If you are a shooting guard using the wrong shooting form for 20 years, you're going to miss out on a lot of awards, records, and opportunities. The same applies to business. If you don't learn the fundamentals, you will leave a lot of money on the table. Not only that, but it will take you longer to generate any sales, resulting in frustration.
Focusing on the fundamentals of the business will help you get small wins faster, which are vital to keeping you motivated, preventing you from eventually quitting. I know this is a lot to take in all at once, but if you keep working at this daily, it will start to become part of you.
Remember, every success story has a beginning.