The inner workings of a subscription based company. $100K in 6 months! How we did it and what’s next!

First posted on Reddit

TLDR: I bought a site on reddit for 4K, partnered with another redditor, and together we spent 2 months completely retooling the business. We followed this up with 3 months of marketing, and we’re now less than 30 days away from $100K in revenue.

This is a post on how we did it.

(Read time: ~15 minutes).

Grab a cup of coffee and get comfy! I’ll get right to it.

THE INNER WORKINGS OF A SUBSCRIPTION BOX COMPANY.

So about 6 months ago, I came across this thread from a guy looking to sell a website he owned:

I contacted him and found out that it was wetshaveclub.com, a wet shaving subscription box. I felt like I could make it work given the fact that dollar shave club had proven out the model. “Ok, Let’s do it!” This was the extent of my analysis on this. The site owner sent me a screenshot of his revenue, I offered about 15X his monthly profits, and we wrapped everything up that same weekend. We skipped the usual back and forth dance people go through when they’re buying websites. I sent over the money, he sent over the passwords, and that was that.

I reached out to redditor u/kaster who I had been talking to on skype for some time. He had read my original series of posts, followed it to launch and grow a local business to 40k/month, sold it, and spent a few months in Costa Rica on vacation. We had never met, but I felt like he would be the perfect person to work on this with me. This is a guy that does not play around when an opportunity presents itself. Case in point: A few weeks later he was in his car for a 5-day drive from California to the east coast so we could work on this. (Kevin’s Facebook post as he was hitting the road).

Ok, so here’s what we did to get moving:

Step 1: Website Rebranding
The original website needed some work and we set out to change the look and feel of it. Design is critical, and even more so with a consumer product where emotion is a large component of the buying decision. Click to see of our branding efforts.

Step 2: Expanding the Product line and raising prices
So the original service only delivered soaps and at a price of $12 per month. We felt that we had to double that price to make this worthwhile. In order to do this we had to expand the product line and provide more value. Click to see how we expanded our product line.

Step 3: Box Rebranding
Since we were now shipping more products (and we had rebranded the site), the next effort was to find a box that worked. We called around to different box suppliers and had them send us samples. We settled on Salazar packaging. We sent them our box design and they got on it. Click to see our box rebranding efforts.

Step 4: Increasing prices and adding annual option
Everything so far took us about 2 months of balls-to-the-wall work, but things were starting to shape up. We were then able to increase prices to $29 for the monthly box instead of $12. We also added an annual version at a reduced monthly rate to see if people would prepay for an entire year. And they did. Click to see our new pricing options.

Step 5: Marketing
So with our conversion rates up, and our box at a higher price point we were able to unleash the hounds. You’ll see that most of what we do is completely free marketing mixed in with a few paid sources. Click to see how we drive traffic.

Step 6: Ordering, Warehouse and Shipping
So with the results of our efforts, we needed space. We were shipping from our living room and while I had a small office, there was no way we could do it from there any longer. So we found an office/warehouse, moved in 10 days later and got everything set up. Click to peep the warehouse.

BonusOur new office.

So the result of all this work: We’re going to hit $100K in revenue in the next 30 days, and just passed $78K (Obligatory screenshot). We did $22K last month (Cratejoy screenshot)-They have pretty awesome analytics btw, and we’re on pace to do $35K in September. We think we can hit our first $100K month in 6-12 months and join the ranks of /u/bandholz from beardbrand.com. Dude knows his stuff and I respect how much he shares with the community. In some ways I think we’re cut from the same cloth, he’s just smarter and better looking!

What Comes Next: We’re launching an accompanying ecommerce store. This way, when folks find products that they like in the box, they can order more of them. In addition, we can expand the product line a bit to include additional grooming products and other men’s accessories. Click for a sneak peak of the upcoming store.

TAKEAWAYS FROM ALL OF THIS!

This is hard work and we made a lot of mistakes and will continue to make more. We’re working every day on providing a better customer experience and trying to improve the product line. We went into this not knowing a thing about selling and shipping products, logistics, inventory, warehousing, or even wet shaving for that matter. But we live in the information age. Anything under the sun can be figured out if you’re resourceful enough and willing to bust your ass until you make yourself an expert in that thing. We’re not well connected, nor do we access to a gazillion dollars in VC funding. We just work. Hard. And we’re just getting started.

The companies that made this happen:

Cratejoy.com for our subscription box web platform. (Awesome service and Amir rocks!)
Salazarpackaging.com for our box (Great to work with)
Sonicprint.com for our inserts (Karen is the bomb)
99designs.com for our design work (I wish I owned this company)
Uline.com for our warehouse shelving and box fill (Their delivery speed is insane)
Shipstation.com: (Integrates with cratejoy to handle our shipping. This gives us life!!)
Endicia.com: (Integrates with Shipstation so we just print labels from our computer. The truth!)
Stripe.com: Payment processor (You already know)
Perfectaudience.com: Re-targeting (Works. Well! ROI positive and helps with branding too)
Kabbage.com: $15,000 Line of credit (Surprisingly smooth experience)
Gleam.io: Contests (Super awesome set up and easy to add virality to your contests through sharing)
TeamBeachBody.com: (haha, we do insanity every morning before work! Thanks Sean T)

If you’ve made it this far, props.

This is where the case study ends!


But if you’re interested in taking a look at the mindset that has gotten us to this point, read on.

Launching something:
I read almost every front-page thread on r/entrepreneur and have done so for the past 2 years, so I know a lot of folks are stuck right now with coming up with something to launch. Here’s what I would do if I wanted to start a new business today and had no idea what to do next:

1) Check your bank account for something you’ve spent money on in the last 12 months. Bonus points if it’s a recurring service of some sort (Your customer lifetime value is instantly boosted, and you can thrive even with a high customer acquisition cost). Either way, you know it’s something that people already spend money on. This simple rule eliminates fantasy ideas: “If I get enough members I’ll figure out how to monetize it later.” Later never comes, so ideas like these don’t get a minute of my time. The only things I work on are things where I can make money starting on DAY ONE!

2)Narrow down the list to things where a lot of people are making money in that industry. Competition is good. I know, this goes against everything you’ve learned somewhere. But the more thriving competition you find, the more money is being made, and the larger the market. Join the party, throw your hat in the ring, and be at least as smart as somebody there. Most people search for a great idea with no competition without realizing that this makes it almost impossible to start something.

3) Narrow things further to something that can be delivered with a simple but well designed website that cost no more than a month’s salary. If it’s a product, you’ll then have to find someone that will let you re-sell his or her product. If it’s a service, you simply have to find someone that already provides that service. In both cases (product or service) you’re just re-selling something, and with a well-designed website, you’ll double your chances that your supplier will feel comfortable enough to let you resell their thing. Yes, good design is important for both your customers and your suppliers! Don’t launch with bad design!!! MVP or not!

4) When you get that “Yes” from a supplier, make sure you set things up so that you’re not in the customer’s way. Make things as easy as possible for them to do business with you. Seriously, remove all hoops. They should be able to do business with you as easily as they do business with Amazon. If you don’t need that extra field on the form, get rid of that shit. As easy as humanly possible!

5) Market your thing until you pass out. If your thing is something that really speaks to a person’s identity like grooming, fashion, makeup, fitness, etc. you can kill on social media (twitter, instagram, Facebook, YouTube). If your thing is more detached from a person’s identity like say a car wash or home cleaning, your best conversions will come through search (adwords, seo, yelp).


A few additional thoughts:
I think that a lot of “startup best practices” work well for people that have access to funding. For the rest of us, some of the generally accepted ideas end up pushing folks further away from launching something. Consider:

Validation: Validation in my opinion is for fantasy ideas. If you stay away from having to come up with an awesome idea, you won’t need validation in the first place. There are plenty of things you can do that other companies have already validated for you. And when you find that thing, stop worrying about competition. Competition IS the validation.

Competition: Stop measuring this by quantity. One of the first things you’ll hear is “the market is oversaturated”! This is meaningless, yet this single phrase has stopped more potential entrepreneurs in their tracks than…well I honestly can’t think of anything that beats this. Start looking at the quality of the competition instead, and you’ll often find that the market is saturated with a LOT of bad players, and they’re making a LOT of money despite being so bad.** This is the perfect situation.

Business plans: This often ends up being a way to push action further down the road. If It’s longer than one page you’re wasting your time. Download something like this, fill that bad boy out, and get to work.

LLC/incorporation: Unless the company can pay for it, it’s not happening. So this only happens AFTER the company is making money. One more excuse…GONE!

Business Analysis: Demographic data, market analysis, the economic outlook… blah blah blah. More ways to kick the can down the road and to feel that you’re doing something when you’re really not. I just get to work. If a lot of people are making money doing this thing, the startup cost is low, and there is no sorcery involved, it can be done!

Fear of your idea being stolen: Ideas hold little intrinsic value without execution. However, you can start to extract value when you get feedback on it, massaging it, push and poke it, and really run it through the wringer. And the only way to do this is to tell people about it. This goes against our most basic instincts because we’re fearful that our ideas might be stolen. Well the reality is, most people are sitting on the bench with a gazillion ideas of their own that they are not executing on. You just added one more to that list. Either way, if an idea cannot survive competition it’s probably not that good in the first place. In addition, what happens when you launch? You can’t run a business without telling anybody about it. You’ll often get this response, “ But I’ll lose my first-mover’s advantage?”. Well good. I would never want to be the first mover anyhow. First movers bare a tremendous cost in educating customers. Most of us don’t have the money to bare that cost. The folks that are second and onwards, can just slide in and benefit from all of that work. For example, I don’t have to explain the concept of a subscription box service sending you shaving equipment every month. Most people already know what this is, thanks to Dollar Shave Club. Bottom line: Try to get over this stuff.

Find something you’re passionate about: Nah son. Find something that is viable. I’m passionate about table tennis, but I’m not looking to turn that passion into a business. When it comes to business, I’m far more passionate about providing a good product/service that has good margins, than about being able to marry that business to any hobby or other exciting pursuit I may have in my regular life. This way, I’m free to work on the best opportunity that arises without limitation. And honestly, quite often the least sexy industries are where the big money is being made. So while most of the brainpower is busy chasing sexy mobile apps and such, you can make bank by selling ugly widgets or providing basic services. It’s tough to pay bills with app downloads.

A note to Engineers and consultants: Resist the urge to complicate things. For technical folks, it seems like the inclination to complicate things is overwhelming. So a problem like “find people that need lawn service and connect them with people that provide lawn service” becomes, “well how about we use Zillow’s APi to pull a picture of the lawn, and the customer confirms it by drawing an outline of the area to be serviced and we tie that into Google maps and feed everything into a pricing algorithm”…. and on and on. Unfortunately, many of these guys do not make it. More often than not simplicity wins. Get out of the customer’s way.

Start something small to get practice: You don’t get good at running marathons by reading about running marathons. And you don’t get good at business by reading about business. You get good by doing. And doing it over and over again. But just like you wouldn’t expect to win the first marathon you entered, why put so much pressure on yourself to win at the first company you start? Or worse yet, paralyze yourself with fear into never running at all because you’re afraid you won’t win? It doesn’t make sense with marathons and it doesn’t make sense with business. So while a lot of folks over-analyze every minutia about the thing, people like Kevin and me would have already downloaded a training regiment, bought a pair of shoes, and hit the bricks.

What if I fail? Nothing happens! It’s literally the most mundane non-event imaginable. I spend a day or two wrapping up any loose ends, head to the movies or do something fun, and by the next day I’m already figuring out what the next thing is. My personal experience hasn’t been “Try->Win”, it has been more like “try, fail, try, fail, try, fail, try, fail win, win, win, win.” With each failure you get better, and then things just start to come easy. Don’t be afraid of failing, it’s like the best and cheapest MBA you’ll ever get.

Naysayers: If you’re doing something…I mean anything, you’ll meet them. Whether it’s in real life, on the Internet, or wherever else. Sometimes it’s even your friends and family. I keep an imgur album of the best ones I come across. Sometimes for a little motivation, and sometimes just to look back and smile. For example, recently I mentioned in passing that my next big project will be a restaurant, and I already have a list of comment screenshots explaining why I won’t succeed. :-)

Here’s one of my favorite ones from a few years back when I was making $4k per month, from what was a new company at the time. This was the top comment on Hacker News.

That little company now pays me a 6 figure salary. What intrigued me about this comment was the fact that it was so thoughtfully written. This wasn’t a troll. This was someone that provided a seemingly well-reasoned analysis of where he thought I would be in 12 months, complete with business school type analysis: barriers to entry, competitive landscape, etc.

So why is this important? Because this is exactly what many of us do to ourselves.

We have a naysayer living permanently inside our heads that is constantly appraising and analyzing every business idea we entertain. And the analysis sounds just as reasoned, and well thought-out and measured as the one I posted above. Not a bad thing on its face, but the guy in our head typically skews negative. Shut that dude up! Or you’ll analyze and over think and what-if every single idea until you convince yourself it won’t work. Over time this messes with your confidence, and you end up paralyzed. Say what you want about the guy, but Kanye was right about this:Most people are held back by their perception of themselves! It’s a brutal feedback loop.

At some point we have to just say “Fuck It” and get to work!

Okay peeps, hope this was helpful to at least one person. Oh, and for making it this far even if you skimmed…:-)

AMA