How to Make a Subscription Box Business ProfitableMay 08, 2022
I talk a lot about mindset on this blog, on the Launch Your Box podcast, and inside my coaching membership. Mindset challenges hold subscription box owners back from taking action or making progress. An important piece of mindset for subscription box owners is stepping into the role of a CEO. Because that’s what you are. You are the CEO of your subscription box business. And being the CEO means seeing your subscription box as a business not a hobby. That means focusing on being profitable - from the very beginning.
New subscription box owners often think they will become more profitable simply by having more subscribers. This is not true. You can be profitable with 100 subscribers. You can be profitable with 300 or 750 or 1000 subscribers. I have 3000 subscribers and I’ve always been profitable.
You can also not be profitable with 100 subscribers. Or 300 or 750 or 1000 subscribers. I remember watching an episode of Shark Tank where the entrepreneur was talking about bringing in 10 million dollars in revenue the previous year. But when the Shark asked about profitability, the entrepreneur admitted he was operating at a loss. Every month.
My subscription box has been profitable from the first month. With careful planning and attention to all the costs that go into your box, you can be profitable, too. Keep reading for tips and strategies to help you be profitable from the start.
Buy in bulk.
Buying in bulk allows for considerable cost savings. This is true when it comes to the products you put in your boxes as well as the packing supplies you need to curate a special experience for your subscribers. When you order hundreds or even thousands of pieces, you’ll benefit from bulk discounts offered by vendors and manufacturers.
When buying wholesale, you can negotiate discounts based on the number of items ordered or dollars spent. These are called volume discounts.
When you’re sourcing products directly from the manufacturer, there is typically a minimum order quantity (MOQ) for each item. Each tier up from the MOQ gives you significant discounts per piece.
When you’re just getting started, I would caution you not to order thousands of the same size boxes. Take the time to figure out what size or sizes of boxes will work best for your subscription. Learn more in this blog post.
Set a product budget.
I struggled to set and stick to a product budget when I started my subscription box. I was constantly tempted to add “just one more” item to the box in order to make it extra special for my subscribers.
Then one month I realized all those “just one mores” had eaten into my profit so much that I was barely covering my costs. I was barely making any profit.
I wasn’t working this hard to hardly make any money at all! Something had to change.
I created an average product cost budget and that made all the difference. That tool helped make it a black or white issue. Either I had extra money to add something else to the box or I didn’t.
I still catch myself wanting to add “just one more” to my boxes. But I don’t. I know the rules and I stick to them!
Increasing the perceived value of your subscription box.
When you increase the perceived value of your box, you add a LOT of value by spending very little.
There are so many ways to add perceived value to your subscription box. Simply packaging the contents with care and presenting them in a way that makes them feel “special” adds to the value your subscriber sees.
If you are including a pair of earrings in your box, instead of leaving them in the plain, plastic bag the manufacturer sent them in, take the time to package them in a branded box or simple organza bag. You increase the perceived value of the item by elevating the packaging you present it in.
Include a well-designed, branded insert that walks your subscriber through the experience you’ve curated each month. Add touches that build your connection with your subscribers. Feeling that they are part of something special adds perceived value, too.
Calculating correct shipping costs.
Shipping your subscription boxes can get VERY expensive and shipping costs vary widely depending on the destination. You can either charge for shipping separately or include it in the price of your box. Whichever you choose, it’s important that you research shipping charges to a variety of locations in order to determine what to allow for shipping costs.
Make sure to spend time researching the most cost-effective ways to reduce shipping charges. Spend time talking with representatives from different carriers in your area to negotiate shipping rates.
In this blog post, I share my top five shipping tools to make shipping more affordable and more efficient!
Counting ALL the costs and managing expenses.
We talked about product costs and shipping costs, but have you considered the cost of packaging, labels, inserts, and any other “extras” you’ll need to curate your box?
All costs matter and all must be figured into your overall costs to determine whether you’re making a profit.
Create and maintain a system for keeping track of all these costs. Look for opportunities to save by ordering in advance or ordering bulk. Don’t be afraid to negotiate with vendors. As your subscriber numbers grow, your buying power increases.
I know many of us creatives don’t see ourselves as “numbers people.” But you’re your business’s CEO. You have to know your numbers. Keep track of and manage all the money coming into and going out of your business.
Price your subscription box the right way from the beginning.
Pricing your subscription box correctly is one of the most important parts of making a profit. Take the time to do your research. What are the price points of other boxes in your niche? What are they offering?
When determining how to price your box, make sure you calculate ALL the costs that go into the box. From the cost of goods to packaging, shipping, and more.
It is important to price your box right from the beginning. Pricing too low can eat into your profit margin and lower the perceived value of your box. Pricing too high means bigger challenges selling.
Learn more in this blog post where I go into more detail about how to price your subscription box.
So what is a good profit margin for a subscription box?
Profit margins in our industry range from 5-90%!
Realize you’ll start with a lower profit margin when you’re getting started. Once you’re able to buy in bulk and negotiate with vendors and manufacturers, your costs will go down and profits will increase.
I recommend a profit margin of 30-70% for subscription boxes, depending on your niche and number of subscribers. I don’t want you to start your box with less than 30% profit. Have a goal of pushing that closer to 50-60% as you grow.
As a subscription box owner, knowing your numbers is essential. Download my Subscription Box Budget Excel Spreadsheet to keep track of your costs and profit margins!
So, can your subscription box business be profitable? You bet it can! Set your budgets, know your numbers, and watch the revenue hit your bank account every month.
Learn from me:
- Subscription Box Blueprint eBook: This $10 ebook covers logistics from product selection to packaging to shipping. Plus a 90-day launch plan and bonus ‘Instant Scripts’ for your social media.
- Launch Your Box: My complete training program walks you step by step through how to start, launch, and grow your subscription box business.
- Launch Your Box Podcast: I share tons of practical tips and strategies to help you start, launch, and grow your subscription box business. You’ll also hear from industry experts and current Launch Your Box members who are crushing it - get ready to get inspired!
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