How Gifting tripled my revenue.

As November approached, chats & emails flooded in. My customers were trying to purchase gifts for their friends and loved ones. But there was no easy way to do it on my site, Moustache Coffee Club. Sure customers could pay for a subscription for someone else and use their shipping address but it’s weird. If I gift a subscription, am I paying $19 / month forever? How do I communicate the to receiver that I’ll be cutting them off after 3 months? Also, I felt that while customers clearly wanted to buy coffee subscriptions for their friends & family, there was still too much friction to getting it done. People didn’t know the correct shipping address, they wanted something tangible that they could gift and they wanted to be able to guarantee that an item would arrive on the day (usually Christmas morning).

Obviously, I needed to figure out a solution to these problems and I decided to do what any good programmer does when he comes up against a difficult problem. I solved a different easier problem. I’m not Santa Claus, the notion of me being able to reliably deliver a parcel of freshly roasted coffee on Christmas morning isn’t going to fly (pun very much intended but I promise it’s the last). There are just too many variables that are out of my control, and people aren’t prepared to pay a premium for the service. But what I can deliver reliably anywhere in the world at a very precise time, is an email. This solved the present delivery problem. I let customers write a nice customized note (optional) and partnered it with a custom designed image that would be emailed on the date the customer wanted to the recipient.

The second part of the puzzle is allowing the customer to prepay the entire gift and restrict the receiver to this length of time. I hooked into the coupon credit functionality of the site, and each gift is really just gift credit for a set amount. This works great because it allows the receiver to change the frequency of the gift or to pause and restart the gift and then later on seamlessly switch to becoming a customer.

The final part of the problem (getting the correct shipping address) was solved by prompting the receiver of the gift to “claim their gift” and then enter their best shipping address. We signed the customer up for an account at that time, which meant they could get delivery emails and they knew when and where to expect the package.

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So did it work? Hell yeah it worked! I released this in December as Christmas was approaching. It was killer. I was able to triple my revenue. I literally saw my revenue increase from the moment I released the feature and it kept going until well into January.

Screen Shot 2015-02-15 at 7.38.26 PM

Moreover, it was great that we had the email address of the recipient. It allowed us to communicate with them & up sell them once the gift subscription was over. Once they had a taste, it was pretty easy to get them on board as a full subscriber.

What I didn’t realize what how amazing this would be for all holidays. From Father’s Day to Birthdays to Valentine’s Day, we’ve seen a gifts spike consistently during holidays. Even Halloween is big! Seems intuitive, but it took my customers flooding me with emails for me to make it a priority.

If you run a subscription box company and you like the sound of this you can use it too. I’ve created BishBashBox which is an all-in-one subscription platform which I use to run Moustache Coffee Club (read about that story here). Simply visit BishBashBox to schedule a demo.

Why Subscription Businesses Are The Future.

Great entrepreneurs take advantage of first-mover-advantage. It’s vital to figure out what the future will be and to build for it. In this presentation, we explain why we know subscription businesses are the future.

Read the case study on how Moustache Coffee Club grew from $0 to $150k in revenue using BishBashBox.

If you want to learn more, schedule a call with the founders of BishBashBox. Schedule a call.

Here’s how I increased my margin 40% for my subscription business.

At Moustache Coffee Club, we recently released our internal data: From $0 to $150,000 in Subscription Revenue. But revenue doesn’t mean anything if you don’t have good margins. Today I’m going to reveal how I increased my margin 40% for my subscription business.

In subscription businesses, you live and die by your margins. And your margins can get eaten up by postage and boxes. While each subscription business is different, there are some fundamental questions you have to ask yourself:

1. What are the dimensions & weight of your box?

2. How much distance between you & your customers?

3. How much does packaging cost?

Postage can get costly very fast – it can approach or exceed 30% of your total revenue. It’s vital that you focus on minimizing shipping & operational expenses for you to run a successful subscription business.

In the process of creating Moustache Coffee Club, I actually build another startup BishBashBox to help other subscription box founders. You can read about the process here: How I accidentally built a tech startup. As I started to build BishBashBox and get more subscription businesses on the platform, I was able to get volume discounts for shipping. Now every customer on BishBashBox can save between 10-40% on shipping discounts we offer.

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At Moustache Coffee Club, I was able to increase my margins 40% by using the volume discounts on BishBashBox.

When I first started I used flat rate packages that cost $5.95. At $19 per bag, that’s 32% of my revenue! Not to mention, I was forced to use USPS flat rate boxes which looked ugly and unprofessional. I needed to do something or I wasn’t going to be making any money. I knew other subscription companies got discounts on shipping but I had no way to access the discounts and not enough volume to negotiate with any of the carriers.

So, to get access to better shipping rates I coded an integration with Easypost, an awesome API for purchasing shipping. Even with a Ph.D. in Computer Science it still took a couple of days to get fully integrated but boy was it worth it.

Using Easypost volume discounts through BishBashBox, I was able to get my shipping per box down to $4.05 saving $1.95, increasing my margin 40%. Now that I’m shipping 200+ boxes per month, that’s $400+ more every week for my subscription business. Delivery times haven’t change & now I ship a box that is cheaper and branded well. Want to see what volume shipping would look like for your business? I made a handy little tool, Click Here to Calculate How Much You’ll Save.

Everything is now fully integrated into BishBashBox. Once you signup for BishBashBox, it’s as simple as clicking “charge your customers” and we automatically charge the credit cards on file, generate & print all the labels and send your customers their tracking codes. All you do is slap on the labels to your boxes. You can 1. watch in your BishBashBox dashboard the status of a customer’s package (great for customer service!) and 2. email customers at different stages via the easy Mailchimp integration.

Have international customers? You’ll need custom papers. On BishBashBox, we automatically include this…hello easy international shipments!

So what are you waiting for? See how much you can save:

Calculate How Much You’ll Save

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How I accidentally built a tech startup.

tl;dr
While doing a passion project, I discovered real pain-points and built a tech startup.
___________________

In 2013, I quit a former YC company and started my own bootstrapped business. I knew I needed to do something that:

  1. I was truly passionate about.
  2. Actually becomes a sustainable business (real revenue…not user growth)

So I, the coffee nerd, launched Moustache Coffee Club ~ fresh bags of single origin coffee delivered monthly. It’s been ~ 1.5 years and now every month I get $20k+ in revenue & ship 1000+ pounds of coffee. [Read that story here] While I was building my passion project, I ran into lots of headaches. I realized that there are huge problems that are very unique to subscription businesses. Bit by bit, I was creating an admin backend to solve these issues…and by summer 2014, I had built an entirely new business:

BishBashBox: The all-in-one platform to build & grow your subscription box company.
Think “Shopify for subscription businesses”

I’m writing to share my journey with other entrepreneurs. While there were small learnings along the way, there were three major pain-points that led me on the path to building BishBashBox:

Screen Shot 2015-02-15 at 8.09.02 PM

source: Moustachecoffeeclub internal data (2013-2014)

Pain-Point 1: Credit Cards Are Tricky
[summer 2013]

Problem: Storing and periodically charging customer’s credit cards kinda sucks.

Charging credit cards for a subscription box business is more complicated than single purchases. And physical products make it much more difficult than digital subscriptions. I needed to store credit cards and then charge them every time I needed to ship them coffee. Dealing with declined credit cards and remembering what customers had paid for became a major headache. Unlike a time based subscription (like Netflix), I couldn’t just turn the service back on once the customer pays because each charge is tied to a physical shipment.

So I came up with a solution…

Startup Stock Photos

I looked around for existing solutions (Shopify, Squarespace, etc.) and didn’t find a good answer.

Rather than billing on a set schedule, I needed the ability to store credit cards and charge them as needed. And what happens if a credit card fails? I needed an automated way to flag people who got coffee shipped this week so that I didn’t send coffee to individuals whose card fails (which definitely happens). Lastly I built a way to retry the credit cards that failed because A) it costs nothing to retry B) customers actually want to receive their coffee.

Implementing these solutions allowed me to space to run more growth experiments. But after that Christmas season, shit hit the fan.

Pain-point 2: Feeling Overwhelmed With Spreadsheets

My first Christmas, I saw a 122% month over month (MoM) growth. Now I was shipping over 250 pounds of coffee! I was working off of a big spreadsheet full of people…it was a huge mess. Because I was dealing with recurring shipping & payments, I became overwhelmed. What happens when someone’s credit card fails? Do we ship them coffee? Some customers get shipped monthly, some weekly….and each may have started on a different week in the month. Some had cancelled and some had upgraded. Printing labels & packing boxes became a nightmare.

So, I popped open a beer & started coming up with my next solution.

Processed with VSCOcam with e6 preset

I decided to expand my admin to accommodate a customer management system. I built a system that:

A) Make it easy to charge. Each Monday I could simply click “charge customers” & it would attempt to charge all credits on file (of the people who had started their subscription and/or were on a weekly or bi-monthly plan).

B) Make it easy to print labels. Once the credit cards were charged, I knew who to ship to and would automatically purchase shipping labels using Easypost. I could just click a button and print all my labels at once.

C) Make it easy to ship. Since each customer was being delivered a different quantity of coffee, I learned to add a note on the label for quantity to make packing easy.

The system made me 10x more efficient. Instead of spending hours frustrated, I could focus back on what matters most: growth. While I saw the spike in Christmas, I wasn’t seeing the growth rates I wanted. So I started to take seriously the question: how do I grow?

Pain-point 3: How the F*** do I grow?

For the first year, I was doing anything I could to get noticed. I was active in the /r/coffee subreddit. I got to the top of HackerNews with my post “I have a PHD & now I sell drugs online”. I started building a follower on Twitter by starting conversations with other coffee nerds. Blogger outreach got a few articles out there. I tried & failed at running a couple ads on Facebook. The truth is that I didn’t know the answer to the growth question.

So instead of continuing the (sometimes) sporadic approach to grow, I decided to run the numbers. I had implemented referrers on links a while ago, but never looked at them. So, I created a “revenue source” tool in my admin. I could see exactly how much money came from each source. Below you’ll see my top 10 referrer sources.

Top 10 Revenue sources:

Revenue Source
$22,633 https://www.google.com/
$3,132 http://digg.com
$2,410 http://frshgrnd.com/2012/10/coffee-subscription-roundup-review/
$2,305 http://blog.moustachecoffeeclub.com/i-have-a-ph-d-in-computer-science-now-i-sell-drugs-online/
$1,834 http://www.ramblingsofasuburbanmom.com/monthly-subscription-box-list/
$1,657 http://www.reddit.com/r/Coffee/comments/1ik5gn/looking_for_a_coffee_subscription_recommendations/
$1,613 http://www.moustachecoffeeclub.com/gift
$1,426 http://mommysplurge.com/subscription-boxes-list/
$1,254 https://www.facebook.com/
$1,135 http://hellofoxy.com/monthly-subscription-boxes/

This allowed me to understand where my real growth was coming from and to focus my energy on blogging & word of mouth marketing.

When I started Moustache Coffee Club, I had no intention of building a software business. But along the way, I started to realize that my tools would be useful for other entrepreneurs trying to start a subscription box service – especially those that didn’t know how to code.

Now you can start your own subscription business on Bishbashbox. Try it free for yourself.

[$0 to $150k revenue] How I grew my coffee subscription business

I created Moustache Coffee Club as a passion project in summer 2013. Within 1.5 years, I’ve grown it to $150k+ in revenue. Because of this success, I actually created a platform for other entrepreneurs to create their subscription business (read about it here). I’ve received lots of inquiries by other subscription business founders – most of them asking about my data. So, in an effort to transparently help these entrepreneurs, I decided to disclose my internal data.

Moustache Coffee Club
Data: 2013-2014

Monthly Recurring Revenue (MRR)

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Month over Month (MoM) Growth Rate:

Screen Shot 2015-02-16 at 8.18.53 AM

Life Time Value (LTV) of a customer:

Screen Shot 2015-02-16 at 8.24.25 AM

Average Life Time Value (LTV):

For every customer I get, I expect to have received $7.46 in their first month and by month 12, they will have given me $65.83 in total revenue. This helps me to understand how much I can spend to acquire a new customer (CPA).

Screen Shot 2015-03-03 at 11.23.44 PM

I hope that helps answer some questions. Email sean@bishbashbox.com to request more data and I’ll update this post.

Make sure to subscribe to get our next posts on how to

  1. Grow your site using an affiliate program.
  2. Successfully track where your revenue is coming from
  3. Automatically calculate the life time value of your customers
  4. Get volume discounts on postage
  5. Cut costs & increase appeal by getting custom made boxes & packaging
  6. Much more