This transcript was generated from the episode audio and may contain minor errors.
[Music]
Let's talk about subscription boxes. We haven't talked about subscriptions in a while. Well, subscription boxes specifically, you know, where you're paying a monthly fee and you're getting a new set of face masks or toys for your kids, educational toys, perhaps, or puzzles, or it could be anything else, like so many different subscription boxes out there. Let's talk about the business of subscription boxes. How many do you need to sell to be sustainable?
Like on a monthly basis, how many monthly subscription box customers do you need? I love this question 'cause it's so specific. And if you're trying to set up a subscription box, if you're like, this would be a cool business, I try to do it once for maybe like a year and a half or so, not as a full-time thing, but as one of my many side hustles. This was a long time ago and it didn't really work. Like it was fine for a little while, but I never actually scaled it, which is the key to making it work on a sustainable basis, especially in this industry.
So what does that look like? How do we do the cost analysis, the market understanding, the strategic pricing and such? We've got a question from a listener, Layla. She wants to know basically like, how do I get to that number or what is the number? How do I have a goal?
Give me a benchmark. So let's see if we can simplify it. How many subscription boxes do you need to sell to be sustainable? Her question and my detailed answer coming up in just 30 seconds. [Music]
Hi, I'm Layla.
And I've been planning a subscription box service focused on home products. And I'm trying to figure out the number of subscriptions I need to maintain and ensure my business is sustainable. Could you help me understand how to calculate this number, considering factors like production costs, shipping and marketing? Basically, I'm trying to determine if my idea is viable and this info would really help. Thanks.
[Music]
Layla, it's fun to hear about the subscription box world. I haven't thought about it in a while, but I know we've got a bunch of listeners out there who are doing it. We featured a number of stories over the years. I actually went to go and look online to see like, are some of those still running? And most of them are.
So that's great because there is often a really high churn rate with subscription boxes where people will get the box for a couple of months and then they'll unsubscribe from it. So it really is the kind of thing that benefits from scale in terms of having at least a couple of hundred customers. So that's the number I'm gonna give you and I'll walk through the numbers here, but at least a couple of hundred customers and you're not gonna have that right away unless you have a huge audience. But if you're not able to get to that within about a year, I would say, then perhaps another business might be better for you. So let's look at a concrete example.
Like suppose your total monthly costs in terms of production, shipping, marketing, et cetera, like $5,000 and you want to price your subscription box at $50 and also assuming the variable costs are $30 per box, like the direct costs of producing each box and your net revenue would be $20 per box. And so basically you've got a formula here of like fixed costs divided by revenue per subscription minus variable costs per subscription. And that gives us an answer. So in this example, to break even with those estimated costs and revenue, you would need to sell 250 subscriptions each month to get to that point. Now, these are fun things to play around with in a spreadsheet, just put in those different variables and say, okay, what if my subscription box costs is higher or lower?
What if my total monthly costs are higher or lower? So it's a simplified example, but it can actually give you pretty helpful info. I also always encourage people to check out CrateJoy, CrateJoy Online, C-R-A-T-E-J-O-Y. It is a business, but I know that many listeners have used them and had mostly good experiences. So they also have a lot of resources that can help you figure out what that number is for you, whether you end up working with CrateJoy or not.
Layla, anybody else out there? Good luck cheering you on. Let me know what your experience is, listeners with subscription boxes. I'm also gonna go and subscribe to a couple others because it's always fun to get something in the mail. So I'm gonna do that myself.
If you have a question or comment, sidehustleschool.com. You can also find some resources and tools there, show notes for every episode. Of course, much more is on the way. Thanks for listening today. My name's Chris Guillebeau.
This is Side Hustle School. [Music]
From the Onward Project.
