Cigar Subscription Box Delivers Smoking Returns

This transcript was generated from the episode audio and may contain minor errors.

A subscription box service can be one of the most reliably profitable business models once you build it to a fundamental level of sustainability. We have talked about subscription boxes before, many times in fact on the program, I was looking through the archives. We have done episodes on subscription boxes for Korean face masks, for natural hair products, comic books, low carb, low sugar snacks, bariatric weight loss snacks, different projects, candles, personal shopping for kids, and tea, just to name a few. Actually that was more than a few. But the point is I should start an offshoot subscription school just for all these stories.

I love telling them to you though because there's something valuable and interesting in each one. This is a high profit business, as I said, and this whole model is attractive because regardless of the content, regardless of what you're actually shipping, if you can get this, as I said, to a fundamental level of sustainability, you can predict, often with great accuracy, how many people will remain subscribed, therefore, how many people will be paying a monthly fee leading to consistent revenue and cash flow. So lots of opportunity here, again, if you can get a few basic things taken care of. Welcome to Side Hustle School. My name is Chris Guillebeau.

In today's subscription school story, a software engineer creates a premium subscription box service for savvy cigar smokers. So we're moving from Korean face masks to cigars. He now works for Google during the day, operating his cigar box biz at night, but he actually started it while he was in college. It's bringing in a consistent $4,500 a month with lots of room to grow. So good story here today.

Stay tuned for a cigar subscription box delivers smoking returns. Michael Archiola is a curious person with a great interest in learning. He double majored in computer science and business while attending Florida State University. In the throes of those academic pursuits, he stumbled upon an interesting observation. Computer science students seem to actively use their knowledge and newfound skills to build things while the business students never seem to exercise their skills at all.

In fact, the business schools seem to be rooted in theory rather than doing. Michael found this odd. Why wouldn't you reinforce what you were learning by applying it to the real world? So he decided to put his education to the test and build a real business. His approach would be different.

This wouldn't be following his passion. It stemmed from a deep curiosity to understand how the process of building a business actually worked. And it would be an experiment in learning. What he chose for his idea needed to meet certain criteria and be viable on its own. For months, he considered different options and possibilities.

Then on a visit to New Orleans during his junior year at Florida State, he was struck with a smoldering idea. While relaxing by the hotel pool, he saw a man smoking a cigar and a humidor went off in Michael's head. He was already familiar with the subscription box model from his brainstorming sessions and he had an appreciation for cigars, so he decided to do some research. What he liked about the cigar market was that it's well known, has a loyal following, and not much has changed about cigars over the years, as opposed to software engineering where he was studying computer science and would eventually begin his other career. While conducting further research, Michael observed the limited selection of cigar boxes sold by e-commerce shops.

Most were low quality. None of the shops were offering unique selections categorized by flavor, size, shape, strength, origin, or manufacturer. What if he were to launch a premium subscription service focused on quality cigars? After further brainstorming, Michael pitched the idea to his roommate, a fellow cigar aficionado, and they decided to go for it. Southern Cigar Company officially launched in September 2015.

Moving forward with the subscription model, Michael chose Crate Joy, saying their platform helped tremendously on the management and logistics side. And by the way, I'll talk a bit more about Crate Joy at the end of the episode. So if you're not familiar with that, just keep listening. Starting out, Michael worked with a local store to handle his curated cigars. Later, as business grew and order size increased, he began to buy wholesale directly from manufacturers.

All shipments from the beginning and now have been handled out of his apartment. Michael doesn't work with fulfillment centers because they either massively overcharge or simply won't work with him. This is because the humidor included with his orders needs to be properly maintained. He also said he can't rely on major advertisers to attract customers because of his type of business. Platforms like Google and Facebook won't run tobacco-related ads, even for a product like cigars.

So he just doesn't have it. Instead, his visitors come from word of mouth, referrals, and media attention. The business has been featured in Maxim, Buzzfeed, The Distilled Man, and InStyle Magazine. This media coverage has helped generate a generous amount of traffic from search engines. Their costs were about $7,000, which mostly went toward website design.

Michael decided to hire out that part of the business. He didn't want to worry about designing a website on top of handling his business incorporation, branding, and tobacco licensing. Since that launch, Southern Cigar Company has reached a sustainable recurring income of $4,500 a month, with subscription boxes priced based on the length of commitment. You can pay $40 per month to month, $37.95, $38 for a three-month subscription, or $36, $35.95 for six months. First-time subscribers get a triple-torch lighter, a double guillotine cutter, and four new cigars with a humidity pack for freshness.

Each box comes with a highly detailed info card explaining everything you need to know about the product. Michael has since moved on from the glory days of Florida State and currently holds a job with Google as a software engineer. He wants to continue the steady growth achieved with Southern Cigar Company while tending to an all-new business venture called Formal Founder, which helps young startups verify potential business names. It's not just in computer science where doing is better than theory. Michael's glad he didn't let his idea go up in smoke.

All right, so several things here. First of all, I mentioned at the top of the episode a number of previous episodes that we've had about subscription boxes. We will include a list of many of those on the show notes page in case you're curious. You want to go back and listen to the Korean face mask story or the candle story or whatever it is. We'll put those all in an ordered list on the show notes page.

Then also, I mentioned CrateJoy. What is CrateJoy? Well, it is basically a platform, a directory of subscription boxes that can bring substantial traffic and attention to yours. If you have a subscription service that you're starting up, you definitely want to check them out. They basically have fees of about $40 a month plus a percentage of sales and that percentage of sales is like one to 2% for the sales that you bring from your website and then 11% for the ones that come through their platform.

It's a higher rate there because presumably they're bringing you those customers and that's how they make their money. So CrateJoy is definitely something worth looking at if you're going to do a subscription box business. Now, finally, here's a fun fact, we just noticed this while we were working on the story. In his early days, Michael's tobacco license, which you have to have to sell cigars, that license was addressed to his apartment and whenever you have that kind of license, the Bureau of Alcohol, Tobacco and Firearms, ATF, can come by your place of business and do a random check. So one time, it just so happened that Michael was like in the throes of studying for final exams.

This is why he's in college and the ATF shows up at his apartment and the good news was he passed the inspection except for one minor detail. He was missing a sign in his bathroom that says employees must wash their hands before returning to work. So no doubt he had a good time going and sourcing one of those signs to put up in his apartment bathroom. All right. I hope you enjoyed this one.

Much more is coming up. Inspiration is good, but inspiration with action is better. Those aforementioned show notes are at sidehustleschool.com/934. Episode 934. Thanks so much, my friends.

My name is Chris Guillebeau, this is Side Hustle School. From The Onward Project.