Do you want to start subscription box business?
Do you plan to start a subscription box business? Subscription box business has been growing steadily over the last couple of years which has seen a drastic increases in the number of subscribers gaining interest in subscription boxes. The best part about this business is you can exercise as much creativity as you want since there are so many creative ideas you can implement to stand out from your competitors. Everyone gets excited at the thought of receiving a subscription box every month not knowing what the box contains. Statistics have shown that traffic to subscription box sites has grown by over 3,000% in a span of three years. There are so many niche categories to choose from and with a well-laid out business plan, you’re guaranteed to make good profits.
2.1 The Business
The subscription box business will be registered as Brandchoice and will be situated in Los Angeles, California. The business will be owned and managed by Raul Davis who’s an experienced Accountant by profession.
2.2 Management Team
Raul Davis who’s the owner and manager of Brandchoice is an experienced accountant with vast experience in the subscription box industry that spans over 10 years. During his career, Raul has worked for top subscription box companies such as Ipsy and Blue Apron gathering crucial experience associated with the subscription box industry.
2.3 Customer Focus
In this subscription box business model, focus will be on targeting customers who love subscription boxes and are excited by the curiosity that comes with not knowing what they will find in a box each month.
2.4 Business Target
Brandchoice plans to offer high quality, niche specific, durable and exciting products to a wide range of customers. After carefully considering local trends, Brandchoice is looking to target both local, regional and international customers with an aim of targeting customers.
3.1 Company Owner
Raul Davis is an experienced accountant who has had the opportunity to work in reputable and well known subscription box companies across the United States. Given his past experience, he knows how to start a subscription box business. Raul clearly understands the various aspects involved in niche selection, strategy and business marketing.
3.2 Aim of Starting the Business
Subscription boxes have become so popular thus necessitating the need to have providers who can creatively cater for customer needs. Customers love subscription boxes because they’re highly convenient and are delivered at your doorstep. With people preferring personalized items, subscription box businesses cater for these needs. The excitement associated with subscription boxes is evidently increasing and for these reasons, Raul found the best approach of how to build a subscription box business that caters for individual customer needs.
3.3 How the Business will be Started
With over a decade in subscription box industry, Raul Davis is an expert in subscription box businesses as he has actively helped many businesses to prosper. Given his accounting experience, Davis understands what needs to be done and has come up with a comprehensive financial analysis for Brandchoice.
|Research and Development||$13,000|
|TOTAL START-UP EXPENSES||$79,000|
|Other Current Assets||$23,000|
|Start-up Expenses to Fund||$40,000|
|Start-up Assets to Fund||$30,000|
|TOTAL FUNDING REQUIRED||$0|
|Non-cash Assets from Start-up||$14,000|
|Cash Requirements from Start-up||$0|
|Additional Cash Raised||$50,000|
|Cash Balance on Starting Date||$25,000|
|Liabilities and Capital||$0|
|Accounts Payable (Outstanding Bills)||$0|
|Other Current Liabilities (interest-free)||$0|
|Additional Investment Requirement||$0|
|TOTAL PLANNED INVESTMENT||$120,000|
|Loss at Start-up (Start-up Expenses)||$40,000|
|TOTAL CAPITAL AND LIABILITIES||$40,000|
Services for Customers
Brandchoice plans to offer its clients a wide range of exciting products. The best part about subscription box business is it directly caters for the needs of customers. Brandchoice hopes to collect information from each customer in order to better understand their likes and preferences with an aim of making customized products. In order to successfully create a subscription box business, it is important to identify the products you wish to sell and try to diversify where necessary. In this case, Brandchoice is planning how to start a monthly subscription box business that will offer customers the following products:
- Art and Culture subscription boxes such as jewelry boxes, toys, paintings and kids books.
- Food and beverage subscription boxes such as chocolate subscription, jams, honey, healthy food bars and baking boxes.
- Home and Living subscription boxes i.e. cleaning suppliers, flowers and doormats.
- Fashion, Beauty and Grooming subscription boxes such as luxury bags, t-shirts, soap, underwear and deodorants etc.
Marketing Analysis of Subscription box business
Ever since the introduction of subscription boxes, the market has been receptive as the number of people signing up for subscription boxes has increased. The retail market has changed and customers now want to be surprised with pleasant items they didn’t expect. There are numerous reasons that have increased the popularity of subscription box businesses. This subscription box business plan identifies technology as one of the main drivers of the growth of subscription box enterprises. According to Hitwise, there are approximately 5.7 million subscription box shoppers as at 2017. Demographics are key and Brandchoice knows too well starting a subscription box business must clearly identify and target specific demographics.
5.1 Market Segment
For Brandchoice to meet the needs of its customers, the business plans to offer diverse subscription box products whose demand is high. This way, subscription box can effectively reach out to consumers. Subscriptions don’t last forever as customers eventually end them. Brandchoice has done a comprehensive market analysis to only target the right customers with the right products in order to lengthen subscriptions.
Los Angeles has a high population of households that require different types of items for various uses. However, research has shown subscription box purchases are mainly done by households with an income exceeding $100,000. Given the unique nature of subscription boxes, only households with specific interest in unique items will be expected to subscribe for boxes from Brandchoice. This business plan for subscription box intends to specifically offer subscription boxes with products tailored for household use. There’s no doubt, this is a major revenue source for Brandchoice.
5.1.2 Working Class Population
Subscription boxes are a favorite for employed individuals and entrepreneurs earning a steady income. Subscription boxes come at different prices and the concept of monthly payments makes them an ideal choice for salaried individuals with a taste for fine and unique items. Los Angeles is a business hub thus providing a high population of working class individuals who’re likely to commit to monthly subscription of products cutting across various niches.
Women ordinarily love creative and unique items and will therefore to go any lengths to search for customized products. Subscription boxes offer a perfect solution because these boxes are famously associated with various fashion and beauty items. Brandchoice plans to sell fashion, beauty and grooming subscription boxes which are a favorite for women. To succeed in the business, Brandchoice has incorporated subscription box business ideas that target female shoppers who’re considered a key customer segment for the business.
A good number of subscription boxes to be offered by Brandchoice will be geared for children. These boxes contain kids’ items such as toys, children books and clothes that attract parents who want to buy them for their children. The aim of the business is to venture into niches that are appreciated by children in order to capture this lucrative market. Brandchoice is keen to curate products for children to maximize retention and offer a great customer experience.
|Potential Customers||Growth||YEAR 1||YEAR 2||YEAR 3||YEAR 4||YEAR 5||CAGR|
5.2 Business Target
With the demand for subscription boxes increasing, Brandchoice has created a unique subscription box business plan template that will cater for both local and external customers. Los Angeles is a large city and the business expects to make good sales by putting in place systems that allows for the creation of unique and exciting subscription boxes. This box subscription business model hopes to achieve an annual sales growth of between 15-20%.
5.3 Product Pricing
In order for Brandchoice to achieve its targets, a detailed pricing survey was done in order to come up with a competitive pricing structure after taking into account the market average. Brandchoice also hopes to initially sell its subscription boxes at discounted prices for the first two months.
The subscription box industry has witnessed positive growth and it is expected more people will join this new wave. The appetite for unique and customized products has grown and trends indicate an increase in the uptake of subscription products. When determining how to create a subscription box business, focus should be how to attract long lasting subscriptions to keep a steady flow of income. With good strategies in place, Brandchoice hopes to reach out to a wide market segment.
6.1 Competitive Analysis
When you start subscription box business, it is critical to analyze the market and come up with the best strategies to grow the business. Despite the growing number of subscription box companies in Los Angeles, Brandchoice has come up with the best strategies to remain ahead of competitors.
6.2 Sales Strategy
For Brandchoice to advertise its subscription boxes, the following sales strategies will be adopted for marketing the business.
- Understand client preferences and what they want in order to minimize cancellations and find out ways of making subscription boxes more appealing
- Find a creative and customer-friendly approach of handling cancellations and returns to keep a positive image of the business
- Provide a good alternative for customers who’re not satisfied with the present subscription plan or model
- Advertise the subscription box business on local media channels such as television, radio and newspapers
- Offer new clients a free subscription box in order to entice and allow them to see the quality of products
- Adopt direct mailing approach for targeted customer segments such as household and corporate organizations
- Advertise the business using digital marketing strategies such as Social media platforms (Facebook, Twitter and Instagram).
6.3 Sales Forecast
To achieve its sales targets, Brandchoice has formulated a detailed sales forecast to show how the subscription box business will perform when it begins operations.
|Unit Sales||Year 1||Year 2||Year 3|
|Art &Craft Subscription Boxes||500,000||520,000||540,000|
|Food &Beverage Subscription Boxes||400,000||420,000||440,000|
|Home & Living Subscription Boxes||300,000||320,000||340,000|
|Fashion, Beauty & Grooming Subscription Boxes||250,000||270,000||290,000|
|TOTAL UNIT SALES||1,450,000||1,530,000||1,610,000|
|Unit Prices||Year 1||Year 2||Year 3|
|Art &Craft Subscription Boxes||$400.00||$420.00||$440.00|
|Food & Beverage Subscription Boxes||$300.00||$320.00||$340.00|
|Home & Living Subscription Boxes||$200.00||$220.00||$240.00|
|Fashion, Beauty & Grooming Subscription Boxes||$100.00||$120.00||$140.00|
|Art &Craft Subscription Boxes||$350,000||$370,000||$390,000|
|Food &Beverage Subscription Boxes||$300,000||$320,000||$340,000|
|Home & Living Subscription Boxes||$250,000||$270,000||$290,000|
|Fashion, Beauty & Grooming Subscription Boxes||$200,000||$220,000||$240,000|
|Direct Unit Costs||Year 1||Year 2||Year 3|
|Art &Craft Subscription Boxes||$3.20||$4.20||$5.20|
|Food &Beverage Subscription Boxes||$2.20||$3.20||$4.20|
|Home & Living Subscription Boxes||$1.20||$2.20||$3.20|
|Fashion, Beauty & Grooming Subscription Boxes||$1.00||$2.20||$3.20|
|Direct Cost of Sales|
|Art &Craft Subscription Boxes||$120,000||$140,000||$160,000|
|Food &Beverage Subscription Boxes||$70,000||$90,000||$110,000|
|Home & Living Subscription Boxes||$30,000||$35,000||$40,000|
|Fashion, Beauty & Grooming Subscription Boxes||$50,000||$55,000||$60,000|
|Subtotal Direct Cost of Sales||$315,000||$350,000||$365,000|
Brandchoice plans to hire an experienced and small team of staff to run the subscription business. How to start your own subscription box business requires you to identify your personnel team as well as each role every member will play. It is also important to come up with a staff budget to help the business know how much it will spend on staff salaries.
7.1 Personnel Plan
Brandchoice is owned by Raul Davis who will also become the manager of the subscription box business. As preparations take shape to open the business, the following staff members will be hired to help on how to run a subscription box business. The team is expected to work closely together to facilitate a smooth flow of business activities.
1 Marketing Executive
1 Operations Manager
1 Admin Assistant
Those who’re successful will be taken through extensive training in order to familiarize themselves with how subscription box businesses are managed on a day-to-day basis.
7.2 Average Salaries
Brandchoice plans to remunerate staff members the following salaries in the first three years of operation.
|Year 1||Year 2||Year 3|
Brandchoice has come up with a comprehensive financial plan that will guide how the business will be run and managed. In this subscription box service business model, key financial parameters have been identified. Raul Davis will raise capital from his personal savings and will be working closely with two investors. Before planning how to start a box subscription business, you need to know about the expenses and costs involved to launch operations. A bank loan will be secured to finance any budget deficiencies.
8.1 Important Assumptions
The financial forecast for Brandchoice will be based on the assumptions below.
|Year 1||Year 2||Year 3|
|Current Interest Rate||8.00%||11.00%||13.00%|
|Long-term Interest Rate||5.00%||5.00%||5.00%|
8.2 Brake-even Analysis
The Brake-even Analysis for Brandchoice is shown in the graph below.
|Monthly Units Break-even||12000|
|Monthly Revenue Break-even||$420,000|
|Average Per-Unit Revenue||$250.00|
|Average Per-Unit Variable Cost||$3.00|
|Estimated Monthly Fixed Cost||$520,000|
8.3 Projected Profit and Loss
Below is the Profit and Loss information for the subscription box business calculated on a monthly and annual basis.
|Pro Forma Profit And Loss|
|Year 1||Year 2||Year 3|
|Direct Cost of Sales||$100,000||$130,000||$160,000|
|TOTAL COST OF SALES||$600,000||$650,000||$700,000|
|Gross Margin %||70.00%||74.00%||80.00%|
|Sales and Marketing and Other Expenses||$6,000||$8,000||$10,000|
|Total Operating Expenses||$320,000||$350,000||$380,000|
|Profit Before Interest and Taxes||$70,000||$80,000||$90,000|
8.3.1 Monthly Profit
8.3.2 Yearly Profit
8.3.3 Monthly Gross Margin
8.3.4 Yearly Gross Margin
8.4 Projected Cash Flow
Below is a summary of pro forma cash flow, subtotal cash received, subtotal cash spent, subtotal cash from operations and subtotal cash spent on operations.
|Pro Forma Cash Flow|
|Cash Received||Year 1||Year 2||Year 3|
|Cash from Operations|
|Cash from Receivables||$80,000||$100,000||$120,000|
|SUBTOTAL CASH FROM OPERATIONS||$230,000||$255,000||$280,000|
|Additional Cash Received|
|Sales Tax, VAT, HST/GST Received||$0||$0||$0|
|New Current Borrowing||$0||$0||$0|
|New Other Liabilities (interest-free)||$0||$0||$0|
|New Long-term Liabilities||$0||$0||$0|
|Sales of Other Current Assets||$0||$0||$0|
|Sales of Long-term Assets||$0||$0||$0|
|New Investment Received||$0||$0||$0|
|SUBTOTAL CASH RECEIVED||$158,000||$165,000||$172,000|
|Expenditures||Year 1||Year 2||Year 3|
|Expenditures from Operations|
|SUBTOTAL SPENT ON OPERATIONS||$65,000||$75,000||$85,000|
|Additional Cash Spent|
|Sales Tax, VAT, HST/GST Paid Out||$0||$0||$0|
|Principal Repayment of Current Borrowing||$0||$0||$0|
|Other Liabilities Principal Repayment||$0||$0||$0|
|Long-term Liabilities Principal Repayment||$0||$0||$0|
|Purchase Other Current Assets||$0||$0||$0|
|Purchase Long-term Assets||$0||$0||$0|
|SUBTOTAL CASH SPENT||$65,000||$75,000||$85,000|
|Net Cash Flow||$20,000||$23,000||$26,000|
8.5 Projected Balance Sheet
Below is a Projected Balance Sheet for Brandchoice that shows assets, capital, liabilities, long term assets and current liabilities.
|Pro Forma Balance Sheet|
|Assets||Year 1||Year 2||Year 3|
|Other Current Assets||$5,000||$5,000||$5,000|
|TOTAL CURRENT ASSETS||$430,000||$463,000||$491,000|
|TOTAL LONG-TERM ASSETS||$5,000||$3,000||$1,000|
|Liabilities and Capital||Year 1||Year 2||Year 3|
|Other Current Liabilities||$0||$0||$0|
|SUBTOTAL CURRENT LIABILITIES||$20,000||$23,000||$26,000|
|TOTAL LIABILITIES AND CAPITAL||$340,000||$380,000||$420,000|
8.6 Business Ratios
The following is the Ratio Analysis, Business Net Worth and Business Ratios for Brandchoice.
|Year 1||Year 2||Year 3||INDUSTRY PROFILE|
|Percent of Total Assets|
|Other Current Assets||3.00%||4.00%||2.00%||35.00%|
|Total Current Assets||120.00%||150.00%||150.00%||60.00%|
|Percent of Sales|
|Selling, General & Administrative Expenses||65.00%||75.00%||60.00%||70.00%|
|Profit Before Interest and Taxes||25.00%||28.00%||33.00%||3.00%|
|Total Debt to Total Assets||4.00%||3.00%||2.10%||60.00%|
|Pre-tax Return on Net Worth||85.00%||95.00%||100.00%||4.00%|
|Pre-tax Return on Assets||65.00%||55.00%||68.00%||10.00%|
|Additional Ratios||Year 1||Year 2||Year 3|
|Net Profit Margin||20.00%||23.00%||26.00%||N.A.|
|Return on Equity||55.00%||60.00%||50.00%||N.A.|
|Accounts Receivable Turnover||7||9||11||N.A.|
|Accounts Payable Turnover||14.2||16.2||18.2||N.A.|
|Total Asset Turnover||3.6||2.6||1.6||N.A.|
|Debt to Net Worth||0||-0.1||-0.05||N.A.|
|Current Liab. to Liab.||0||0||0||N.A.|
|Net Working Capital||$410,000||$430,000||$450,000||N.A.|
|Assets to Sales||0.75||0.5||0.35||N.A.|
|Current Debt/Total Assets||9%||7%||4%||N.A.|
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