Start a subscription box business by following these 10 steps:
You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple guide to starting your subscription box business. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
Check out our How to Start a Business page.
STEP 1: Plan your business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
- What are the startup and ongoing costs?
- Who is your target market?
- How much can you charge customers?
- What will you name your business?
Luckily we have done a lot of this research for you.
What are the costs involved in opening a subscription box business?
Logistics will be one of your largest challenges in the box business. While you don't need a storefront, you do need the space to store products and pack boxes. A small start-up may survive in your garage, but when you go viral you may need a warehouse. Otherwise, major costs will be focused on launching a blanketing advertising campaign and brand. Shipping costs will be a huge expenditure. You can launch a modest box business with a limited number of subscribers for around $10,000, but if you're planning to launch a major business right away, expect to invest much, much more than that.
What are the ongoing expenses for a subscription box business?
Once you are up and running, the cost of products, packing, and shipping will drive your bottom line. However, marketing and networking will remain crucial to keep your box current after the initial shipments are done.
Who is the target market?
While some current boxes appeal to a wide range of ages, it is true that the millennial generation is driving the subscription box market. The young consumer is anxious to experience new and unusual products while enjoying the convenience of door-to-door delivery. Your dedicated customer will be someone who has a good job with some expendable income, who also enjoys a value-packed purchase.
How does a subscription box business make money?
Your customers will pay you a regular amount for their box subscription. In order to turn a profit, you must source a collection of items that costs less than the price of the subscription. Some vendors may offer you free sampler packs, but customers will place a higher value on hard to find items or new products they can't find on the shelves at the store. Some month's boxes will turn a higher profit than others.
How much can you charge customers?
Your price will be part of the attraction. Gamers who spend hundreds a month on their hobby will easily spend $20 on a box packed with T-shirts, gadgets, and gifts. Popular box services run from $5 per month up to $200 per month for gourmet boxed meals and designer clothing rental services.
How much profit can a subscription box business make?
A good target for profit margin is about 30% per box. It takes creativity and hard work to find the right balance between inexpensive products and quality offerings. An aggressive marketing plan for a startup can see an income of $50,000 in the first six months. However, if your business manages to go viral, you can expect to see a lot more profit.
How can you make your business more profitable?
Many companies offer free samples for new products. By working with a network of companies that are in expansion, you can offer a unique experience to your customers while keeping operating costs at a minimum.
What will you name your business?
Choosing the right name is important and challenging. If you don’t already have a name in mind, visit our How to Name a Business guide or get help brainstorming a name with our Subscription Box Business Name Generator
When registering a business name, we recommend researching your business name by checking:
- Your state's business records
- Federal and state trademark records
- Social media platforms
- Web domain availability.
It's very important to secure your domain name before someone else does.
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC or corporation protects you from being held personally liable if your subscription box business is sued.
Form Your LLC
Read our Guide to Form Your Own LLC
Recommended: You will need to elect a registered agent for your LLC. LLC formation packages usually include a free year of registered agent services. You can choose to hire a registered agent or act as your own.
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
Small Business Taxes
Depending on which business structure you choose, you might have different options for how your business will be taxed. For example, some LLCs could benefit from being taxed as an S corporation (S corp).
You can learn more about small business taxes in these guides:
There are specific state taxes that might apply to your business. Learn more about state sales tax and franchise taxes in our state sales tax guides.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
Additionally, learning how to build business credit can help you get credit cards and other financing in your business's name (instead of yours), better interest rates, higher lines of credit, and more.
Open a business bank account
- This separates your personal assets from your company's assets, which is necessary for personal asset protection.
- It also makes accounting and tax filing easier.
Recommended: Read our Best Banks for Small Business review to find the best national bank, credit union, business-loan friendly banks, one with many brick-and-mortar locations, and more.
Open net-30 accounts
When it comes to establishing your business credit, net-30 vendors are considered the way to go. The term "net-30," which is popular among vendors, refers to a business credit arrangement where the company pays the vendor within 30 days of receiving goods or services.
Net-30 credit terms are often used for businesses that need to obtain inventory quickly but do not have the cash on hand.
Besides establishing business relationships with vendors, net-30 credit accounts get reported to the major business credit bureaus (Dun & Bradstreet, Experian Business, and Equifax Business Credit). This is how businesses build business credit so they can qualify for credit cards and other lines of credit.
Recommended: Read our guide on the best net-30 vendors so you can start building business credit now, so you never have to worry about cash flow in the future. Keep in mind that poor cash flow is the #1 reason businesses fail!
Get a business credit card
- This helps you separate personal and business expenses by putting your business' expenses all in one place.
- It also builds your company's credit history, which can be useful to raise money and investment later on.
STEP 5: Set up business accounting
Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
STEP 6: Obtain necessary permits and licenses
Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
Federal Business Licensing Requirements
It is important that your business abide by all federal postal regulations. Visit the United States Postal Service website to learn more.
State & Local Business Licensing Requirements
Certain state permits and licenses may be needed to operate a subscription box business. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
For information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
STEP 7: Get business insurance
Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.
There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.
Learn more about General Liability Insurance.
Another notable insurance policy that many businesses need is Workers’ Compensation Insurance. If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.
STEP 8: Define your brand
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
If you aren't feeling confident about designing your small business logo, then check out our Design Guides for Beginners, we'll give you helpful tips and advice for creating the best unique logo for your business.
How to promote & market a subscription box business
Before you start to spend money on placing ads, you need to develop a brand. Create a catchy name and theme for your box that stands out from the crowd. Before doing a big launch, reach out to celebrities (traditional and internet) and local media and offer a sample box and have them share their experience to get the conversation going. Flood all media channels, focusing on social media to saturate feeds with mentions of your new product.
How to keep customers coming back
Your young customers will buy their first box because you have a fun ad and your crate is filled with clever and unique items. They will maintain their subscription when they are always surprised by the variety and quality of your offerings. Their loyalty will be demonstrated when they share their box with friends, generating more subscribers.
Still unsure about what kind of business you want to start? Check out the latest Small Business Trends to help inspire you.
STEP 9: Create your business website
After defining your brand and creating your logo the next step is to create a website for your business.
While creating a website is an essential step, some may fear that it’s out of their reach because they don’t have any website-building experience. While this may have been a reasonable fear back in 2015, web technology has seen huge advancements in the past few years that makes the lives of small business owners much simpler.
Here are the main reasons why you shouldn’t delay building your website:
- All legitimate businesses have websites - full stop. The size or industry of your business does not matter when it comes to getting your business online.
- Social media accounts like Facebook pages or LinkedIn business profiles are not a replacement for a business website that you own.
- Website builder tools like the GoDaddy Website Builder have made creating a basic website extremely simple. You don’t need to hire a web developer or designer to create a website that you can be proud of.
Using our website building guides, the process will be simple and painless and shouldn’t take you any longer than 2-3 hours to complete.
STEP 10: Set up your business phone system
Getting a phone set up for your business is one of the best ways to help keep your personal life and business life separate and private. That’s not the only benefit; it also helps you make your business more automated, gives your business legitimacy, and makes it easier for potential customers to find and contact you.
There are many services available to entrepreneurs who want to set up a business phone system. We’ve reviewed the top companies and rated them based on price, features, and ease of use.
Recommended: Find the best phone system for your business; check out our review of the Best Business Phone Systems 2021.
Start A Subscription Box Business In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
Is this Business Right For You?
Subscription boxes are a marketing guru's dream. If you love networking to expand the impact of your brand and connecting with people who are passionate about cooking, pets, technology, or any other niche market, you are halfway there. You will also need to be ready to tirelessly work with suppliers in order to deliver new and unique products that your customers can't wait to try.
Want to know if you are cut out to be an entrepreneur?
Take our Entrepreneurship Quiz to find out!
What happens during a typical day at a subscription box business?
During regular business hours, you might have to:
- Pack and ship boxes ready
- Source new products
- Expand your network of suppliers
- Create advertising campaigns for your target market
- Perform a quality test on all of your products
- Create box themes for the upcoming year
- Staying on top of customer service
What are some skills and experiences that will help you build a successful subscription box business?
- The ability to research consumer trends and apply marketing metrics
- A knack for smart investing
- Personal passion related to the specific theme(s) of your subscription box business
- The ability to network, form relationships, and negotiate the best prices for any given item
What is the growth potential for a subscription box business?
Great news! The subscription box service industry is exploding. When you create a box that fuels the need for new shoes, clothes, techie toys, or children's activities, the potential for growth is exponential. You may start out shipping a few hundred boxes out of your garage and end up with a massive warehouse in a short time. Your ability to read and respond to trends in the consumer market and create a unique box will determine your ability to expand.
TRUiC's YouTube Channel
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Take the Next Step
Find a business mentor
One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
Learn from other business owners
Want to learn more about starting a business from entrepreneurs themselves? Visit Startup Savant’s startup founder series to gain entrepreneurial insights, lessons, and advice from founders themselves.
Resources to Help Women in Business
There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:
If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.
What are some insider tips for jump starting a subscription box business?
The box business is all about feeding a hole in the consumer's life they didn't know they had. Your path to success is identifying that need--whether it be for organic jelly, shower curtains, or refrigerator magnets--and creating a collection of items the average customer won't find while shopping downtown. After delivering a fabulous crate crammed with fun, you will need to take advantage of the initial excitement by encouraging chatter on all social media outlets that can end up with mentions in mainstream feeds. This is truly a viral business. Be ready to respond by anticipating success.
How and when to build a team
Upon launch, you will likely want to hire additional workers to pack and ship boxes. Additionally, finding highly skilled team members to run your marketing campaigns will be essential, unless you have the skills to do this by yourself.