Bulu Co-Founder and Chief Product Officer Stephanie Jarrett was invited to share some of her Top Tips as a Subscription Box Expert at SUBTA Women in Subscription in September. In this ongoing series, you’ll find 6 tips you need to navigate your own box program - pulled from Stephanie’s experience launching more than 16 subscription box programs that have resulted in over 10 million shipments from Bulu’s warehouse, earned $100 million in revenue, and an average customer rating of 4.5/5 stars per box.
Bulu has launched or managed nearly two dozen subscription box programs across so many different product categories. Along the way, we’ve become experts in financial modeling and projecting. One of the most common mistakes we see with new programs is underestimating marketing costs or overconfidence in their ability to acquire customers - which impacts your cashflow irrevocably. Our tip? Overestimate your Customer Acquisition Cost (CAC) and plan to improve it over time.
In the beginning, estimate that your CAC will be between 75% and 125% of the average retail price for one box. Where you land in the range of 75% to 125% is really a judgment call for your marketing team, but keep in mind that if you are launching a new brand or your existing customer base is small, you should lean towards the 125% end.
Ouch, right? It’s really better to aim high in terms of your financial modeling, though. You can always set aggressive goals for your marketing team to improve CAC over time, but your cash flow will thank you for overestimating costs, especially during launch. For example:
Your Product: $25.99 - MSRP
Year 1: $29.99 CAC
Year 4: $23.00 CAC
Maybe your CAC ends up being $40. Maybe it’s $15. Either way, be sure to continually update and modify your financial model. Poor cash flow management will kill your subscription business and all it takes is a little time to log your lessons learned along the way to make your subscription a success!
Not sure where to get started? Check out our Subscription Box 4-Year Financial Model template for our first-class budget, forecast and churn model in an easy-to-use, downloadable file.
If you have questions or would like to talk to Bulu about Financial Modeling or our other services, send a message at the top right of this page using the Contact Us button, or send an email to email@example.com.