Starting a Subscription Business by Cocoa & Roast – Part 1 - Subscription Radar
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Starting a Subscription Business by Cocoa & Roast – Part 1

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Hi there, my name is Paul and I am the co-founder of start-up subscription company
The Cocoa & Roast Club. We deliver micro-roast coffee and match it with fine chocolate from specialist chocolatiers.

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We’ve just launched our business, and I’ll be giving you an account of the steps we have taken to launch and our progress since.

Building a start-up is pretty daunting and I hope this will help give you confidence in getting started!

Why I Wanted To Start a Subscription Company

​I’ve always wanted to set up my own company, however, I can safely say that instead of being an entrepreneur I was a WANTREPRENEUR. I always had ideas, and on many occasions got through to writing an in depth business plan and market study before shelving it due to other commitments and excuses (family, work, hobbies etc). As I am sure many of you can relate, “tomorrow” never comes!

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​Then in Dec ‘15 my co-founder, Jade, pinged over an article she had read about a guy called Rohan who had written a blog called “The inner workings of a subscription company”. I have to say this is a truly amazing read, it's definitely worth 15 minutes of your time… obviously with some coffee and chocolate to compliment the read 😉

I must admit, before reading that article I hadn’t seen the true potential of setting up a subscription company. I had even been exposed to a subscription company when Jade got me 6 months coffee subscription from “the Coffee Factory” as a present. I thoroughly enjoyed it but it hadn’t really clicked that people all over the place were doing it and doing it well.

​(Interestingly, I didn’t renew that subscription and was part of what I now know as “churn”, which is one of the most important key performance indicators (KPI) of a subscription company – more on that later).

​However I soon came to the conclusion :  The subscription box business model is in theory, perfect!  Here's why : 
  • You get cash up front (typical for b2c but not always b2b which I have been used to).
  • Suppliers can be paid on time and you have cash in bank already (this is true but there will be exceptions if you want to kick on and expand– I’ll explain later).
  • Recurring income at a fixed time – ideal as you can forecast easier.
  • Shipping is easy to manage.
  • Supply chain is easy to manage as you set your ship date and can plan in advance.
  • Good fun and enjoyable working experience – you can have a lot of fun with the marketing, launch and content.
  • Low start up costs - ideal if you want to get your idea off the ground but don’t want or can’t get a bank loan or go through seeder funding.
  • Plenty of support platforms to help you with running a subscription company.
  • Plenty of companies are doing it – market validation that the principle works.

​So there were plenty of positives to go full steam ahead to the planning phase.

Planning

​Finding a co-founder

Yes, You need a Co-Founder

​My advice is to get a co-founder involved early. Find someone with the same mindset as you and with the same passion for setting up a company. Owning a business consumes a lot of time and for that you need passion, belief and determination.

It was clear from the start that Jade would be my co-founder. We both have skills that the other doesn’t and after living together for 5 years, we know we can put up with each other’s company for sustained periods! Having someone to discuss the plan with is invaluable as you can make decisions so much quicker and can bounce ideas off each other.

​Starting with the Idea

​After we decided that we were going to run with the subscription model, we had to decide what we are going to put in the box!

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​Rohan suggests that you should look at your bank account over the past year and see what you have been buying regularly. Is it something you would recurrently buy? If yes, then it’s perfect for a subscription company.

​I like that idea, it works… but I do think that it can limit you somewhat. I think you should also look at your hobbies …how often do you partake in it? Could you or do you buy it regularly? Does it appeal to other people? your friends and family? Are there any magazines, expos, TV programmes on it?

​(But don’t just think the subscription should be hobbies or fun…it could be anything…it may be business related, or lifestyle. There are also plenty of convenience subscription companies that are doing really well too. The options and sectors are endless. )

Test and Validate Your Idea

​We covered the following when trying to validate a concept:

  • Key benefits – Why would it be good to have this as a subscription?
  • Pain points – What’s missing from the market?
  • Target market – Who would buy it?
  • Competitors – Are other people already doing it? Are they doing it well, or could this be improved?

​Try to imagine yourself as the customer and ask yourself “If I saw this, would I want to part with my hard earned money to have it?”

Chosen Idea : Coffee & Chocolate Subscription

​Pretty early on I liked the idea of bringing products together into a pairing, and after various iterations I came to the idea of a coffee and chocolate combination.

Micro coffee roasting

Micro roast coffee is an emerging market.

​Next stage was to find out if this really was a good idea or not. I got a general idea from the market. Micro roast coffee is on the up, particularly in the UK and more people are buying into the idea that coffee does exist outside of the high street chains.

There is a clear market need for it. I done a quick check with family and friends and most of them drank freshly ground coffee in one way or another, which affirmed my suspicion that people enjoy the fresh coffee experience at home as much as they do in their local coffee shop.

​Personally, I always love combining ground coffee with really dark chocolate, and after discussing with a few people I soon learned that I wasn’t alone in this. Like coffee, artisan chocolate makers and chocolatiers are popping up all over the UK and making beautiful and incredibly tasting chocolate.

​By creating this business, I can market to two major target customer – both the coffee and chocolate lovers plus it’s a unique experience that hasn’t been fulfilled elsewhere yet.

​At this point I got a bit nervous about the whole concept and was thinking…isn’t there a load of other companies doing coffee subscriptions? I once again took inspiration from Rohan’s blog, which discussed that any competition is a validation of the market.

​"If there are other companies doing it there is clearly a market for it."

​Look at what your competitors are doing; see what they do good and not so good. Make sure you are just as good as them at the aspects they do well. Improve on what they don’t do well and you are on to a winner (sounds easy on paper).

I had the concept so the next stage was to prepare a business plan. One thing I realised with all the other business plans I wrote was that it takes ages to write an in depth plan and this will probably not reflect the end result as to when you come to launch your final product.

​Things happen which will inevitably change you from you original chosen path.Instead, this time I kept it brief and basically bullet pointed key information that would be easy to modify if things needed to change. I used the following template:
Cocoa & Roast Business Plan Template - Download

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Click to Download the Business Plan Template

​Feel free to use it - add and remove as you see fit to suit your needs. Resist the temptation to keep adding in text. At this point I had the following:

At this point I had the following:

  • An idea
  • Brief business plan
  • A business partner

​I’d say it took a couple of weeks to go from reading the blog to being at this stage.

Product Selection 

The next stage requires a bit of thought and various iterations to finally get to your end stage, which is a product, costs, sales price and gross margin. Here is how I did it:

I decided what I wanted to include in the box. I just went down to the supermarket and got a load of coffee and chocolate and put them together to get an idea of how much should be in there. After much discussion, we decided that the box would include :

  • 250g bag of coffee (standard size)
  • 2 x 100 g bars of luxury chocolate or equivalent.
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Letterbox Friendly Boxes

The next step was crucial - should the box be letter box friendly? If it can fit through the letter box it’ll be cheaper packaging and postage, plus the customer doesn’t have to sign for it. If you can go for this option, then do- it’ll save you a headache and money!

​It becomes an iterative operation to find the minimum size that will fit the products in, still look good and keep your prices as low as possible. For us, it was already clear that no matter how hard we tried the box was not going to fit through the letterbox. I then decided to get a sample box to get an initial idea of how the products would fit. Here is a photo of the items:

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I put all the products in and then started arranging the products in various ways for the best fit. Once I got some sizes from various layouts I started trawling packaging websites to : 

  • See what sizes were closest to our desired size.
  • See what the prices were of each brand of box.
  • Get free samples of the boxes.

​I managed to get a couple of free samples of boxes with similar sizes. (I would recommend chancing your luck with cardboard box suppliers, as they probably will give you a free sample). For the coffee, I also got some free bag samples from different suppliers which worked out well as the minimum order quantity on the coffee bags was 500! We made a list of pros and cons of each box size and looked at factors such as MOQ, unit price at quantity, colour, size, lead time, was delivery included etc).

​The box was sourced from UK Packaging 

​So by this point, I had decided my box size, decided my box supplier and also how much product I would include in each box. I had also decided that I was going to include inserts on the coffee and the chocolate to give the customers some information on the USP’s of the products included.

Branding

​The next step was very important. We needed to decide on the branding of the box. From the beginning I really wanted to go for a printed box design. I spent about 2 weeks on PowerPoint making concepts and drawings and the designs were wide ranging. There was world maps, giant coffee beans on the box and all sorts of designs that were going to be on the box.

Sites like Fiverr and Freelancer allow you to invite designers to submit logos and branding with you only paying for the design you like.

​Stupidly, this was done all before I had spoken to a single printer! With printers, you get charged for the printer plate for the branding, and the die cut for the box size. That, with the large minimum order quantities, simply meant it was out of our budget. Back to the drawing board.

​I came up with a few other ideas to make the box stand out and be cost effective. These options included : 

  • Sticker of the logo
  • Paper attachment onto box
  • Paper sleeve

​The products we source are all luxury so the brand image had to be one of luxury also. So we decided that a sticker was not going to fit our brand vision. (It would certainly work for some business ideas though.)

​The other option was a paper sleeve right around the box. We made a mock-up of this but this proved costly- especially with a wide sleeve. We decided to go for our logo printed onto luxury thick paper which would cover the top of the box and side of the box.

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Our First Sample Box

​We wanted to keep the branding simple and elegant. We liked the contrast of the white against craft so felt adding much more would make the branding messy. Our efforts are shown in this photo. We love the branding, but we’re sure it will evolve as our business does.

​To help pick a signature colour for our brand, we used this website www.colourlovers.com for inspiration. We wanted our branding to be consistent across all channels. Our end result was simply red, black and white.

​Hopefully this first post has given you some ideas and actionable advice to help planning your subscription box business. Keep an eye out for our next post, where I’ll discuss costing and pricing. Thanks for reading!

More Information

If your interested in trying out Cocoa & Roast Club for yourself then check out our review for more information and use discount code RADAR10 for 10% off your first discount from our site.

About the author

Paul from Cocoa Roast Club

Paul is the co-founder of start-up subscription company The Cocoa & Roast Club, who send out monthly micro-roast coffee and match it with fine chocolate from specialist chocolatiers. To help and inspire others, Paul is documenting his journey of setting up a subscription box company here on Subscription Radar.