How We Started A $50K/Month CBD Subscription Box Side Hustle

$50K
revenue/mo
2
Founders
2
Employees
product
Hemp Crate Co.
from Indianapolis
started March 2019
$50,000
revenue/mo
2
Founders
2
Employees
527K
alexa rank
7.16K
followers
262
followers
36
subs
market size
$82.3B
avg revenue (monthly)
$25.5K
starting costs
$14.9K
gross margin
40%
time to build
7 months
average product price
$25
growth channels
SEO
business model
E-Commerce
best tools
Canva, Instagram, purechat
time investment
Side project
pros & cons
35 Pros & Cons
tips
3 Tips
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platform
email
shipping
customer service
social media
accounting
design
payroll
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Hello! Who are you and what business did you start?

We’re Ryan and Lowell- the Founders of Hemp Crate Co. Hemp Crate Co. is the leading CBD Subscription Box. Each month we partner with 5-7 different brands to put the best and brightest of the CBD world into a box that gets sent out to our 1000+ subscribers. We believe that everyone deserves relief and that relief should be affordable and not regulated by Big Pharma.

We’re currently delivering our crates to anyone over the age of 18 in the US and Canada. Our boxes focus on delivering tons of value as CBD can be expensive. Our starter boxes ($44.99) deliver on average $125 in value and our pro boxes ($69.99) deliver on average $175 in value!

We’re currently doing ~$50,000/month in revenue between our online store and our subscription boxes.

how-we-started-a-50k-month-cbd-subscription-box-as-a-side-hustle

What's your backstory and how did you come up with the idea?

Ryan came up with the idea in late 2018. The founders (Ryan and Lowell) actually worked together at another eCommerce company. Funnily enough, Ryan was Lowell’s boss. Ryan had been a casual CBD user for a few months when he heard talk of the 2018 Farm Bill coming down the pipeline. The 2018 Farm Bill was what unequivocally legalized CBD on the federal level. Up until that point, it had been very much in a legal grey area. He also was really interested in the recurring revenue model that subscription boxes provide.

We launched the business in ~5 months from idea to website launch, all while maintaining full-time jobs.

With this impetus to start the business, Ryan approached Lowell with the idea. Lowell initially took some convincing to come on board but after starting, we never looked back. We knew that the subscription box model was perfect for the business as it was a consumable product that customers would regularly need to replenish every month. Additionally, it’s a new industry where curation was important. People wanted help deciding which products to purchase and also needed to be educated on how to try CBD.

We established our pillars as Education, Discovery, and Affordability. We wanted to make sure our customers were educated about CBD, were able to discover the products that were effective to them, and could do both of these things affordably!

We had some experience in the eCommerce industry and Ryan has 20 years in the logistics industry. The rest we were able to piece together along the way. Subscription boxes are a relatively low capital-intensive business to start since you can operate on a prepay model. We were both able to maintain full employment while starting the business and still operate it as a side-hustle.

Take us through the process of designing, prototyping, and manufacturing your first product.

The initial idea for starting the box was to “private label” all of the products that’d go in the box. We flew down to Florida to meet with a manufacturer to discuss how we might work together to create unique brands to all go inside of the box. However, we soon realized that the startup costs involved with starting the business this way were too high.

We then pivoted to a model where we’d showcase other brands inside the box every month and then slowly, over the next several years, start to introduce our own. We currently only have one private label brand of our own, our Hippie Hemp Balm chapstick.

We knew we wanted to have an online store option, as well. This helps customers that find a product they like in a box come back and purchase more of that item. We also have straight play customers that just purchase from our shop as they know what they want. We think most subscription boxes should consider this model as it really helps lifetime value (LTV).

We started the business with $20,000 of our own money. There was no external funding. We spent most of this on our inventory as well as website costs, photography, logo and website design, etc. We initially pursued and received a trademark but probably wouldn’t do the same again.

One of our biggest challenges initially was payment processing. This issue is specific to the CBD industry but I’d encourage other entrepreneurs to make sure they have their payment processing squared away before getting too far along in their business. We spent the better part of 2019 figuring out payment processing and bouncing between providers until we found one that’d work for us.

Describe the process of launching the business.

We officially decided to launch the business on March 15th, 2019. We essentially set this date about a month in advance and just started working backward from there on everything we needed to complete. We launched the business in ~5 months from idea to website launch, all while maintaining full-time jobs.

We had started to gather followers on social media and mainly launched to these prospective customers plus family and friends. We broke $1,000 on the first day which we thought was a massive success. I remember the best thing was seeing an order come through on your phone those first few months. It probably took us another 6 months to get back to that $1,000/day mark that we saw on launch day.

We had very different (and hideous) branding back then, as you can see from these initial box photos.

how-we-started-a-50k-month-cbd-subscription-box-as-a-side-hustle

Since launch, what has worked to attract and retain customers?

Because we’re in the CBD industry we haven’t been able to run ads on Facebook/Instagram and Google, like most eCommerce companies. These platforms don’t allow for advertising on products such as alcohol, firearms, and CBD. Thus, we’ve grown primarily organically -- 99% of our all-time sales have been organic.

One of our biggest growth channels has been Cratejoy. Cratejoy is a marketplace for subscription boxes and in any given month 20-40% of our sales come from that platform. Additionally, social media has been huge for us. We’ve slowly grown our Instagram and Facebook followings and have a very loyal fanbase on those platforms. We utilize Amazon as a sales channel but only for our one product that doesn’t contain CBD and is just hemp seed oil (our Hippie Hemp Balm chapstick) as Amazon doesn’t allow CBD products to be sold on their platform either.

Furthermore, we’ve launched a very successful Brand Ambassador program where some of our top customers can earn rewards, such as free CBD for a year, forgetting other customers to use their customized coupon codes. We’ve created a tight-knit community of CBD lovers and we’re so grateful that our customers can help bring in new customers!

Finally, we’ve grown using influencer marketing and brand partnerships. Influencer marketing is definitely a difficult egg to crack and you can quickly spend thousands of dollars with very little return on your investment if you’re not careful. We’ve found it best to be patient when using influencers. We generally wait for influencers to come to us and then the partnerships seem to work better if they’re eager and engaged. We’ve also found some great success in working with other brands in mutually beneficial partnerships.

How are you doing today and what does the future look like?

We’re still operating the business as a side hustle while we work full-time jobs. Ryan has actually started a 3rd Party Logistics and Fulfillment business (Lessgistics) that helps provide fulfillment solutions for eCommerce and subscription box businesses. This means that in September 2020 we were able to outsource the physical fulfillment of the boxes to Ryan’s company which was a huge time saver so that we no longer had to fulfill all of the boxes out of our basements!

Don’t be afraid to start the business as a side-hustle until it has substantial traction. You’d be surprised with yourself on how much you can do on the side while still maintaining a full-time job.

We currently still do all the customer service, procurement, marketing, bookkeeping, and analytics for the business. We’re looking to continue to slowly scale the operations of the business by outsourcing the customer service and the marketing so that we can focus on the “high ticket price” items while only spending 5-7 hours/week each on the business.

We’re currently able to make ~50% Gross Margin each month. We have another 25% that goes to expenses such as marketing, software cost, and other job supplies.

The eventual goal is definitely to sell the business to the right buyer!

Through starting the business, have you learned anything particularly helpful or advantageous?

Most of the decisions come down to how you want to allocate your time. You’ll have to decide what the top priority item each day, week, and month that you want to take care of are and then work on only those high priority and high revenue-generating items.

Honestly, one of the biggest lessons is to just make sure you exist and stay afloat long enough to let good things begin to happen. If you only give it 6-months or a year you’ll never know what the business is capable of. Just staying in the game for a long enough time period is hugely important. That doesn’t however, mean that you shouldn’t be agile and pivot quickly. If something isn’t working, quickly move on to the next thing and never stop testing. Being an agile startup is so critical. If you are rigid you will likely fail within the first year.

We’ve been lucky to also have highly complementary skill sets as co-founders. Our attitudes and work ethics complement each other very nicely. If you don’t have fun with who you’re working with, none of it is worth it!

What platform/tools do you use for your business?

We host our website and manage our subscriptions through Cratejoy. The platform definitely has its issues, but we wouldn’t be where we are without it! Other more common tools include Quickbooks, Canva, Google Analytics, PirateShip for fulfilment and MailerLite for email campaign management. We use PureChat for chat on the site and CartStack as a cart abandonment tool.

What have been the most influential books, podcasts, or other resources?

Atomic Habits by James Clear is a current favorite book of ours. We also enjoy listening to ‘Revisionist History’ and ‘My First Million’ podcasts.

Advice for other entrepreneurs who want to get started or are just starting?

Don’t be afraid to start the business as a side-hustle until it has substantial traction. You’d be surprised with yourself on how much you can do on the side while still maintaining a full-time job.

The relationship you have with your co-founder is also hugely important. Don’t get too stuck on equity splits at the beginning on who owns what percentage of the business. Once you get large enough, and if you maintain a strong relationship, you’ll be able to work around that. It’s not worth spilling milk over in the beginning and delaying getting your idea out to the world.

Are you looking to hire for certain positions right now?

We’re currently looking for a virtual assistant (or two) to handle many of our day-to-day operations. Additionally, we’re looking for a marketing firm that is purely results-driven and knows its way around the CBD industry. The marketing company would be on a contract basis and the virtual assistants would be part-time, up to 40 hours per week total.

Where can we go to learn more?

If you have any questions or comments, drop a comment below!

-  
Ryan Culver,   Founder of Hemp Crate Co.
Pat Walls,  Founder of Starter Story

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