Cigar Subscription Box Delivers Smoking Returns

A subscription box service can be one of the most reliably profitable business models, once you build it to a fundamental level of sustainability.

We've seen this before —

• 899: Natural Hair Enthusiasts Create Curl-Care Empire
• 705: Friends Foster Korean Face Mask Frenzy
• 685: Comic Book Curator Creates Custom Crate Subscription
• 546: What's In the Box? Low-Carb, Low-Sugar Snacks
• 333: Business Analyst Turns Weight Loss Problem Into $130,000 Solution
• 301: Project Manager Spreads Light, Sells Candles, and Shares Profits
• 216: Dutch Personal Shopping Service for Kids Measures Up
• 114: One Entrepreneur Reads the Tea Leaves to Launch His Subscription Hustle

This model is attractive because you can predict—often with great accuracy—how many people will remain subscribed, therefore paying a monthly fee, leading to consistent revenue and cash flow.

In today's story, a software engineer creates a premium subscription box service for savvy cigar smokers. He now works for Google during the day, operating the cigar box biz at night, but he actually started it while he was still in college. It's bringing in a consistent $4,500/month with room to grow.

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Michael Arciola is a curious person with a great interest in learning.

He double majored in computer science and business while attending Florida State University. While in the throes of these academic pursuits, he stumbled upon an interesting observation.

Computer science students seemed to actively use their knowledge and newfound skills to build things, while the business students never seemed to exercise their skills at all. The business school seemed to be rooted in theory rather than doing.

Michael found this odd. Why wouldn't you reinforce what you were learning by applying it to the real world?

So, he decided to put his education to the test... and build a real business. His approach would be different. This wouldn't be "following his passion." It stemmed from a deep curiosity to understand how the process of building a business worked. And it would be an experiment in learning.

His idea needed to meet certain criteria and be viable on its own. For months, he considered different options and possibilities.

Then, while on a visit to New Orleans during his junior year at Florida State, he was struck with a smoldering idea. He was relaxing by the hotel pool and saw a man smoking a cigar. A humidor went off in Michael's head.

He was already familiar with the subscription box model from his brainstorming sessions, and he had an appreciation for cigars. He decided to do some research.

What he liked about the cigar niche was that it's well known, has a loyal following, and not much has changed about cigars over the years (as opposed to software engineering, where he would eventually begin his other career).

While conducting further research, Michael observed the limited selection of cigar boxes sold by ecommerce shops. Most were low quality. None of the shops were offering unique selections categorized by flavor, size, shape, strength, origin, or manufacturer.

What if he were to launch a premium subscription box service focusing on quality cigars?

After further brainstorming, Michael pitched the idea to his roommate, a fellow cigar aficionado. They decided to go for it. Southern Cigar Company officially launched in September 2015.

Moving forward with his subscription box model, Michael chose Cratejoy, saying their platform helped tremendously on the management and logistics side.

Starting out, Michael worked with a local cigar store to handle his curated stogies. Later, as his business grew and order size increased, he started buying wholesale directly from manufacturers.

All shipments are handled out of his apartment. Michael doesn't work with fulfillment centers because they either massively overcharge or simply refuse to work with him. This is because the humidor included with his orders needs to be properly maintained.

He also said he can't rely on advertising to attract customers because of his type of business. Advertisers won't run tobacco-related ads. So, he doesn't have any.

Instead, his visitors come primarily from word of mouth, referrals, and the media. His business has been featured in Maxim, Buzzfeed, The Distilled Man, and In Style Magazine.

The media coverage has helped generate a generous amount of traffic from search engines on top of the traffic from Cratejoy's marketplace.

Startup costs were about $7,000, which mostly went toward website design. Michael decided to hire that part of the business out. He didn't want to worry about designing a website on top of handling his business incorporation, branding, and tobacco licensing.

Since its 2015 launch, Southern Cigar Company has reached a sustainable recurring income of $4,500 a month. Michael's subscription boxes come with three payment options:

$39.95 for month-to-month; $37.95 for a three-month subscription; and $35.95 for six months.

First-time subscribers get a triple torch lighter, a double guillotine cutter, and four new cigars with a humidity pack for freshness. Each box comes with a highly-detailed info card explaining everything you need to know about the product.

Michael has since moved on from the glory days of Florida State and currently holds a job with Google as a software engineer.

He now wants to continue the steady growth achieved with Southern Cigar Company while tending to a new business venture called Formal Founder, which helps young startups verify potential business names.

It's not just in computer science where doing is better than theory. Michael's glad he didn't let his idea go up in smoke.

Listen to today's episode to learn more...