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ButcherBox's Tech Stack:

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Ecommerce: Shopify (Switched from custom built solution. Headless implementation) [✅ our recommended eCommerce platform]

Customer Data Platform (CDP): Segment

Email: Klaviyo [✅ our recommended email marketing tool]

Domain: GoDaddy

Conversion Optimization: Black Crow AI

Analytics: Heap

Audience Measurement: Snowplow

A/B Testing & Personalization: Convert

Site Speed: Yottaa

Incrementality: Measured

Customer Service: ZenDesk [read our guide on customer support platforms]

Headless: Contentful

Programmatic Ads: Outbrain

Payment Recovery: Churn Buster

Podcast Analytics: Podsights

Landing Page Builder: Unbounce

Subscription: Custom

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History

It's 2015 and Mike Salguero is walking away from the wreckage of a failed startup. He has spent the last 7 years building Custom Made, a marketplace for custom woodwork, that he has poured his life into. 7 years of blood, sweat, and tears and he’s walking away with $500k in the bank.

The initial pitch for Custom Made was a simple one. The original site was started by a woodworker in 1996 and it allowed woodworkers to list their wares for a low monthly fee. The site's design had not been updated much since its founding and it required woodworkers to email the owner to make updates to their profile. Despite its design, the Custom Made domain had an incredible SEO footprint. If you googled “custom bookshelf” or “custom coffee table”, custommade.com was the first search result. Mike describes the original thesis as a real estate one. Custom Made was a ‘shack in Manhattan’. They would buy the site, improve its appearance and functionality, raise prices and benefit from its entrenched SEO position. 

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Once the site was purchased, and Mike and his co-founder went out to raise additional funds the pitch evolved based on feedback from VCs. VCs latched on to the marketplace aspect of the business and pushed the team to double down on that and become the world's largest marketplace for custom made items. The only problem was that there wasn’t product market fit. They raised a total of $29M from top tier VCs like First Round Capital and Google ventures, but despite their best efforts, Mike and team could not get the company to work. Woodworkers did not want to become sales people to pitch their business on a marketplace.

The Idea

As his time at Custom Made was coming to an end, Mike and his wife were experimenting with an elimination diet. His wife has Hashimoto's disease, an autoimmune disorder that impacts the thyroid, and Doctors suggested his wife’s condition might be improved by a low inflammation diet. As part of this new diet, Mike learns about the benefits of grass fed beef. He loves the meat but realizes it’s really hard to find grass fed beef and prohibitively expensive. Mike meets farmers in parking lots to buy pounds and pounds of frozen beef in trash bags. The minimum order sizes are so large that Mike begins selling the excess to co-workers. One of his co-workers suggests that Mike ship the meat to people rather than hand delivering it, and the idea for ButcherBox is born.

Mike’s idea was to offer a monthly subscription box of grass fed beef. Subscribers would get a curated box of different cuts of beef shipped to them monthly on dry ice. Meat with a Name was the original title for the project but (thankfully) Mike eventually lands on the name ButcherBox.

Having been burned by his first startup, he decides his new business is going to be a hobby business à la Tim Ferris and the Four Hour Work Week. He didn’t think there was a huge opportunity in grass fed beef, but he thought it was big enough to allow him and his wife to live comfortably.

Instead of writing a business plan for ButcherBox, he sat down and architected his ideal day 3 years in the future running ButcherBox. He would be on a beach in Argentina and open up his laptop and spend a couple of hours working and then have the rest of the day to spend with his wife and on other passion projects. He thought if he could get one thousand subscribers, with $20 a month profit from each, that would be enough to fund his lifestyle.

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The launch

Mike reads an article about the meat industry in which Ron Eike, an expert from Omaha Steaks, is quoted. He reaches out to Ron on LinkedIn, and Ron is willing to chat. Even better, Ron has left Omaha Steaks, his non-compete has expired, and he is willing to help Mike on his new venture. Ron is an expert in the meat industry and helps Mike source a supplier in Wisconsin that is located next to a cold-chain distribution center. He also advises Mike to add chicken and pork to the monthly box offering. 

Because Mike plans for ButcherBox to be a hobby business, he doesn’t want to invest more than $10,000 into it. Instead of paying Ron, Mike gives him equity in the company. In order to fund his initial purchase order, Mike launches a Kickstarter on September 9th, 2015. His goal is to raise $30,000. He blows by his goal and raises $210,203 from 1,155 backers. Check out the original campaign here.

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Scaling

The Kickstarter campaign validated the initial product market fit. Mike ships out the Kickstarter orders and then calls the initial Kickstarter backers and asks if they want to sign up for a monthly subscription. He has a 60% signup rate and immediately gets 600+ monthly subscribers - very close to his initial goal of 1,000 monthly subscribers. The initial price of the ButcherBox is $129 a box and Mike nets $20 a box after his operating expenses. Customers didn’t choose their cuts of meat, but instead, they were curated by the ButcherBox team. Each box had a mystery element where customers wouldn’t know exactly which cuts would be in each box.  

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In order to educate customers on how to cook the cuts included in their boxes, Mike and the team would include a recipe card in each box. They would source their recipes online from well known influencers in the Paleo and Crossfit communities. Mike would reach out to the influencers and ask for permission to use their recipes with a mention of the influencer and a link back to their website or socials. While he was reaching out for approval to include the recipe, he would also mention ButcherBox’s affiliate program where influencers could earn a commission by promoting ButcherBox through an affiliate link. Since Mike didn’t have enough money to pay influencers a large bounty up front, he would instead pay influencers $10-15 a month for each box shipped to a referred subscriber. Mike describes this as the “Trojan Horse” method of promoting their influencer program. The program was a massive success. It was so successful that Mike didn't use any other channel to promote the business for the first 1-2 years he was operating. The recurring payment strategy began because Mike had limited funds, but Mike ended up stumbling into a very interesting moat for the business. Because influencers loved the recurring revenue they would get from their ButcherBox referrals, they were reluctant to promote competing brands for fear of impacting their income stream from ButcherBox. Influencers could make a great living by simply mentioning ButcherBox in a quarterly email. As Mike sees it, the American Dream for a lot of people is to sit on your ass and collect checks.  

ButcherBox did $300k in the year they launched, then $5M in their first full year in business, then $33M in year 2, and $105M in year 3. In between their second and third years in business they added Facebook as a marketing channel. In 2023, the business is on track to do over $600M in revenue.

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Playbook

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Oil Wildcatting Approach to Marketing Strategy 🛢️

Mike describes the ButcherBox marketing strategy with the analogy of wildcatting for oil. When you are just getting started wildcatting, all you have is a small, cheap shovel. The goal should be to dig as many holes as quickly as possible. The holes should be small, cheap, and rapid. This is analogous to the early days of marketing a business. You should try to test as many marketing channels as rapidly and cheaply as possible. Once you dig a hole and begin to see some oil bubble to the surface, then you should invest in building a rig. But don’t build a huge rig. Only build something to pull the oil from slightly deeper than your shovel could access. In business, maybe this means hiring a single person to manage a channel once it shows signs of working. Over time, as you see that there is more and more oil in the well, invest in a bigger more advanced rig. Only once the wells production starts to decline, should you bring in the most advanced fracking technology to make sure you extract all of the oil possible from the well. This would be the equivalent of going extremely deep on optimizing for a specific channel. 

The wildcatting analogy also leads to another important playbook theme: focus. ButcherBox didn’t expand their marketing focus away from influencers until that “well” had gone dry. Don’t start digging other random holes looking for oil when you have a gusher on your hands! Focus on that channel and continually refine it until you reach the point of diminishing returns. To this day, ButcherBox’s best performing cohorts are sourced from health influencers in the Paleo and Crossfit communities. 

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Box One Profitable 📦 

Because Mike was bootstrapping the business, he had to be laser focused on margin. He refers to this as ‘box one profitable’. In the early days, he had to make sure that he made money on the first box. This perspective also led him to focus on gross profit dollars per box. He says that gross margin percentage is important but only because it will impact gross profit dollars per box. With deep knowledge of gross profit dollars per box, Mike could set a threshold for marketing spend. His CPA must be lower than his gross profit dollars per box in order to be box one profitable. In the early days, he knew that he made $20-25 a box, so they needed to acquire a customer for less than that. He started with the constraint. Over time, as he became more confident in the performance of his cohorts, he could lean into marketing spend and become box 2 or 3 profitable. He was only able to confidently do this because he had the data on the cohort performance over time. This philosophy is very similar to the True Classic approach covered in this guide.

The focus on gross profit dollars per box also led to margin expansion. Mike knew that for every dollar he added in profit per box he would have another dollar to reinvest in marketing. Rather than take out those profits and be taxed on them, he could re-invest them into creating a recurring revenue stream from monthly subscribers. The team optimized the price of tape, the yield of their meat, their distribution center footprint and a thousand other things to increase gross profit dollars per box. They focus relentlessly on eliminating waste and maximizing efficiency. As a result, they went from $20-25 per box when Mike launched the business to over $50 per box today.

Outsourcing as Backbone of Business 🦴

ButcherBox has a really interesting counter example in Blue Apron. Blue Apron was founded around the same time as ButcherBox and had a similar monthly food box subscription model. At one time Blue Apron was the darling of the VC world and raised a whopping $433M before going public in 2017 at a $1.9B valuation. Today, the company trades at a $37M market cap. Much less than the money that was raised to fund the business. The Blue Apron team felt that they had to do everything in-house to create a defensible moat. Instead of using warehouse software used by thousands of other companies, they developed an in-house solution. Instead of using an off the shelf warehouse design and parts used by countless others, they developed an assembly line that was suspended 40 ft in the air to increase efficiency. It was great in theory but failed miserably in practice. Turns out the hundreds of other companies that had iterated towards best practices knew something that the Blue Apron team didn’t. Mike and the ButcherBox team outsourced by default. They had no interest in owning the farms to raise the beef or in developing their own warehouse software. They didn’t have the capital or time to do that. Instead they relied heavily on third parties. To this day, they outsource a lot. They use third party farms, distribution centers, customer service, pick pack and shipping, last mile logistics and much more. What evolved from necessity for Mike, ended up leading to a much more valuable business. Be like Mike.