Oh darn! I was going to ask you to inquire if they blew through all of Mark's $75,000 investment yet? And how much longer they envisioned making a go at selling beans - before they got tired of filling 100- 1,xxx bag's by hand or ran out of money altogether.
Having looked at similar subscription box models and p/l (profit and loss) statement's, I can tell you that it's a very low margin business, with a relatively high customer acquisition cost (long term).
Some of the issues:
1. They claimed on the tv show their cost to acquire a customer was $5. (They also said they did limited advertising, and most was blog outreach, kickstarter, techcrunch,ect). The issue is that REALLY they do not have a firm grasp on the cost to acquire a customer, which is a huge factor of how long they will be able to be sustainable. The FREE press that came from their kick-starter campaigns, tv show promo,ect .. Is not something that will be continuously repeatable. So they will have to pay a LOT more to acquire each customer going forward -- honestly I wouldn't be surprised if their true COST TO ACQUIRE A customer is more within the $40-60 range.
a)On the first month they already reduce the price for that month to $5.. So right there that's a $10 acquisition cost, on top of whatever marketing/PPC/advertising costs it took to get that customer.
2) They literally are bagging each product by hand, filling the beans and then sealing the packages. So even if they can do it right now, going forward, they will have to buy more equipment, buy automated equipment, hire more workers,ect...
a) At some point, they are going to want to draw a paycheck and be able to pay themselves a reasonable salary, which will be extremely hard to do, with profit margins. It's not going to take long, before they get tired of filling 1000+ bag's of coffee, and not having any "Beans" to show for it ...
3) Then you get down to the fixed operating costs and cost to fulfill the orders, which they clearly at this point are taking upon themselves. Going forward, to really grow the business and make it an invest-able venture, they are going to have to take that into consideration.
So going with the smallest monthly order it's $15 per month/customer.
a) Assuming they are able to continue to convince suppliers to give them free coffee, which is highly unlikely forever.. but assuming.
b) You have packaging, fulfillment, shipping and fixed operating costs now. Which just in shipping costs and packaging you are looking at about on the low side $8 a box. Judging by the box, shipping costs, ect (you can see what all goes into a box in the video below).
[ame=http://www.youtube.com/watch?v=64ayW4opyQI]Misto Box Month 2 Review ... Free Grinder! - YouTube[/ame]
c) Then you have fixed costs- such as rent, electricity, equipment, repairs
d) And let's assume people want to get paid - you have to factor that into things.
So once you factor everything in, you are looking at if they are lucky a $1-2 net profit per customer, per month... And with cost of acquisition, it could make it much lower and potentially negative...
4) And then finally as a forward looking indicator and their market reaction. Their facebook page has 769 likes, an abysmal user interaction rate. Youtube uploads about the product are equally as bad, with limited views. All which lends itself as consumers aren't REALLY EXCITED about this service, so cost to acquire a new customer, is going to be much higher going forward.
5) Which leads me to similar businesses in the marketplace. There are about eight companies that also do the same thing - subscription coffee boxes in the past year. Already two of those companies are shutdown.
https://terrabeancoffee.com
http://www.boxofbrew.com/
