Today we’re talking about subscriptions and membership sites – how to create them, grow them, and why recurring revenue streams are so attractive to potential buyers.
*Use Promo Code “dealclosers” for 20% off your first box at Bake Eat Love.
About Our Guest
Our guest today is Kristen Baileys, Co-founder and CEO of Bake Eat Love, which sells baking kits that come once a month.
This episode of Deal Closers is hosted by Izach Porter, brought to you by WebsiteClosers.com, and is produced by Earfluence.
Kristen – 00:00:04:
I think it’s okay to move at the pace where you can find that harmony between work and your life. What I’ve found is it’s the people in our life who we do it for. And it’s important for us to find ways and time to experience life with them. And it was actually on one of these more dreary days that I discovered the power of brightening someone’s day with a simple cupcake.
Izach – 00:00:41:
You’re listening to The Deal Closers Podcast brought to you by websiteclosers.com, a show about how to build your e-commerce business to be profitable, scalable, and one day even sellable. Today on the show, I want to talk about subscriptions and membership sites, how to create them, how to grow them. and why the recurring revenue stream from this type of business is so attractive to potential buyers. Our guest today is Kristin Baileys. She’s the co-founder and CEO of Bake Eat Love, which sells baking kits that come once a month in a cool box. Hey, Kristen, how you doing? Welcome to The Deal Closers Podcast.
Kristen – 00:01:23:
Hey, how are you? Thank you so much for having me.
Izach – 00:01:26:
Yeah, absolutely. Glad you’re able to join us on the show. I’ve got a bunch of questions for you about Bake Eat Love, but I want to start at the beginning. Can you tell us about the business and how did you develop the concept and how did you get into this?
Kristen – 00:01:44:
Yeah, yeah, so all great questions. So I am a native of North Carolina, but the story of Bake Eat Love really starts in Seattle, Washington. So a few years after I graduated from college, I met my now husband. And at the time he was in a training program for Naval submarines of all things. And a few months later, he got stationed on a submarine that’s based right outside of Seattle. My background is that I had a few years of marketing experience under my belt, and I was really excited to move to Seattle where there’s a huge digital marketing presence. Even though there was this whole world of opportunity in the space I wanted to move into, which was advertising, digital advertising, I wanted to take my time to find the right next role for me. I surprisingly found myself working at a cupcake and coffee shop during my job hunt in Seattle. So actually, have you ever been to Seattle?
Izach – 00:02:42:
I have, yeah. I love seeing there.
Kristen – 00:02:44:
Did you go in the summer or any other season?
Izach – 00:02:48:
I was in Seattle in August.
Kristen – 00:02:50:
In August? Okay, so probably some pretty nice weather. I loved the summers in Seattle, but the rest of the year, it tends to rain quite a bit. And it was actually on one of these more dreary days that I discovered the power of brightening someone’s day with a simple cupcake. It was amazing. People would come in and maybe they wouldn’t be in the best mood, but they would get their cupcake and it seemed like it would just turn their day around. I found this to be like a magical and memorable experience that inspired me to find a way to share this joy throughout my career. But that would have to wait because I did ultimately land the marketing role I was looking for. And over the years, I had the opportunity to work with some really remarkable brands like Zillow, Zulily, and Pendo. And it was during my time at Pendo that something really interesting occurred. My mom asked me, what do you want for the holidays? And we actually had this work group at Pendo that would make desserts from the Great British Baking Show. And I don’t have the actual statistics on this, but I’m going to guess about 80% of the time we would have mistakes in our bakes. And they just wouldn’t turn out looking that great, or maybe we would have missed an ingredient or couldn’t find an ingredient locally. So I had a lot of fun doing it, but I was also ready to learn how to be a better baker and to actually nail the desserts. So I assumed, when my mom asked me, what do you want for the holidays? I assumed there would be a subscription baking box out there to help me really sharpen my baking skills, one recipe at a time. But to my surprise, I couldn’t find one. So-
Izach – 00:04:37:
Okay, what year was this now? Just to understand the timeline.
Kristen – 00:04:39:
This was 2018, holiday season of 2018. Yeah, yeah. So we decided, well-
Izach – 00:04:45:
So you thought, hey, I need a box, like send me all the pieces to make a recipe, and then you’ll teach yourself how to bake with this box, and you make something every month. This was the idea.
Kristen – 00:04:57:
Yeah, and also I think what I imagined with it isn’t just, send me all the ingredients, but send me a tool that I don’t have, maybe a fancy piping tip, so I can have that really cool effect on my cupcakes. Send me videos I can access from, there’s going to be some physical recipe card, but let me scan stuff and get access to videos that are going to help me really nail this recipe. And I didn’t want it to be the same recipes that my grandma makes. I want it to be inspirational, like something I could go to a fancy bakery and buy, but I want to learn how to make that. And that’s what I couldn’t find.
Izach – 00:05:35:
So that’s the kind of the impetus for the idea for Bake Eat Love, but then how did you actually know that there would be demand for the product?
Kristen – 00:05:43:
The first thing that happened is we built out a business plan. So you’re doing a lot of research, trying to better understand the market. One of the things that we did was we actually looked at the audience sizes for people who are interested in baking shows. We used Facebook to try to gauge that interest. We also looked at reports to see how much of different types of baking kits that are on the market, like the Duncan Hines, et cetera, how much volume is there. We did a lot of the more, I guess, black and white research. But I feel like when you are a business owner, you don’t really get to experience that demand until your company’s grown to a point where it has a sizable part of the market share, which comparing ourselves to Duncan Hines or any of these big baking shows, we didn’t and still don’t have that big chunk. It’s cool because we got to have a sneak peek of what this demand is like during the pandemic. It seemed almost overnight, everyone who had ever had an inkling of wanting to make or just missing eating delicious baked goods got to baking and they got to baking from scratch. So I remember going to the grocery store in the pandemic and the whole flower shelf was empty. It was all gone. And so when you start a business, oftentimes there’s demand for the thing that you’re starting out with already, but then it’s also like this untapped demand that you’re trying to grow and engage with that audience. So for me, it was just really cool to see how much untapped demand there really, really is and how one change can really bring it about. So we’re still growing into a bigger part of the market share, but it was cool to see that sneak peek firsthand.
Izach – 00:07:37:
Awesome. Okay. So I have a couple of questions just technically on the startup part of your business. So how did you pick the right platform? You know, did you look at Shopify? Did you look at building your own website? How did you pick that? And were there any special components that you needed to think through for customers to order the box versus ordering just a kit for a specific recipe? What was that part of the startup like for you?
Kristen – 00:08:05:
Yeah, yeah. So it was an interesting contrast because we were so excited about the idea. We’re like, this is something that people want and they may not even realize that they want. Like there’s, we think that there’s going to be a really great traction here. We’ve run the numbers. We were ready to get going. But the digital operations that you’re talking about were really daunting. At the point when we were starting the business, I had worked in tech for about a decade. I knew that from working at the companies I’d been with, that having streamlined and really seamless digital operations makes it feel so easy from the consumer side, but it’s extremely resource heavy to build. So the questions of how we’d connect our front-end with the back-end and a back-end that could manage payment processing, the CRM, Renewal Schedules, the email automations that are synced with the Renewal Schedules, that is really what kept me up at night. And knowing that we wanted to bootstrap our business, so it wasn’t like we could hire a developer to build us things. Like I had to find something that already existed. And in doing research, it was hard to find something at that point in 2018 that was already built and comprehensive and complete. But I stumbled upon Cratejoy. And Cratejoy from the consumer side is a marketplace for subscription boxes. But on the merchant or business owner side, they provide website hosting, design templates that are optimized for subscription conversions, a comprehensive backend that manages your CRM, payment processing, renewal schedule. It had everything that we needed already. And I didn’t have to worry about figuring out how to integrate separate tools. So that was really huge and amazing for us starting out, that we were able to get our business idea off the ground with that tool.
Izach – 00:10:04:
Okay, so we’ve represented a bunch of subscription box businesses and I really like the business model because there’s some unique aspects that we market on the sell side and I’m just curious about some of those from your perspective on an operator side in a business that’s in the scaling and growth mode. What are the performance indicators that you’re looking at each month to gauge the success of your business? Are you looking at acquisition costs, number of subscribers, the lifetime value? Like what’s important to you to keep a gauge on how the business is performing?
Kristen – 00:10:40:
Lifetime value is definitely extremely important to us in a number that we’re always looking to increase. But I think also the average order value is a big one. And we actually don’t do a ton of advertising at this point. Ironically, considering that most of my career was in digital advertising, we tend to do more organic marketing. And then-
Izach – 00:11:03:
Oh, that’s really interesting. Yeah
Kristen – 00:11:05:
Yeah. So that’s one that I think is super important. And we definitely learned a lot here. is gross margin and looking at it in tandem with our discount strategy.
Izach – 00:11:19:
Alright, there’s a couple things there I want to, I have more questions. I could probably talk to you about this all day, but the… with the box, okay, are you using a 3PL and are they doing the kidding for you and putting the ingredients in? And then what’s the planning process look like for you for these recipes? How far out are you anticipating what your next monthly box is going to be? And then how are you actually getting those ingredients to the right spot at the right time? That seems like it could be pretty complicated.
Kristen – 00:11:48:
Yeah, yeah. So when we started out, everything was done out of our house. So we went through and we got the certifications and everything that we needed. And we purchased everything at, honestly, grocery stores. And some things were ordered, but it was more economical for us to go to our local grocery store, buy the ingredients and pre-measure them. But we scaled to a point where we had to decide, are we going to continue to manage the operations ourselves? So do we need to invest in a warehouse, another space? Or might there be a company out there who would support us and support that function? So luckily, we were able to find a, I guess you could call it a 3PL, but we call it a Co-Packer. And they managed the packaging portion for us. So we knew that was the next step that we wanted to take. And we knew roughly who we wanted to be working with. We just didn’t know how quickly we would get there. And the pandemic made it happen almost overnight. So when the pandemic happened, there was no flour on the shelves. That’s also when our business experienced growth that we could no longer manage outside of our house. Which was impossible to predict for. So we did go through several months of just selling out and just some crazy, forecasting that needed to happen there. But we do now work with a Co-Packer who is also our fulfillment team and they manage all the things, I guess, that 3PL would. And we just work very closely with them. We plan our recipes out six months in advance. So we know roughly six months from now what we are going to be making. But then with, in terms of like our shipping logistics, that’s about 30 days out that we’ll start placing our orders.
Izach – 00:13:40:
Okay. All right. Very cool. So you said something that surprised me. You said you’re not doing a lot of paid advertising. You’ve got a really strong background in digital advertising, digital marketing. Why have you chosen to just focus on organic? and I’m assuming SEO. rather than leverage some more paid traffic? Or what’s the thought there?
Kristen – 00:14:03:
We do use SEO. I’d say another strong one for us has been partnerships. For one example, we started working really closely Cratejoy, where we originally had our website hosted, but they have their own marketplace. Our biggest resource at this point was time, and we were able to pour time into working with partners who have a really, really wide reach. Instead of paying X per sale, we invested that time into partners who were able to help us generate those sales for much less. Beyond that, we’ve been working with vendors. So people or companies whose product goes inside of our box, we can work with them to get better negotiated rates. And in addition, co-market. So maybe we’ll do a giveaway with a jam company where they’re giving away a three pack of their product and we’re giving away the kit that uses their product and tap into each other’s audiences, grow each other’s email marketing list and continue to grow there. So we’ve really found, I guess you could say more frugal means of growing. And that has really allowed us to continue to stay bootstrapped and continue to reinvest most of our profit into ways that we can continue to grow the business sustainably.
Izach – 00:15:24:
Awesome. Okay. That makes, that makes a lot of sense. What are, one of the things I always, I always think is interesting to hear about and I know it’s interesting for other founders, what are some of the mistakes that you made early on in the journey that, that maybe somebody else could learn from and prevent if they, the benefit of hindsight.
Kristen – 00:15:49:
Yeah. You know how I mentioned when the pandemic happened, we sold out for several months and there was this feeling of like, oh man, we’re leaving so much on the table by selling out. And then as things settled after the pandemic and things have returned more to a typical growth pattern, I think it’s just going too aggressive on our growth and expecting like, over forecasting. And then our product is a perishable product. So over forecasting is almost more painful than under forecasting. So I think for us, a mistake was over anticipating and just being overzealous with our product forecasting in the beginning. And now we know that if we sell out, we can pre-sell for the following month or we can point people back to existing inventory. So really learning how to optimize our digital marketing, especially website marketing, to point people to the inventory that we need to sell instead of saying, hey, Mother’s Day is coming up. Everybody’s going to want XYZ Box for the month of May, but maybe they don’t. Maybe we miss that. So yeah, I would say forecasting and learning how to optimize.
Izach – 00:17:07:
So what do you do if you’ve got excess inventory and you’ve got extra boxes, what do you do with those?
Kristen – 00:17:14:
Yeah, so we try to make sure each box has a pretty long shelf life, even though they will ultimately expire. We work with all of our vendors on expiration dates to ensure that they have as long of a shelf life as possible. So that’s the first line of defense. The other thing is, so I mentioned we started on Cratejoy, but ultimately Cratejoy was wonderful at getting us off the ground, but it wasn’t a platform that would help us scale and continue to grow once we reached a certain point. And part of the challenge that we faced was it was optimized for subscriptions, and there was really very limited in terms of things you could change to optimize it to sell your existing inventory. So last year I moved everything over to Shopify. Shopify is an e-commerce first platform. And I think a lot of times if you want to start a subscription box, it doesn’t come to the forefront because there’s plugins and integrations that you have to do to get that working. So it’s not, it’s not subscription first, but we, you probably know this, but you can check out what tech your competitors, your peers, or even like companies that you aspire to be like are using. And so I did a lot of inspecting, you can inspect their website and see who are they using? Are they Shopify? Are they using Recharge? Are they using bold subscriptions? What’s going on here? So I did a lot of research on the landscape that felt closest to us, as well as just the typical research you do where you compare different products to each other, do free trials, et cetera. And where we landed was Shopify plus Recharge. And that has been Recharge Managers, our… the more subscription-based functions that your website might have. And then Shopify is the e-commerce side. But the thing that Shopify gets so right is it’s so customizable. We’ve been able to, with Shopify, optimize to sell one-time boxes. You can do true merchandising with Shopify. You cannot do that type of merchandising with Cratejoy or many of the other tools that are built subscription-first.
Izach – 00:19:32:
Have you tried mystery boxes?
Kristen – 00:19:35:
Oh, you know what? I haven’t. And I think that my one challenge with that might be if they really didn’t like like a flavor or if there was an allergy, like a dietary restriction. But I do think that could be fun. Like have them fill out a form maybe.
Izach – 00:19:51:
Yeah, right. Like, yeah, what your preferences are or something. I know a lot of our clients that I’ve worked with that have excess inventory will combine it and then do, do mystery boxes at a discount, but they just sell through their inventory really, really well that way. It’s cool.
Kristen – 00:20:07:
And another thing, another thing is that we found that works really well is bundling. So of course we have our subscription. You can do a three month prepay, but if you want all of the things now, we have like an international series that you can buy today. So you can learn like three different internationally, international desserts that increases the AOV. It gets three products out instead of just one. So a lot of, a lot of benefit in bundling.
Izach – 00:20:36:
Yeah. You only got one time shipping charge.
Kristen – 00:20:38:
Yeah. One single shipping charge. And you can price it comparable to your three months subscription, but it does have like a higher margin for you in the end. And then you can do things on your homepage, if you’re going to sell out of subscriptions. or if you have already sold out of this month’s subscriptions, take the subscription off of the forefront of your website and push your other products.
Izach – 00:21:01:
Yeah, that’s super cool. So I want to talk about the product a little bit too. We talked about the business and some of the technical stuff, which is always near and dear to my heart on the M&A side of these type of businesses. But the thing that really impressed me when I looked at bakeatlovebox.com was… like how unique the recipes were. And you touched on this a little bit at the beginning, but there’s just a lot of stuff when I look at it, I’m like, I don’t know how to make that. I wouldn’t even know how to begin making, like you had like a flambé, sticky bun recipe
that looked delicious. Just a bunch of like really cool stuff. So how do you actually come up with these ideas? Like where are you getting the concepts from? And then how do you put it, like take something that looks complex and then I’m assuming that it has to be simple enough and practice that a regular baker can actually execute on making the recipe.
Kristen – 00:21:56:
Yeah, so oftentimes we’ll start with a flavor combination. So if you’re tuning in visually, you can see behind me, we have Yuzu lava cakes, and then it’s with a Blackberry drizzle. So Yuzu and Blackberry, and we’re like, oh my gosh, that flavor combination is delicious. Like, what can we do with this that makes it like very interesting? And maybe something that you’ve never tried before, or maybe you’ve tried something similar, but it just like gets you really excited. Like, I want to learn how to make that. So oftentimes we’ll start with the flavor and we’ll think, okay, what month could this go with? Okay, this month, I believe it was March. So like still like a little chilly outside with something like warm and you’d want t share with friends and families. These are like warm lava cakes. And then in terms of like developing the recipes, So I myself, I told you about my background, digital marketing, never mentioned going to culinary school or working back of house in the bakery. I worked front of house. Sometimes they’d let me pipe frosting, but not usually. So-
Izach – 00:23:07:
Wait, you did go to culinary school or you’re pointing out that you’re not?
Kristen – 00:23:10:
I did not. No, never went to culinary school.
Izach – 00:23:12:
You’re going to say I missed that on the LinkedIn profile.
Kristen – 00:23:14:
Yeah, never went there. So I look at recipes and I’m like, okay, how could we, I want to learn how to make a lava cake. So I’ll look at recipes, I’ll make lava cakes, I’ll make tons and tons of mistakes. And then once I figure out how to make a lava cake, okay, well, how do I turn this into maybe a Yuzu lava cake or a white chocolate lava cake? And honestly, I think a lot of the box for like, why does this work? Why could a novice do it? Because I am, even though I’ve done baking a lot now for each recipe that we try, I’m still a novice. I might have to make a recipe 30 times before I get it exactly right. And I feel confident that other people can too. And I’ll throw in there, we do now have a professional baker as a part of our team. And she helps me a lot when I’m like, okay, what is going on here? I don’t have to figure it all out for myself. I would say in terms of like coming up with the recipes and making sure that they are streamlined, it’s a lot of lessons learned and making sure that our bakers don’t have to learn those lessons the hard way.
Izach – 00:24:26:
So I bought the Macaron Kit, disclosure and if I can execute on making a good macaron then anybody can do it. It’ll be awesome. I’m excited to see how it goes because I love macarons and I’ve never tried to make them. I have no idea how to do it.
Kristen – 00:24:46:
Awesome, awesome. Well, I would say that one is definitely one of the more advanced boxes, so watch the videos. But I’ll also tell you that a lot of our bakers are, I would say, teens that get really inspired by these baking shows. And I’ve had a number of parents and grandparents say, look what my 15-year-old made. And it’ll be, I don’t know why, maybe 15-year-olds are all really interested in macarons. But that’s what it’ll be. It’s the raspberry and orange.
Izach – 00:25:16:
That’s really interesting. And I was thinking about this. I wanted to ask you a question about demographics. I guess my assumption was that you’re customer avatar was a 30 to 50 year old woman, but is that is that correct? Like what what is what are the demographics the team? That’s really interesting.
Kristen – 00:25:32:
So I would say the demographic that you estimated is really on par with the demographic that I estimated. And it’s like partially right because the people who buy the product are usually in that range, if not further north, but they’re generally buying it for a child or grandchild.
Izach – 00:25:52:
Oh, yeah. Super giftable, right? It’s a super giftable product.
Kristen – 00:25:55:
Yes, yes, exactly. And I think it’s that, but it’s also like, I have a child or grandchild who’s interested in baking and like, I want to spend time with them and this is something that we can do together. So while it may, the 30 to 50 year old may not think, hey, let me get this product for myself. They’re thinking of like, hey, let me get this product for my child or grandchild. They also want to be a little bit involved in it too, but they want to help the person in their life explore something that they’re really interested in.
Izach – 00:26:28:
Man, that’s a great idea. My son is 12 and he loves to bake. He watches those baking competitions. Is it cake or not?
Kristen – 00:26:41:
I know exactly what you’re talking about.
Izach – 00:26:42:
And then he’ll go to the kitchen and just like try to bake stuff like with no recipe, right? He just goes with like he’ll get flour and sugar and eggs. And he’s actually like come up with some pretty good stuff.
Kristen – 00:26:52:
Izach – 00:26:53:
Some terrible stuff too. But he just likes the process. He likes the science-y aspect of baking. There’s some chemistry-like components to it. I’m totally going to buy him a subscription and that’d be really fun to do. That’d be a really fun thing to do with them. Is that like a target market for you? Is like parents baking with their kids?
Kristen – 00:27:14:
Yeah, definitely. Definitely. Cause it, you know, like,
Izach – 00:27:17:
Doesn’t have a dessert, right? You all get to eat desserts.
Kristen – 00:27:19:
Like everybody gets to enjoy. Yeah. Yeah. Whether or not people want to be involved in the actual baking process. I think baking as a concept brings people together because you’re, maybe you’re baking something together. Maybe, your son’s in the kitchen doing it mostly by himself, but asking questions here and there, you’re spending time together. And then you have the finished product that you can enjoy with, with your son, but you can also spread the love and, uh, and share it with others, which is actually, I don’t know. I don’t think I’ve actually mentioned this, um, that comes back to our mission, which is we’re a baking education company that was developed to share the love of baking by making it more accessible.
Izach – 00:28:03:
Alright, that’s awesome. So, hey, if there’s one call to action that you would want our listeners or other founders in the space to take from the conversation, what would it be?
Kristen – 00:28:15:
I’ve worked on a lot of, well not a lot, but a handful of really fast-paced startups. And I think that they were growth at all costs at some times. At some point, it wasn’t when we first started, but at some point I decided that wasn’t the right fit for us. So when we first started working on the business, my husband and I both had full-time jobs. So it was all about finding time to work on the business. And also I was pregnant at the time. And we had our concept, we were starting to gain traction, we were packing boxes at night, doing as much marketing work as we could, but really burning the midnight oil. And then once we had our daughter and relatives we wanted to visit, they’d meet her. And then almost immediately after meeting her, we would enlist them in helping us, like weigh and package ingredients, taste test. It was just all a whirlwind. And I did end up leaving my corporate job during that time to give myself a bit more time for the business. And now we have our second daughter, and I’m still really not back to this total number of hours that I thought I would be at. But what I’ve learned is this is okay. It’s not a race. We don’t have to grow lightning fast. Could we be tripling our growth every year? Yes, I’ve seen that and I’ve contributed to that at several companies. And I know that’s something that we could do, but at what cost? So the way that we’re growing the business is steadily and profitably. And coming to this understanding is still sometimes a huge challenge for me because I want to grow as fast as possible, but definitely reeling it in has been really, really wonderful from Work-Life Balance. So the call to action that I have for the listeners is no matter where you are in your business, whether you’re just starting out or years in, I think it’s okay to move at the pace where you can find that harmony between work and your life. What I’ve found is it’s the people in our life who we do it for. And it’s important for us to find ways and time to experience life with them. So the call to action is if you’ve ever seen a pastry or another baked good and you’ve thought, I might like to learn how to make that, learn how to make that with somebody who’s important to you. And if you need a place to start, check out bakeeatlovebox.com, see if there’s something that you want to make on there. And if it’s okay with you, I also have a discount code where you can use deal closers, all one word to get 20% off the first box in multi-month subscriptions.
Izach – 00:31:05:
Oh cool. Deal Closers all one word. All right. Yeah. That’s the, I’m going to take advantage of that right away.
Kristen – 00:31:12:
Izach – 00:31:13:
For my son’s box. Yeah, thanks for doing that. Yeah, we’ll put the… If it’s okay, we’ll put that promo code in the link with the show description and everything, so that’d be great.
Kristen – 00:31:22:
That’d be awesome.
Izach – 00:31:24:
How can our listeners connect with you and bakeeatlovebox.com?
Kristen – 00:31:29:
Yeah, so, I guess, bakeeatlovebox.com. Follow us on Instagram @bake.eat.love.box. Sorry it’s so long. but you’ll find all sorts of tips and tricks on there. And then if you want to connect with me directly, check out LinkedIn, I’m Kristen Baileys, that’s Baileys with an S like the drink and feel free to send me a direct message.
Izach – 00:32:08:
That was Kristen Baileys who you can find @bakeeatelovebox.com. Follow her on Instagram @bake.eat.love.box. Thanks everyone for listening to this episode of The Deal Closers Podcast brought to you by websiteclosers.com. If you like the show, be sure to rate us, write a review, press the follow button and share us with your network. And of course, if you’re looking for help selling your e-commerce business, be sure to visit websiteclosers.com. This episode was edited and produced by Earfluence. I’m Izach Porter. Follow me on LinkedIn. And we’ll see you next time on The Deal Closers Podcast.