Key considerations before embarking on setting up a subscription business.

Subscription businesses have grown in popularity in recent years, with Lidl recently launching their own beauty subscription box worth £70 for just £2.

SMEs have also been jumping on this popular business model in recent years, with startups gaining traction in a range of categories including beauty, food, pet care, and more.

But what should entrepreneurs consider before embarking on this type of business model? Experts at money.co.uk business insurance have spoken to the founder of a beauty subscription box business to find out.

Rebecca Allison, Founder of The Indy Box, said: “I founded The Indy Box during the pandemic while on furlough from my full-time job in retail. I discovered that many major beauty subscription boxes rely on free products from brands to curate their boxes, and I didn’t think this was fair – especially for the smaller brands you often see crop up in beauty subscription boxes. That’s why I ensure that all beauty businesses I work with are independent brands, giving them a platform to meet new customers.

“We have such a highly engaged community, and our customers are genuinely excited to discover new, innovative brands they don’t see anywhere else. Our box has a budget to ensure that the brands receive a contribution for the products we feature, which isn’t a guarantee with other beauty boxes. They shouldn’t lose out financially when being a small business owner in these times can be so tricky.

“Every box has a guaranteed value of over £100, and every product we feature is full-sized. I used to hate receiving boxes of small sample-sized products, so I wanted to solve this problem for other beauty box subscribers.

“I founded my business with no experience of running a business, using my wages. I taught myself all business founding aspects, including branding, website creation, and marketing, so I didn’t need to outsource. I loved the marketing aspect, and because of this, I’m now in my second year of university studying marketing. I’m learning so much that I can implement in my business to help it flourish.

“One of my biggest challenges to date has been the cost-of-living crisis. People don’t have the money they used to for luxuries such as beauty boxes. We’ve seen so many people cancel as they can no longer afford the additional outgoing, and this has left us concerned at times about how we can adapt and continue to grow in such difficult times.

“We’re working on bringing in new revenue streams, including a new subscription box that will suit those with tighter budgets but still want to experience the joy of a beauty subscription box.”

Kyle Eaton, money.co.uk business insurance expert, shares his tips on setting up a subscription business:

“A subscription service is a great business model as it encourages repeat purchases. If you can establish long-term relationships with your customers, they’ll pay you regularly for access to your product or service. This means recurring and more reliable revenue for your business.

“An excellent way to begin thinking about what subscription service you could offer is to try and find a problem you can solve with your service. Is there anything missing from the subscription services currently on offer? Could you build a subscription service around your current line of work?

“Entrepreneurs starting out with this kind of business model need to ensure they have the necessary insurance. In the challenging business landscape, business insurance can protect you against any unexpected issues so you can focus on building your startup.

“Ensure your policy covers you for the risks associated with your specific business model, such as any delivery issues if you’ll be delivering a product or cyber fraud if you’ll be processing payments online. Business insurance will also protect you from everyday risks, such as accidents in the workplace, stock damage, and any legal costs.”