How I Started A $20K/mo Cigar Subscription Business As A College Student

Michael Arciola III

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Published: July 30th, 2019

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Michael Arciola III

Founder, Southern Cigar Co

$20K

revenue/mo

Founders

Employees

Southern Cigar Co

www.southerncigarco.com

from Austin, Texas, USA

started April 2015

$20,000

revenue/mo

Founders

Employees

Discover what tools recommends to grow your business!

platform

Cratejoy

G Suite

shipping

Pirate Ship

seo

Ahrefs

other

HARO

Discover what books Michael recommends to grow your business!

Never Eat Alone, Expanded and Updated: And Other Secrets ... Keith Ferrazzi

Building a StoryBrand: Clarify Your Message So Customers ... Donald Miller

Outliers: The Story of Success Malcolm Gladwell

Getting Things Done: The Art of Stress-Free Productivity David Allen

Without Their Permission: How the 21st Century Will Be Ma... Alexis Ohanian

Getting Past No: Negotiating in Difficult Situations William Ury

The Mathematical Corporation: Where Machine Intelligence ... Josh Sullivan

Want more updates on Southern Cigar Co? Check out these stories:

Hello! Who are you and what business did you start?

I’m Michael Arciola III and the founder of Southern Cigar Co. At the time of founding, I was a student at Florida State University studying computer science and business. I started the company 4 years ago out of my apartment and couldn’t be happier with the progress we’ve made thus far.

Southern Cigar Co.’s primary product is a subscription box, which was all the hype then and still is now. Our primary customers are fathers, golfers, businessmen, and new hobbyists. We ship worldwide and have shipped to over 30 different countries so far. Currently we are doing ~250k a year in revenue, but this has been growing at about 20% year over year.

Me packing boxes outside out apartment on the deck. I would do them in batches, this being one of them.

how-i-started-a-20k-mo-cigar-subscription-business-as-a-college-student

What's your backstory and how did you come up with the idea?

My journey to build Southern Cigar Co. was much different than most. Although I’ve always enjoyed cigars, it wasn’t built around a passion for cigars.

During my time at Florida State University, I always joked around (sort of kidding, sort of not) that the computer science students were expected to learn something than immediately put it to use in the real world. The flip side being the business school, where you learn something very abstract that you likely won’t be able to apply until you are at the senior level.

There are people less qualified than you, doing things you want to do, simply because they decided to believe in themselves.

I felt that I could prove my computer science knowledge, but business knowledge I couldn’t. I needed to prove to myself that I could make it in the business world, a test or grade wasn’t enough for me. After realizing this, I started a year-long journey that would eventually lead to Southern Cigar Co.

Knowing I wanted to create a business, my next problem was I had no money and no time. I was a full-time student without a job during the school year. With that, I started brainstorming business types that wouldn’t take up tons of time and that I could start with a relatively small amount of money.

After some time I came across subscription boxes, which seemed to work well. You only need a few thousand to buy initial inventory, get some boxes, website, and I’m good to go. Additionally, we only have to ship once a month. So this didn’t require that I pack and ship packages every day/week. Just a few days of packing and shipping and I can continue on with my life.

Now with the business plan setup, I need an actual product to sell. This process took the longest, but was the most important. Again, like I did before, I laid down my initial constraints.

I wanted to sell something “consumable”. I always felt like subscription boxes for something non-consumable, like socks, wouldn’t work. After a few months, you would have enough and cancel the subscription.

With that constraint in place, for the next 6-8 months, I would write down anything I saw that was consumable throughout my day. When I saw everything, I wrote down everything. This includes pencils, toilet paper, gasoline, or anything else that was consumed. At the end of the day, I would remove the bad ones, and make a list of top 1-2.

After about a week I would have a list of solid 3-5 ideas that could work. I would text my Dad, Mom, brother, and girlfriend with my ideas to see what they thought. My Mom always knowing I could do it stood behind all of my ideas (like a great mom should). My girlfriend generally took the middle ground, knowing I could do it but was hesitant. My Dad and brother weren’t as easy to sway and generally were my harshest critics (which ended up being a blessing in disguise). They asked me the hard questions making me think from different perspectives.

Eventually, ~ 6 months after I decided on building a subscription box I saw someone smoking a cigar and thought this was the one. But, as I always did I ran it by my advisors (Mom, Dad, and Brother).

With some hard convincing they seemed not to hate the idea, which was a good sign to me. So I did more research on my own and jumped right in.

Take us through the process of designing, prototyping, and manufacturing your first product.

This was possibly the easiest part. Since we aren’t doing anything new or novel, there’s processes and companies in place to help us out.

But first, when I got to this phase I realized I wouldn’t be able to manage the day-to-day activities. Not that I couldn’t, but at the time I was a double major in computer science and business, was running my own web design firm, very active in school clubs/activities, and just got accepted to be an intern at Viacom/MTV at their headquarters in NYC.

Due to my overwhelming schedule, I knew bringing on help would be my best help in bringing this vision to life. I ended up asking my roommate and good friend at the time to manage the day to day operations as I knew I could trust him with that.

With him now onboard we came up with the business name (fun fact: actually with another good friend, originally 3 of us, who ended up leaving after we all agreed we need to put $1,500 each into the company to be a founder as startup capital). The 3 of us after a brainstorm session decided on the name “Southern Cigar Co.” because we all were from the “South” US, and also from South Florida. (Another fun fact: our logo in the center shows M & J for Michael and Jason, and 4 & 15, because we came up with the name on 4/15/15).

Next came the product. This was something I refused to skimp on and the bulk of our money went to. We spent ~2k on the website which is still in use today! (which I consider our storefront since we don’t have a physical store).

Another ~2k to have professional boxes designed, manufactured and shipped to us. Next came the customer cigar bars, which is bought and had our logo put on. Last came lighters, cutters, and humidifiers which we standard we bought from wholesalers.

The rest of the money went towards buying the cigars to fill the boxes each month. At the time Jerry’s was letting us buy singles, so however many customers we had we would grab. Then I would fill in the description card and have that printed. The card was designed once from Freelancer.com contest which we paid like $300 for and are still using it to this day. Below is a photo of the first card we ever sent. We eventually removed the small text, but everything else is the same. I input the details, dates, and photos into the design with a standard backside with our logo and social media handles.

Describe the process of launching the business.

The process of launching the business after the idea was fairly standard.

At the time of the LLC creation, I was actually doing an internship at Viacom in their headquarters in Time Square, NYC. We were able to submit the LLC business incorporation and open the bank while I was in NYC and he was in Florida.

Pricing was based on a few different data points. The most important data points were existing (outdated) cigar subscription services. They generally fell in the ~$25 range however, many offered 5 cigars, but to stay within a reasonable range I decided on 4 (roughly 1 per week - which is our ideal customer). The cigar’s we include in our box retails for, on average, at least $10 each. $40 was a fairly clean number which was more than all the subscription services available at the time, but still accessible to most people. So I decided on $40, but to add value shipping (contitental US), sales tax, triple butane lighter, cutter, and information card are all included at no extra cost. 4 years in and we still have not changed the price, although I cannot promise that will stay forever which shipping prices increasing year after year.

Next up was the tobacco license to legally be able to sell tobacco to consumers and buy from wholesalers/manufacturers. If I remember correctly LLC, bank, and tobacco license ran us ~$600-$800. We never took out loans or credit cards and strictly operated with the original starting cash.

Launching the business was a complete failure, which isn’t what we expected. We thought we could count on social media followers we had built up to signup on launch. None of them did. We originally hoped for around 50 customer to start with since we had already paid for 2,000 brand boxes, 5,000 branded bags, etc.

In reality we ended up with 3 customers our first month (all of them being family/relatives)... It did not look pretty for us and I realized I needed to find a way to attract customers. It was a rude awakening that it’s real money with real people. We can’t just expect them to find us or believe us. With all the investment already made in things we couldn’t even liquidate if we wanted to, there was no way but forward.

Looking back on the experience, I’ve realized you need to be realistic with yourself and goals. We didn’t have any launch strategy so it was just another website going live on the internet. Next time I would likely find customers first to launch with, like a soft/beta launch. Getting reviews online on blogs, marketplaces, or even on your website can be extremely helpful as well.

The USPS guy coming with his truck- that we filled!

Me in the founding HQ (my apartment at school).

Since launch, what has worked to attract and retain customers?

We aren’t able to run ads due to tobacco restrictions on most major ad providers, so we needed to find a work around.

Don’t follow others. Just because <insert newest millionaire overnight business> is the hot new thing and “everyone” is making money doesn’t mean you will.

Since launch, we primarily attract customers via search engines, media, and different marketplaces (including Cratejoy marketplace). We obviously prefer search engines, as there is no finders fees like there is with the marketplaces.

We haven’t been extremely active in the larger cigar community because the hardcore fans generally buy in bulk cigars, which isn’t really our customer. Our customers are generally beginners/novices who are interested in getting started. This is an area we are interested in jumping into soon, however.

Social media has also been a dead end for us, with very little traffic or customers coming from there. This is likely due to our customer’s ages, they aren’t really on Instagram or Twitter. We still keep it maintained and updated but don’t put a significant amount of time into it.

What has worked for us is media and search engines. They have both gone hand in hand with each other as we grew. I spent many hours reaching out and building relationships with blogs (including cigar blogs, mom blogs, fitness YouTubers, mainstream media, etc). This work laid the foundation for the company moving forward and has contributed to over 70% of the lifetime revenue.

Search engines are great because they are specifically looking for it at that time. So someone searching for “cigar subscription service” is a great candidate customer for us. Someone looking for “cigar boxes for sale” isn’t as we don’t sell cigar boxes like a normal ecommerce store does.

Our strategy wasn’t to game the system or make it to the top overnight. It also wasn’t necessarily something I focused on. I focused on everything I mentioned before, and the rankings came with it. I would reach out to hundreds of blogs, anyone who might have an interest. It’s easier for physical products because people feel some sort of value, unlikely online products. I reached out to mom blogs, cigar blogs, men’s blogs, golfing blogs, business blogs, and news sites.

We were looking for honest reviews of our product in exchange for that months box. Many people took us up on this offer, but compared to the amount of people I reached out to it was likely 10-15% response rate. At first I reached out to the smallest of blogs, anyone who would do a review. Slowly we got more reviews I would get stricter on who I would suggest does a review.

With reviews trickling in for over a year, we had all different kinds of blogs reviewing our product which began to grow organically. At about the 2 year mark others were picking up on us and we were getting featured in larger publications. We have now been featured in Buzzfeed many times, Maxim magazine, inStyle magazine as well as many others.

My originally apartment in college. The living room was always filled with orders.

How are you doing today and what does the future look like?

The future looks bright, although when we first started, there wasn’t as many competitors. Now it seems like a lot of subscription boxes are popping up with similar concepts. I say that because at the time we had the highest prices and most premium product that also included a lighter and cutter. Now there are similar boxes that look extremely similar to ours.

Currently, we are doing about 12k in revenue a month, with a 35% profit margin. We should run more analytics than we currently do, I generally only look traffic from different sources.

As far as social media and email campaigns, we keep them limited. In the past social media campaigns haven’t been super successful so we stopped. We have current and past customer on a list, but haven’t really explored many options there either.

Year over year growth has been great at about 30-35% each year. This is primarily because we were one of the first in the market, so we generally are found first. There’s other avenues as well we have looked into, like creating our own cigar brand to accompany the other brands, but haven’t gotten around to that.

As you can see there’s a lot more room for growth. This is an area we have been slacking, but I’m currently working full-time now at Google which has really impacted how much free time I have to grow the business.

Through starting the business, have you learned anything particularly helpful or advantageous?

I have a quote that really hits home for me, and think it’s important for everyone to see. I think everyone can relate to it at some point in their life, and it is true.

"There are people less qualified than you, doing things you want to do, simply because they decided to believe in themselves.”

In business I found my superpower is believing. It’s not going to be easy, there will always be issues, everyones a critic, but you adapt and make it happen. Seeing 3 customers (all family) sign up the month after launch hit me hard.

Thankfully, in business is doesn’t matter about your degree, or the school you went too. You aren’t judged by anything except the results.

What platform/tools do you use for your business?

I wish I had used a new tool I created during the naming/branding phase, as it would have made the entire thing much easier.

One of the things I was looking for in a name was an untrademarked and unregistered in all 50 states, and one that I also could have the primary social media handles as the business name. This took MUCH longer than expected, and because of it about a year ago I started developing www.formalfounder.com. It does it all in a single search!

However, for Southern Cigar Co. we kept our costs and tooling to a minimum. I like to keep things simple, but also didn’t have much money to spare. Our tooling starting off consisted of G Suite (for email, sheets, etc) and Cratejoy.

Today we still use those two, but also use Ahrefs for monitoring SEO performance, Pirate Ship for managing bulk labels, and HARO (help a reporter out) for potential media exposure opportunities.

What have been the most influential books, podcasts, or other resources?

Resources

Find a group you can count on. Bounce ideas off of, ask questions, etc. For me this was my family, friends, and girlfriend, but your’s could be a local meetup group or even a FB group.

Books

I’ve read a lot of books. If it wasn’t required reading in school, the only books I read were business books. Below are my favorite:

Never Eat Alone by Keith Ferrazzi
Building a Story Brand by Donald Miller
Outliers by Malcolm Gladwell
Getting Things Done by David Allen
Without Their Permission by Alexis Ohanian
Getting Past No by William Ury
The Mathematical Corporation by Angela Zutavern and Josh Sullivan

Advice for other entrepreneurs who want to get started or are just starting out?

One thing I don’t see many people talk about that I think is extremely important is timing. Not in the business, but in your life. It’s hard to start a business, so don’t make it even harder doing it at a time when you can’t handle it. Everyone has a change threshold.

If you are moving, jobless, etc, it may not be a great time to jump into it. At the time I was doing well in school, had an amazing girlfriend, awesome friends at school, and parents that had my back. So in my mind, worst case it fails but my life is still okay. It wasn’t going to impact my school, career, family, or friends if it failed.

Last thing I would say is just do it. You will learn to fly as you fall, it’s a learning process that school doesn’t teach you. Problems will happen, just focus on the solution(s). Lastly, don’t follow others. Just because <insert newest millionaire overnight business> is the hot new thing and “everyone” is making money doesn’t mean you will. Cigars aren’t new, they aren’t super sexy like tech, it isn’t a huge industry, but clearly there was need my product.