Why do some non-funded businesses stagnate while others skyrocket? On this 123rd episode of the E-Comm Show, Andrew Maff interviews Mike Salguero, CEO of Butcher Box. By completely bootstrapping its way to a $33 million company in its first three years, Butcher Box is revolutionizing the meat industry.
In this episode, Mike will discuss Butcher Box's one marketing cornerstone that took it from an unknown startup to its $100m+ company. He’ll also highlight what it really takes to be a profitable unfunded company and the one pitfall that gets most. If bootstrapping, subscription models, all mixed with a little bit of bacon is your thing…you won’t want to miss this one!
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Andrew Maff and Mike Salguero
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Mike Salguero
Mike Salguero has been on the forefront of the claims-based meat movement since founding ButcherBox in 2015, when he discovered that 100% grass-fed beef was extremely hard to find in the U.S. He built ButcherBox into the leading direct-to-consumer meat brand by making high-quality meat and sustainably sourced seafood more accessible to all while putting an emphasis on animal welfare, the environment, and supporting farmers and fisherman. ButcherBox has been B Corporation Certified since 2020, signaling the brand’s commitment to using its business as a force for good.
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I think what's most important is having a kick ass product. Most of the people who sign up say that they heard about us from a friend or family
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Hello, everyone and welcome to another episode of The E-Comm Show. I'm your host, as usual, Andrew Maff. And today I am joined by the amazing Mike Salguero, who is the founder and CEO of Butcher Box. Mike, how you doing right here? Good show here. Yeah, doing great. Thanks for having me. Yeah, appreciate you being on the show. So I always like to start off in a relatively traditional manner. But I'd like to hear it. I know at this point, you've been on enough podcasts and had your face everywhere that everyone already kind of knows who you are. But how would you explain what butcher box is to in layman's terms? I mean, having my face everywhere is take some getting used to so
01:42
butcher box out. We ship meat in the mail, meat raised better.
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In the mail directly to customers. We have hundreds of 1000s of subscribers. And we compete against the butcher. We want you to stop going to the grocery store and wondering what you should be purchasing or who treated animals well or who treats the environment well and purchase from us.
02:09
We started with grass fed beef, pasture raised grass fed beef, and moved into
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pasture raised chicken, organic free range chicken, pasture raised pork, etc, etc. And have 120 different products. We're really trying to meet the customer in all of their needs in the kitchen. Everything from you know, a steak that needs to be cooked from raw to pre cooked items that can just be opened up and microwaved and served quickly.
02:44
Beautiful. How did you come up with this because your background, not necessarily in the meat realm. So how did you how did this come to be? Yeah. Well, I was running a company before this.
02:59
So I got out of college. And I decided that I wanted to
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do something entrepreneurial. And in college, I was trying some entrepreneurial hustles. I started in real estate, I rented apartments. That's where I met my wife and my first co founder that I decided I wanted to get a real job. So I went on literally 75 informational interviews and finally landed a job at a real estate developer. I did that for three years. I didn't like that. That was my only like real job. And I really regret that I did that.
03:33
Got my MBA at night at Babson, which was like the entrepreneurship school. And then started my first company which I ran for eight years, we raised $30 million in financing, it was called Custom made.com and ended up hitting a wall losing everyone's money shutting down.
03:48
I took the weekend off. And then I started butcher box, another running butcher box for eight and a half years, roughly. So I've been sealing for 1617 years at this point with really no time off other than, you know, vacations, whatnot. I got into butcher box because when I left custommade I decided that I didn't want to raise money and I wanted to follow Tim Ferriss four hour workweek and find something that was going to be a side hustle that was not going to take all of my time and that I could literally check my numbers from a cafe in Argentina and then go about my day. I was looking to have 1000 subscribers who I was looking to make $20 a month off of and thought with 20 grand I could pay a couple of customer service people and, you know have like a little nice little hobby business. I was particularly interested in grass fed beef and animals raised better. I had read Michael Pollan's book The Omnivore's Dilemma.
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And my wife and I were trying to clean up our diets. She has an autoimmune thing and we're trying to
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I eat better. And a lot of these diets, like an elimination diet, where you eliminate gluten and dairy and soy and nightshade from your diet, and then you add them back in. A lot of those diets said eat grass fed beef. And I lived in downtown Boston, I just got really interested in like, where do you buy grass fed beef and couldn't find any. So I ended up buying it from a farmer. And then like,
05:22
I bought too much. And then I was selling it to my friends. And one of my friends was like, this would be so much better if it's delivered to my house. And I was like, Yeah, that would be better. And so I started trying to figure out how to make that happen. And this is like, wow, custom made was kind of falling apart. I was, you know, in the background, trying to figure out, like, how would you ship meat in the mail and whatnot.
05:48
And I hit multiple roadblocks.
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But you know, doors opened and things happened and
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started with the Kickstarter and 2015 went really well and have been kind of, you know, holding on to the tiger's tail since then.
06:07
It's awesome. The, there's so many things that you have been successful with through butcher box that so many other companies have failed in. And that's more or less what I imagined, we're going to talk a lot about today, one of the one of the very first things I gotta ask, you obviously had some some downfalls with venture capitalists, I don't blame you. So you are now basically, you know, far into nine figure company and you have bootstrapped the entire thing. When you talk to companies that Bootstrap and they hit like, you know, they start breaking seven figures, they hit a wall, and they don't know what to do. And they kind of get stuck, and then they start looking for investments or loans. It kind of gets ugly. Yep. How, how on earth? Did you bootstrap butcher box? Yeah, so
06:58
the the place where people get stuck, when they Bootstrap is inventory.
07:04
Far and Away, that is the problem. So the problem is you grow and you're like, ooh, we're growing, we need to like invest in inventory ahead of our growth. And then you end up with a bunch of inventory, which is cash on a shelf unless you figure out how to finance it. And then people are like, oh, I need money. And I have lots of people who asked me for bootstrapping advice. And I see so many examples of people falling into that trap. Now, the trick is that you need to figure out how you're going to finance your inventory, and not own your inventory yourself. And there's a couple ways to do that you can get debt, you can ask your inventory providers to do it for you. So in our case, we had people who were cutting our meat, who were one, they give us 30 day terms, and two, they're actually really bad at invoicing us. So early on, it would take like a month for them to invoice us. And then we had another 30 days. So it was like 60 days of float. And we built our entire model around wanting to be bootstrapped. So,
08:03
for example, we had this curated box, this is what we started with, we had you chose beef, beef and chicken or beef, chicken and pork, and we're gonna send you whatever we wanted to. Why did we do that? Everyone's like, nobody buys meat that way, why? Who's gonna buy meat that way? And we're like, Well, you know, like Blue Apron. And all those companies seem to just like send you whatever meals they want. So I think there's a market. The reason why we did that is because I didn't want inventory sitting on a shelf. The minute I'm trying to guess, at how many robots are gonna, I'm gonna sell this week is the minute that I have a bunch of inventory sitting on shelf, we did find very advantageous terms with our, our meat providers, where we're like, hey, you need to put up inventory. We still do this today, they have like weeks of inventory on hand in their facility. And they don't charge us for it until they ship it to our distribution center. We also have a line on our distribution center where the distribution center owns the inventory, or it's owned by a third party, but the distribution center is the person who's like responsible for it. So the way it actually works is I buy a piece of meat, it gets cut, it gets put in the distribution center.
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customer pays for it, we ship it out, once it shipped out, I have seven day terms to repurchase that inventory or to sorry to buy that inventory. That is what's called like,
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what is a positive cash conversion cycle? Right. So like we we get, we get paid by our customers before the inventory leaves the facility, we have not paid anything on inventory. And the beauty of that is it puts our like incentives and the company's incentives in alignment. Because where you get into trouble is where you're like, well, we can't grow anymore because I can't afford the inventory. And then what people do when I see countless errors on this is especially people who aspire to bootstrap or whatever.
09:53
You're trying to solve a debt problem with equity dollars, meaning like
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inventory is a debt problem, it's like you get a loan, you, you, you use your inventory, you get more inventory that's generally fixed with debt. What I see a lot of founders do is they like, go and raise $5 million to finance their inventory. And the problem with that is like, Yeah, but if you grow, if you 10x the business, you're just gonna have to raise more money. So it's, it's really important to figure out early, I'm talking to a guy right now he's working in a, I don't think it really matters, but like, he's working in a space, and he has his choice of like, 10 different vendors. And he's like, Well, like these guys have the best quality. And what about these guys? And as like, dude, the only thing that matters is terms, what terms? Are they giving you how much inventory they're willing to put up? How much inventory they're willing to put on their shelves? And what are the terms like everything else is like kind of it doesn't matter nearly as much when you're starting out?
10:53
How so? When you're going to these vendors, you're talking to manufacturers or you know, in your case, you're going all the way back to farmers and dealing with butchers, etc. How are you having these conversations with them to actually do that? Because I know it's not a very common practice, most people that sell online, are sticking with a ton of inventory. It's sitting on the shelf to your point, it's just cash sitting on a shelf. Yep. How do you even How do you even begin that conversation? And how do you make it beneficial for them? To make sure that you're in a good position to keep scaling it up from there? Yeah. So first of all, I want to say there's a whole bunch of stuff on the marketing side as well. So if we want to talk about bootstrapping, and how to think about marketing, I'm happy to talk about that as well, later, but on the supplier side, how do we go about talking to suppliers about like inventory and whatnot.
11:44
So
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I oftentimes find that people don't know what train they're on. It's like you're either on the venture capital train, or you're on the bootstrapping chain, you can't be on both trains at the same time, you'll like end up in the splits, and you'll yours doesn't work, you're gonna die. So oftentimes, you have bootstrap people who then want to go behave like a venture venture backed company. In our case, where like, look, we are not raising money. So if you want to work with us, the only way that you can work with us is to give us 30 day terms. That's it. Like, that's what I'm looking for. That's what we need. And, you know, I do want to say that I had run a company before that was funded by Google and others, we had raised $30 million in financing. So like, I had a name a bit of a name for myself, right. So I have to recognize that I came from a place of privilege. But I think that there are ways to do it for anybody, you just have to know that that's the train you're on, right? I think oftentimes people are like, well, this is the only provider I could find. And it's like, well, actually, if you if you want to go the route of not raising money, and this is the only provider you can find, I would argue they're not a provider. Like you need to find someone different. Because this person is not going to be a provider for you. That type of thinking is not necessarily will, like most people want to be like on bootstrapping, bootstrapping. But then like, I'm going to make these three decisions, which is going to make it virtually impossible to bootstrap. So if you're on the bootstrap train, you need to be on the bootstrap train, which is like, I'm only working with you if you do this. And that's a yeah, that's, I think, a change from how most people want to operate. Yeah. So to your point, and my favorite subject, let's let's look at the marketing side on how you did that. Right. So one thing which you've already named dropped one of them, I know, probably more subscription brands that have failed than have actually succeeded. So the marketing side of subscription brand, and obviously, you've figured out the supply side. And of course, you figured out the marketing side, but let's let's hear about that. I know that you did a lot behind influencer marketing, affiliate marketing, things like that. But what has been the main driver from a marketing perspective that has allowed the business to keep scaling?
14:02
Yeah, so I guess a couple things. So first of all, again, we needed to be, we didn't raise any money. So we needed to be what we call box one profitable, which means I need to make enough money on the first box that we shipped to you, so that we can afford to find more people.
14:26
That is not how most companies work, right? Usually, it's like a cost me $100 To acquire a customer and we make 25. And like, we think that they're gonna like pay us back over time. But we haven't been around in business long enough, but we're pretty helpful.
14:43
And in a in a non subscription business, it's even more risky because you're like, we don't know what the repeat purchase rate is, at least in a subscription business. You could start looking at your churn rate and start like kind of inferring how long people are going to stay. We didn't have that luxury. We had to make money on the customer.
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The first box. And so it was like, Hey, we have a $20 profit.
15:06
How are we going to find a customer for $20? And what we did was we, first of all, we did Kickstarter. And we did Kickstarter, because we thought that there was a way to arbitrage Kickstarter, which we were right about. And then during the Kickstarter campaign, we noticed there was an influencer, who like tweeted about us. And we saw a flurry of like signups. And we're like, Okay, that'll work. And at the time, this is 2015, Thrive Market was out. And they had done this thing where they had like, all of these people in the Paleo space, were saying, like, sign up for your Thrive Market subscription. And we were like, I wonder if they would sell grass fed, like, like this service, you know, meat raised better, specifically grass fed beef. And so we just ended up finding anybody who had talked about grass fed beef.
16:02
You know, like, hey, the same people that like my wife and I were following, right, these bloggers who are like eat grass would be for for a month. And then like, you know, reintroduce stuff. We're like, Hey, I started this company, because I was following your blog. And it said, to eat grass fed beef, but I didn't know where to get it. So I started this company. And do you want to tell your audience about it. And
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by the way, we can't pay you up front, the only way that we can pay you is on residual. And so we signed up people to basically no payment upfront, but a, you know, $15 per subscriber per month type of bounty.
16:42
And, you know, one thing is I'm prefacing this, this was 2016, that arbitrage has largely gone away. Like, I don't think that there aren't many people who are willing to do that anymore. The influencers that we worked with now are like, hey, we want money upfront, like very few people are willing to take that risk anymore.
17:03
But there's always like, there's always a hole in the internet, like the internet was built on arbitrage. It was built on finding these pockets where there's a ton of value and is relatively cheap and exploiting those pockets.
17:17
And so, you know, I've said on podcast before, you really need like one trek, to get yourself to like a 35 to $50 million business.
17:30
We got so our growth was we did 300 grand, we started in September to 300 grand in that first part of that year, we did 5 million the second year, 35 million, the third year, 105 million the next year. So that was like our growth curve. We ran one trick up to 33 million. That one trick was the influencer strategy. And we went deeper and deeper and deeper and deeper and deeper into it. And I think that that's like, you know, most, I have an analogy of like, your wild catting for oil. And you want to in marketing, you want to have a very like cheap shovel, and you're just digging the small holes. And when you find oil, it's like, keep digging there. Don't go further. Don't take your shovel to some other thing, because you're supposed to be like you as the CEO are supposed to figure out all the different ways to advertise like no, just focus on the hole. And it's like, oh, wow, this is like a really deep well built market. The other people involved big build infrastructure, like suck that suck that well dry before you move on. So we went from I mean, we were basically in business for almost three years before we ever did a single Facebook ad.
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And then we did Facebook ads because
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which is a hilarious story. I have this like really funny video of my daughter screaming at my life for bacon. She was like really mad, there was no more bacon. And so she's like, more fake ad. And it's like, annoying, but like catchy. And
18:57
we we posted that just on our Facebook page, and people loved it. And we were like, we should just advertise and so we just started advertising and it worked. It was like get free bacon in your first box. And
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so yeah, I mean, you know and now we we advertise everywhere and we do everything possible, but starting out it was like one one trick, one trick. That's awesome. So you more or less started off completely arbitrage in the influencer side it basically ceding them because you didn't really pay them until they actually made a sale. That's right now I know that you obviously just mentioned but I've been looking through like your social and stuff like that I saw you were just tweeting about or axing if they should call it that now, of actually, the advertising you've been doing. I know January, you've started to see some better results with some of the advertising side of things like what has been the approach from an advertising perspective. Are you still primarily focused on social media? Have you found kind of that other whole outside of the influencer side that you've been focused on? You know, like? So subscription businesses are amazing in many ways because they
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compound on themselves. So, you know, you sign up $100 worth of revenue in month one, hopefully more or less call $1,000 in revenue in month one, you churn out 10% of those people. So now you have $900 worth of revenue. And if you add another 1000, now you have 1900. And then you run that, again, you've got, so it just compounds on itself in a way that's like you can, you can grow really fast. If you figure something out. subscription businesses get really hard a little bit later, when they are when your churn is eating your customer base. So when you're dealing in multiple 100 1000s of customers, even if you I always say like even if you're sending people bricks of gold in the mail, at a certain point, they're like stop with the bricks a goal like everyone's, like your churn, you will have churn no matter what. And so what ends up what ends up happening is your churn when you're, when your number of subscribers is so big, is a big number. And so where we are right now is like we have hundreds of 1000s of subscribers, we have north of 400,000 subscribers. And, you know, on any given month, you've got to replicate 10s of 1000s of people in order in order to like grow, or it really in order to tread water. And that becomes really hard, right? So because you're deepening your pools, there's less people, it's like, it's a whole thing.
21:29
So I mean, we advertise every where
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we are mostly in the demand space. So you know, the Facebook's of the world and Instagrams and
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Tiktok. And
21:44
we've done a bunch of TV, we've done a bunch of brand advertising, like top of the funnel stuff, awareness stuff.
21:51
And ultimately, like, you know, which I'm happy to talk about as well, because we're unfunded, we have a very long time horizon, like we don't need to sell, we don't need to grow at any sort of particular rate, we don't really want to go public, we don't want to sell the company right now. So I, I think what's most important is having a kick ass product. Like that's by far the most important, like, most of the people who sign up, say that they heard about us from a friend or family. And I think that that is going to continue to be the case. So it's like, how do you activate that? How do you like, inspire people to share, etc? is a big piece of kind of the work that we do. Yeah, I've always said like, marketing is actually kind of easy if you've got a great quality product in place, because it's just about being in front of the right people at the right time and reminding them that you exist. So it does obviously make a lot of sense. So you know, the subscription side, you're compounding through that. The the advertising side, one of the questions that always comes up when you're focused on top of funnel things, you know, between whether you're doing it digitally, or whether you're doing it through commercial, how are you painting any kind of ROI when you're looking at, like, we look back at your influencers, right? You wanted to make sure that you were basically just paying them 15 bucks a box? How do you make sure that your top of funnel aspect is still tied to some direct ROI, since it's not as tangible as you'd like it to be? You mean the brand the brand spent? Like like the Yeah, the real top top top top of funnel? Correct? Yeah.
23:22
I don't have a good answer on that. I mean, we have
23:25
I mean, my answer would be that we try to measure everything. And so we don't, we don't play in like the very, very top of funnel unmeasurable stuff we have and we've frankly, I have not seen any economic value from it. And so you know, it was like two years ago that we put like seven and a half or $8 million into brand spend. And at the time is like what is brands band is like well, we just won't put a conversion button on it and then this brand spend it's like that sounds like a bad idea.
23:55
No, I'm not sure that's a good idea.
23:59
So I would say the thing the brand spend that I think is really interesting for butcher box is enabling our customers to send boxes to their friends for free or like giving them tools to talk about us and build that word of mouth. Because I mean, we've shipped a box to over 1.5 million households in this country. So a lot of people have tried our product which is like really cool and humbling and scary and all that but like
24:28
you know there's there's like
24:30
ways to harness that that aren't like oh, do a Super Bowl ad that'll work.
24:37
I don't know how to do the Super Bowl ad and have it work and frankly, I don't think we can afford it. I think we need to like continue just chipping away at like, you know the basics.
24:50
Totally understand. Like I want to take up too much more your time. I know you're super busy. I would love to give the opportunity here. Let everyone know they can find out more about you and of course more about ButcherBox
25:00
Yeah, well you can follow me on Twitter at Mike Salgueiro Sal Gu iero
25:07
where I try to tweet, which is a whole thing and heart.
25:13
And you can go to butcherbox.com We have a promo code Mike sent me if you want that, I think it's like 20 or $30 off your first box. And yeah, I mean, I
25:28
I think that I think operating a company in general is a very lonely endeavor. And I oftentimes encourage people to find a circle of people who can help you because, you know, you don't want to be it can feel lonely, but it doesn't have to be lonely, but also
25:46
I cannot agree more with that, Mike, I appreciate your time. Thank you for joining us everyone who tuned in of course, thank you as well please make sure you do the usual rate review, subscribe all that fun stuff on whichever podcast platform you prefer or head over to theecommshow.com to check out all of our previous episodes. But as usual, thank you all for joining us and we'll see you all next time.
26:12
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