Mike Salguero (0:00)

This guy makes 1.6 million bucks a day selling beef, fish and organic chicken. His name is Mike and he's the founder of a little company called Butcherbox. Today I'm going to tell you exactly how he built this business, plus a ton of insights that you can steal and use in your business right now. That's coming up in just a second. Welcome to the podcast. My name's John Davids, but you all can call me J.D. i'm the CEO of Influicity. And on this show I. I like to share the stories of some of my favorite businesses and the people behind them. If that's your thing, make sure to hit that subscribe button. Leave a review wherever you're listening and tell a friend that's how I know to keep making this stuff. Get my best content to your inbox@johndavids.com now let's talk Butcherbox. You're listening to Making it with John Davidson. All right, so rewind to 2015. That's where this story begins. Mike's wife has just been diagnosed with a thyroid condition. And she's on a very strict diet. No gluten, no dairy, and if she wants to have beef, it's gotta be grass fed beef. Nothing else will do. So Mike starts shopping around. But this fancy beef is actually pretty hard to find. He tries Whole Foods, he tries his local butcher. He you can't find it or they're out of stock. So finally he lands on a local farmer who actually sells it. And there's just one catch. If Mike wants to buy this beef, he's gotta buy the whole cow. Not just one piece, the whole thing. This is kinda nuts, but Mike's a creative guy, so he starts thinking and he decides to buy the whole cow. And then he divvies it up and splits the meat with his friends and neighbors. And they love it. It's high quality meat straight from the farm, delivered to their door. And that worked pretty well. This gives Mike a very big idea. If his neighbors appreciate farm to front door beef, Mike figures maybe others will appreciate it too. So he opens his laptop and throws up a Kickstarter and he launches a beef subscription box campaign with the goal of raising $25,000 on Kickstarter. It turns out that the folks on Kickstarter are pretty hungry for this because he raises $215,000 in just 30 days. He smashes through his objective. Now he's got proof people actually want this stuff. So Mike gets to work. He starts dialing local farmers to build his supply. He Finds a processor who can pack the meat, and he partners with a shipper to deliver boxes directly to customers. And finally, he comes up with a name. Butcherbox. Now it's time to sell. The business is actually very simple. Customers can subscribe for about 130 bucks a month. That gets you a curated box of grass fed beef, free range chicken, and a bunch of bacon. He actually gives away a lot of bacon in the first year. And in year one, ButcherBox racks up $3 million in sales. Year two is $13 million, and year three is a ridiculous $30 million. He's doing all of this, mind you, with no outside capital and just 25 employees. So things are looking really, really good. And then something very bad happens. So it's March 2020. The world shuts down, people lock their doors, and Butcherbox is about to go on a very wild ride. Out of nowhere, there are hundreds of new customers signing up every hour. Way too many for this little business to handle. This could actually break the entire company. And Mike's got to keep the meat moving or this business might crumble again. It's time to get very creative. And Mike's good at this. So first off, his meat suppliers are running empty. They don't have enough stock. So he locks in guaranteed purchase orders to to keep the food flowing. Two, his shippers can't move meat fast enough, so he actually charters private jets to fly in boxes and dry ice so he can keep the meat shipping. And three, his support team is drowning. There's way too much going on. So he rapidly hires dozens and dozens of people to handle the flood of customers. It's total chaos, but it's working. Butcherbox grows faster than ever. Sales smash through $100 million, and they just keep on growing the delivering more meat to more doorsteps than anyone else. Today, the company sells over $600 million a year. It's a good thing Mike decided to buy that whole cow. So I shared this story on Instagram, YouTube, LinkedIn threads, Facebook. Millions and millions of you saw it. I got a lot of comments. And there are so many golden lessons in the story of Butcherbox and how Mike built it. The first big one I want to get into is how he started this business in the first place. So let's go back now. Mmm. I'm hungry. You guys hungry? I could go over some fried chicken right now from Jollibee. And no, this is not a commercial for Jollibee. This is a commercial for Influicity. That's my marketing agency. And Jollibee is One of our amazing clients. You can see how we help drive more foot traffic to their restaurants across America. @influicity.com Check out the case study. And hey, while you're there, check out all the other case studies from the amazing clients we work with. Influencer marketing, podcasts, social media, content, AI and so much more. And if you want to work with us, just hit the let's talk button over at the top of the website. That's influicity.com and I'll see you there. So it all starts with a very personal problem. Mike's wife is diagnosed with this thing called Hashimoto's autoimmune disease. And that's what triggers this whole business journey. He needs to buy organic beef, but he can't find it in any stores. So he goes straight to the farmer, who tells Mike, you gotta buy the whole cow or nothing at all. Then he does, and this is like the world conspiring to force Mike into an idea. I love it when that happens. And it's actually a very unfortunate but very lucky situation. Unfortunate, obviously, because an autoimmune disease is no fun for anyone, but lucky, because what a great motivator for Mike. Like, I'm doing this to save my wife. Those are very high stakes, and it forces Mike on a mission. So he buys the whole cow, he divvies it up with his friends, and let's pause right here. Actually, I would argue that this is Mike's MVC minimum viable concept, which is something I've talked about before. You've probably heard of the mvp, the minimum viable product. I think that's kind of lame. My regular listeners will know that I like the mvc, which is an upgrade of the mvp. Let me explain. A minimum viable concept is about testing the value and viability of a concept. A concept. Not a product, not a business. This happens way before anything like that. This is just the concept. What's the smallest, scrappiest, fastest way to answer one big question number, does anybody want this? And speed is important here because you can waste a lot of time toiling with dumb ideas. Believe me, I've done it. I've done a lot of that. So you want to very quickly learn, does anyone want this? And in Mike's case, the answer comes from his friends. He hands them some meat, tell them where it came from, maybe even delivers it to their doorsteps himself. And the reaction is clear. They love it. They're genuinely impressed, and they want more. So without a product, without a website, without a logo, without anything Mike proves one. People like high quality meat sourced directly from the farmers and delivered to their door. Check. That's step one of the minimum viable concept. So what does Mike do next? He answers the next logical question. He levels up the test. Because you can't just rely on your friends to tell you if they like something, obviously they're going to support you. And that might mean make their decisions. A little bias, but let's see what strangers think. Will people he doesn't know want this? So what's the quick and dirty way to figure this out? Well, again, Mike goes and does it. He launches a Kickstarter. And here's the beautiful part, because this time, strangers need to put their money where their mouth is, which is actually the next question. Will they pay for it? So Mike sets his goal at $25,000, which is enough to probably cover the startup costs of this business. Buying meat, packaging it, shipping it, and within weeks, he smashes through it. He's got $215,000 from more than 2,000 backers, actually. So again, check. Now we've unlocked the second and third potential constraints by answering the questions, will strangers want this? And will they pay for it? So now we have product validation, we have business model validation. And now Mike is ready for the next test in his MVC experiment. We're not done yet. See, everything we've looked at so far is actually just the demand side. So now we've got to look at the supply side. Can Mike deliver? Every entrepreneur has to look at this. It's not just, do people want it? It's can you actually deliver it? So let's see. The next thing he does is he finds farmers who have the quality meat he's looking for, and he negotiates availability and pricing with them. Then he finds a processor who's got a USDA facility. He rents some cold storage space. I'm sure he negotiates rates with shipping partners who can handle perishable deliveries. Piece by piece, he's bolting together a system. And pay attention to the sequence here, too, guys. So much of the time, business builders are trying to solve for problems they won't experience until way down the line. Like, they're at point A right now and they're trying to solve a problem that won't come until point G or point Q, which is such a waste of time. If you're at point A, figure out how to solve for point B and maybe start thinking about point C somewhere in the back of your mind. But don't cloud your thinking with E, F, L, R It's frankly impossible to solve those problems now because you don't even know what other problems you might encounter along the way or what solutions you might encounter between now and then. So stay on track. So that's the minimum viable concept and Mike executes it beautifully. I also want to mention at this point that Mike does have a bit of an unfair advantage. You see, before Butcherbox, Mike was running a little site called Custom Made, an online marketplace connecting customers with woodworkers and artisans, people who make things. And Mike actually raises something like $29 million from investors to build that business. And it actually never really took off, it never achieved a true product market fit. And I'd imagine he spent something like six or seven years just burning through cash, hating his life. Because let's face it, how many VC backed entrepreneurs hate their life right now? If you're listening, I'm sorry, you're playing a very, very different game and I'm kind of envious of you. But at the same time, you couldn't pay me enough money to run a VC backed business. And I understand sub businesses need to do it, but honestly guys, I. A business like this, as you will see, can be built. Butcherbox can be built and should be built without any money raised. You gotta bootstrap it. And I'm gonna tell you why in just a second. But before I do that, I wanna make the point. The reason Mike went about the process of Butcherbox this way is cause he probably had a sting from what he had done at Custom Made and just wanted to do it different. So let's talk about that right now, because I love how Mike built this. Without a single dollar and of outside investment, a $600 million annual revenue, bootstrapped business. Butcherbox never raised outside capital at all. No seed capital, no angel investors, no venture capitalists, no private equity. And he's been able to do this because it's so incredibly lightweight. Listen to how Mike actually structured this business and the operations behind the scenes. So at its core, Butcherbox is not really in the meat business. The company itself doesn't own farms or handle livestock or anything like that. I'd say it's really a logistics business, a marketing business and a customer service business. So let's look at each of those right now and see how they work together. So at the most basic level, Butcherbox connects small farms and ethical meat producers with households all across the US who want to eat meat. And the company handles everything from sourcing the product to delivery, getting it to your front door. It Orchestrates the supply chain, but it never actually touches the supply chain. Farmers raise the animals, then a processing partner portions and packs and labels the meat. Then through cold storage and fulfillment centers, it's boxed and it's kept frozen and. And then they're loaded with dry ice and they're shipped directly to doorsteps anywhere across the country. And all this happens seamlessly. It happens every month for hundreds of thousands of customers. And I don't want to minimize any of this work. The coordination here is actually a very big deal. And plus, Butcherbox has standards. So the beef must be grass fed, it must be pasture raised, hormone and antibiotic free. It's got to be delivered fresh. And let's face it, meat is perishable. So deliveries need to be perfectly timed. A missed package isn't just an inconvenience for the customer, it's expensive for Butcherbox and it's going to be refunded, and that's a pain. So when things go wrong, the customer blames Butcherbox. No matter what, they don't blame the farmer or the processor or the shipper. Butcherbox has its name on the box, literally. And so that is who is responsible. They've got logistics down because they have to understand logistics really well. So the second part of the business is the marketing. Butcherbox is probably one of the best examples of a D2C brand that builds demand through storytelling. Because beyond meat, they're really selling values. They're selling health ethics, convenience even. And they get the word out about these things through podcast ads, through influencers, lots of search engine optimization, of course, a ton of Facebook ads and Instagram ads, just like all my D2C clients. And they all understand. You gotta understand Facebook, Instagram and Google if you're gonna build a successful DTC business. And then there's all the offers, right? They had like free bacon for life referral codes, all that stuff. So their goal is to get subscribers. Absolutely, that is the number one goal. And once you subscribe, they wanna keep you on board, so they get you on board and they need to retain you. They got a strong brand, they've got strong customer acquisition channels. And that's the marketing piece number two. All right, that takes us to number three, customer service. Again, if you're in the subscription business, you live or die by how long you can keep a customer. What is that? Ltv? The lifetime value, my friends. That's all I want to know. So Butcherbox invests in a ton of customer service. Once you're a subscriber, they let you customize your boxes. They let you pause your deliveries if you're going to be out of town. They let you swap items in and out of your box if you don't like what you got. And when things go wrong, as they inevitably do when you're shipping physical goods across the country, the company is really quick to respond. They credit your account. They make it right. They want you to know that they're there for you. Like I said during COVID when demand spiked off the charts and shipping delays hit, Butcherbox really leaned into customer service. It takes years and years to build a brand like this, to build a reputation and as a customer centric business at all times. And it takes no time at all to lose all that trust. So when you step back and you look at Butcherbox, here's really what the full picture looks like. It's a logistics business that moves meat. It's a marketing business that gets subscribers in the door. And it's a customer service business that keeps people subscribed month after month. And that's really what the business looks like. And that takes me back to why they were able to scale with no outside capital, why it's so lightweight, why he was able to bootstrap this. Because this is a super lean business to run. And if you're good at running it, you can get cash first and spend it later. Right? Someone subscribes today, hands over their money, and then you can use that money to pay for the meat and ship it to their door. This is a negative cash conversion cycle. Oh, those words give me tingles, guys. Negative cash conversion. I get cash in the door before I have to pay that cash. Oh, that is a great business. Now, obviously there's a bit of chicken and egg here because you need to put some cash up front to acquire the customer in the first place, and then you need to get their money and then send them the meat. But once you have a bit of scale, any scale at all, and a bit of cash in the bank, you're able to do this. And you can use bank loans and cash flow to finance it. Also, as you're scaling and the word spreads organically, you can actually get a ton of customers on board without spending much money at all. So this is a $600 million meat company that really just needs to focus on getting customers, making sure the farm sends them their meat, and keeping them happy. That's it. And that takes me to my third lesson. Maybe the one that you can put to work right now. If you're in the early stages of building your business or if you're at an inflection point where you need to hit that next level of growth. You can probably use this lesson right now. And that is the idea of building a basic business with a superior business model. If you're spending more than $50,000 a year on marketing, I've got something for you. It's a playbook I wrote called how to Build a Social Media Selling Machine. You can grab it now for free at johndavids.com playbook. This is the nine step formula we use for our clients at Influicity to turn their social media channels into reliable revenue engines. Grab it right now@johndavids.com playbook. ButcherBox is an example of a company that does something pretty basic with a phenomenal business model underneath. Mike could have opened a butcher shop, right? I mean, that would be the most logical strategy of someone who wants to get into the meat retail business. It's so simple. I'm going to sell meat. What is the logical next step? I'm going to have a butcher shop, a store. But he doesn't do that. He builds this subscription box thing, which might sound obvious in retrospect, but really wasn't obvious at the time, and which I just explained has a lot less to do with meat and a lot more to do with logistics, marketing and customer service. He's not even really in the meat business. That just happens to be the product. And that's the story I love here. An ordinary product with an extraordinary business model. And I've seen this many times before. Here are just a few examples I'm sure you can think of. These also take Dollar Shave Club. So they come onto the market in 2011 selling razors, a super basic product, been around for a long time in a category that has actually been dominated by national players for decades. But Dollar Shave Club launches with a new and novel business model. Direct to consumer subscription. Lower friction, higher retention. They also did this really cool launch with a viral video that gave them some rocket fuel. And that story ends with a $1 billion exit to Unilever. Pretty good. The only kind of crummy part of that story, by the way, if I'm being consistent, is that it kind of makes me nauseous. Money. They raised $160 million in venture capital. Yuck. I hope the founders took plenty of cash off the table in secondary financing, but hey, still a good business model. Another example is Netflix. They rethought the distribution channel. So Netflix launches with DVDs by mail with no Late fees. We all hate late fees. We hated them back when we rented from Blockbuster. If you grew up in the 90s like I did, you remember returning your videos and, and paying those icky late fees. Ugh, what a waste. That's how those video stores, by the way, made most of their money. So Netflix comes along, takes away all the friction and bulks up on selection, right? You can go onto netflix.com back in 2000 and rent pretty much any DVD you wanted. And that's how they enter the market. And then of course, they did the exact same thing with streaming, which was a way better business model. Just wasn't possible for a few years. And here's another one I love. Warby Parker. You see, Dollar Shave Club and Netflix really got their advantage on the distribution side, but Warby Parker does it on the cost side. So they design frames themselves, they cut out the distributors and the wholesalers. They own the customer relationship. And by the way, when you're buying glasses from an old school retailer, there is so much markup in the supply chain that goes to you. Those glasses that you pay 4 or $500 for. The actual cost on them is probably like 10 or 15 bucks. But there is so much added cost along the way. Warby Parker takes that all out and suddenly a pair of prescription glasses costs 95 bucks instead of 495 bucks. They also launch with this home try on program. They'll ship five pairs of frames to your door and it's free. Which removes the number one friction point in the category. I need to see how they look on me. So Warby Parker just takes that right away. And now they don't just save you money, but they're making the process better, more personal, and actually kind of fun again. They're doing this with a very basic product. Glasses. You've got razors, you've got movies, you've got glasses. These aren't innovative products, they're innovative business models. So here's the big idea. You don't have to invent a category or have a super innovative product. You can build an amazing business by just rethinking how something is bought, how it's delivered, how it's experienced. Start with something that people already buy and then just ask yourself, can you simplify the delivery in some way? Can you simplify the buying experience? Can you make it recurring so they don't need to think about it and buy it again and again, but you just send it to them? Can you digitize a part of the interaction? Can you increase margins by avoiding infrastructure. Can you make something yourself instead of sourcing it from a third party? Or can you sell something without even touching it? Instead, have it go directly from the source to the customer. Kind of like what Butcherbox does. Figure this stuff out and you could have a fantastic business, my friend. Spectacular. That is the story of Mike Salguero. That's the story. A butcher box. Get my best stuff to your inbox at johndavids. Com.