The world of online marketing has presented countless opportunities for people to create side incomes and also full blown businesses. With the many methods of making money online, subscription based models have become very popular lately for its recurring income streams. While online recurring businesses are usually service based, Giancarlo Massaro created Pump Ups, a monthly service that would ship you supplement samples. After a few months of growing his customer base, Giancarlo decided to test the waters by listing Pump Ups for sale. 2 weeks later he cashed out for $30,000.
Tell me about yourself and your background.
My name is Giancarlo Massaro, I’m a 23 year old entrepreneur from Connecticut. I’ve been building my own ideas and starting online businesses since I was 14 years old. Currently, I’m the co-founder of ViralSweep, a service that allows businesses to build, run, and manage sweepstakes on their own website.
How did you get involved in online marketing?
When I was 15 years old I began making money off of Myspace by promoting affiliate offers through Myspace bulletins. I made my first $1,000 in something like 2 days and actually got scared because this was a huge sum of money to me, and it was so easy to make it that I was afraid that I would somehow get in trouble. It turns out a few weeks later the ad networks banned promotion on Myspace.
Once I saw how easy it was to make money on Myspace, I started exploring other ways that I could capitalize on the social network. I began seeing bulletins posted about a site called Friendstorm, which allowed people to gain more friends on Myspace. They were charging for featured spots on their site, but I wasn’t too fond of the setup and thought I could come up with a better concept. About a month later a friend and I launched FriendFleet.com, which was a Myspace friend adder. You can see what it looked like using Wayback Machine.
We made it super simple, login with your Myspace ID and you can immediately start adding friends. We also charged a fee for anyone who wanted his or her profile to be featured (so they would get tons of friend requests). We made $1,000 on the day we launched the site.
What is Pump Ups and how did you come up with the idea?
Pump Ups is a subscription service that sends you a box of supplement samples and healthy snacks every month for $10.
Subscription startups have become very popular in the last 2 years, with Birchbox (subscription box for beauty samples) being one of the most popular. In April of 2012 my brother and I took a look at many different subscription startups and noticed that we couldn’t find anyone doing this for supplements. Being into fitness and of course being entrepreneurs, we were really interested in testing out our idea, so we built it.
How did you build Pump Ups and what CMS, plugins, add-ons, plugins, were required?
My brother is a designer, so he designed our landing page in a few days and we have a buddy who is a coder that coded the site for us.
The site was custom coded in PHP. It was a landing page with a buy button that would take people to a checkout page. We integrated Stripe for payment processing. Once a purchase was made, a user would get taken to their dashboard which just said ‘Thanks for your order. We ship packages on the 15th and 30th of every month’. We didn’t have a store or a ton of cool features at first. We built the bare minimum of what we needed to get people to pay us. In total, we spent under $500 for the site.
What kind of operating expenses did it cost to run Pump Ups?
This was the first startup that I built that had multiple operating expenses. I’m used to building online services where our only expense is hosting. Since Pump Ups was a physical product, we had several operating expenses which included: hosting, packaging, flyers, shipping and a few miscellaneous one-time expenses like a label printer, stickers, and a rubber ink stamp.
What kind of profits were you seeing?
After our first two months we were seeing over $1,000 a month in profit. We saw almost $6,000 in profit in the first 5 months, and close to $10,000 revenue.
How did you build up your customer base of 200 customers?
Building our customer base consisted of a variety of things. At first, we were using fitness forums to talk to potential customers about our idea in order to get feedback. Once we felt that enough people were interested, we built the site and then re-approached those same people in order to get them to purchase.
Another tactic I used was approaching press with a perfect timing story. About a month before father’s day I began reaching out to the press about our product, letting them know that we would be a perfect addition to any story about father’s day gifts. We ended up being featured on Mademan.com and Foxnews.com.
Next, I took advantage of an opportunity with SEO. There was virtually no competition at the time for the term ‘supplement samples’ and I was able to get us ranked #1 for that term which brought in a good amount of new customers.
Eventually, word about us began to spread. We were picked up for a story on Mashable, and people were chatting about us on forums, which continued to bring in customers.
Social media became another way to acquire customers. Instead of going the traditional route of purchasing Facebook or Twitter ads, we actually got in contact with several pages that had large followings and were able to arrange paid promotion deals. These pages would make a paid post about us on their fitness page on either Facebook or Twitter and this is how we brought in a great deal of sign ups.
Finally, we collaborated with a few bloggers in the fitness space. We sent them a supplement box and had them write a review about the box. We made sure to give them tracking links and we were able to see which reviews were bringing in new sign ups. Here is an example of one of those reviews.
Looking back at what you know now, what mistakes do you wish you avoided?
The first mistake I wish we avoided was not being active enough on Facebook. We had a competitor who really took advantage of Facebook and grew their following pretty rapidly, which definitely helped them grow faster than us. This however, was still just a side business/summer project to us, so we didn’t have enough time to do everything that we wanted to do.
In addition, the only other mistake I think we made was not selling gift subscriptions (3,6,12 month boxes). We could have made a lot more money this way upfront, rather than just charging a flat $10/mo.
Finally, this one is kind of a ‘what if’ scenario. One of our biggest competitors at the time now has their supplement box in GNC (the biggest retailer of supplements). Another one of our competitors raised over $400,000 in venture capital. This just goes to show that our idea had legs and if we stuck with it who knows where we could have taken it. Personally though, I’m glad we sold…which brings me to the next question:
Why did you decide to sell after 5 months? Why not wait longer?
There were a few reasons we decided to sell so quickly. First, Pump Ups was nothing more than a summer project to my brother and I. It was an idea we had and built it on a whim and it ended up doing pretty well. Second, my brother returned to college in the middle of August, which left me to do all of the work. Third, competition was popping up left and right, and it was getting harder for us to get samples from supplement companies because now there were several competitors contacting the same companies asking for samples. Fourth, I was already running another business (ViralSweep) and I just didn’t have the time to deal with customer support, marketing, and packaging/shipping. My heart wasn’t in it for the long-term and we decided it would be better to sell to someone who was in the fitness space and could grow the business.
Did you try to sell it or did someone express interest in purchasing it?
We originally listed it on Flippa, received tons of interest and we had a buyer come through but then they couldn’t come up with the money.
About a month later, I spoke with a guy from Flippa who had originally shown a lot of interest, and we ended up closing the deal after two weeks via email/skype/phone.
How did you come up with the $10/month cost? After material costs and shipping, it seems the margins were low?
We originally started charging $15/month with free shipping, but we were having a tough time acquiring customers. Since the cost of supplement samples is so small (usually under $1 per sample), people felt the price point was too high since they were only getting 5-6 samples. We then began to A/B test price and found that the $10 price point with free shipping worked best so we stuck with that.
In terms of our margins, our costs were packaging, shipping and flyers. We were getting the samples for free from supplement companies. We were making around $7 per package.
You mention contacting press and getting featured on bigger publications. Which ones and how were you able to get noticed and even a response?
The three biggest publications we were featured on were MadeMan.com, FoxNews.com and Mashable.com. For the MadeMan and FoxNews articles, I reached out directly to journalists with a story. I researched the sites first to see if they had ever written a story about fathers day products in the past, then I contacted those journalists directly and let them know fathers day was coming up and we had a really cool gift idea. Those journalists ended up liking our product and emailed us back asking for more information.
In terms of Mashable, we just got picked up somehow. A journalist wrote a story about 6 fitness tools that people need to know about and listed Pump Ups in her story. One day orders started pouring in out of nowhere. I checked our Google Analytics and saw the top referrer was Mashable and I was able to search their homepage to find the story we were mentioned in.
After seeing a competitor in GNC, do you have any regrets not trying to grow it?
I don’t have any regrets. My brother had a friend from college whose father was a higher up at GNC. We approached him with the idea but he said GNC wouldn’t be interested because they do all of their own sampling directly with supplement companies. This was in the very early stages though, about a week or two after we built the site, so we really had nothing to show for it and I don’t think he took us very seriously.
Like I had mentioned before, this was just a summer project to us. We had a simple idea, we thought it would be cool to try it out and we built it. We didn’t put tons of money or time into it, so I have no regrets with the path that we took.
How were you able to determine your valuation? What was your initial website priced at?
Before we sold we were making slightly under $2,000 a month in revenue. Within 12 months at that pace we were confident we would be doing more than that, so we averaged the revenue to be about $25,000 or more. Coupled with all of our contacts, customer information and custom website, we felt $30,000 was a good price.
After it was all said and done, what was your total net profit from Pump Ups?
If you include the sale we made about $36,000 from the months of May to October. Without the sale, net profit was $6,000.
You mention your desire to focus on ViralSweep. Tell us about that and how people/businesses can benefit from it?
I’ve been working on ViralSweep since February of 2012, so this was started before Pump Ups. The development of ViralSweep actually took a little longer than planned so that is why I was able to squeeze Pump Ups in during the summer of 2012.
ViralSweep is a service that allows businesses to build, run, and manage giveaways right on their own website. Instead of having to build a custom system to run a giveaway, collect entries, award bonus entries, and choose winners, businesses can use ViralSweep’s all-in-one solution.
We take the hassle out of the entire process of running a giveaway, which allows businesses to focus on the important part: capturing leads.
All a business has to do is build their giveaway using our DIY giveaway builder. We then supply them with a snippet of code to paste on their website that displays the giveaway and does all of the data collection.
Giancarlo has written a book about PumpUps and starting an online business, so you can learn how he did it every step of the way.