They wanted to solve a specific problem for consumers interested in experimenting with Cannabidiol, or CBD, a chemical found in the Cannabis plant. CBD is approved as a drug in the U.S. to provide different therapeutic effects, like pain relief or better sleep. With a dizzying number of brands, and numerous different forms and functions – from gummies for better sleep to topicals for pain management – trying different options can quickly get expensive.
That’s why Bieber and Culver came up with their CBD subscription boxes, which cost around $50 a month and included a variety of products from different vendors.
Bieber and Culver, who both had a background in logistics and operations, bootstrapped the business in 2018 in Indianapolis and grew it to about 800 active monthly subscribers.
And they did it all without a single employee. Instead, the co-founders worked with a few contractors, (though one worked close to 40 hours a week by the time they sold) outsourcing fulfillment to a third-party logistics company, also known as a 3PL. Third-party logistics companies handle distribution, warehousing and fulfillment.
Neither Beiber nor Culver worked more than a cumulative 10-15 hours a week on the business. In fact, both went from existing to new full-time jobs while building Hemp Crate Co. “We built it as a side hustle and sold it as a side hustle,” Bieber said.
How Bieber and Culver sold Hemp Crate Co.
The business grew larger than the co-founders ever expected, Bieber said. But the team recognized neither were in it for the long haul.
“We wanted to move on to the next business,” Bieber said. “We realized that we were both ‘starters’ and were always excited by the shiny new opportunity.”
Bieber and Culver listed the company for sale on Empire Flippers and Microacquire, but they wound up finding a private buyer through their personal network in the CBD and subscription industries. They sold for mid-six figures, which Bieber said was “a multiple of right around 2x trailing 12-month profit and about .8x revenue.”
Selling wasn’t a quick process, Bieber cautions. “It definitely took more work, time and effort than we expected. I think lots of people see high valuations from brokers or on these marketplaces and don’t realize (like we didn’t) that valuations are just that: valuations or just listing prices. The businesses that sell at these high multiples are often the exceptions, not the rule.”
The buyer was not disclosed. The individual who bought Hemp Crate Co. already had one subscription business in his portfolio and was looking to add another.
Meanwhile, the co-founders are well on their way with their next businesses. Culver started Lessgistics, a 3PL company, in late 2020, and Bieber launched Platterful, a charcuterie board subscription box company in November 2021.
For founders who are considering entering the CBD space, Bieber had this piece of advice: The payment regulations are tricky for the industry, and state laws often conflict with federal laws. Make sure your payment processing is compliant in the states where you are selling your product.