Per Wikipedia, The subscription business model is a business model where a customer must pay a subscription price to have access to the product/service. The model was pioneered by magazines and newspapers, but is now used by many businesses and websites.
Although not part of the SaaS (Software-as-a-Service) acronym, subscriptions are synonymous with startups, particularly in the software and websites. This has also branched out into physical products such as food (my food bag), clothing (trunk club), and everyday items like razors (dollar shave club).
Benefits of Subscription Businesses:
Recurring Revenue
This means that once you sell a customer they will purchase (and pay) you many times over. This recurring cashflow means your startup can plan more easily for upcoming sales, inventory needs and growth.
Improved Business Value
Having a recurring set of clients purchasing from you might mean that instead of a really great product with historical sales, you also have future sales on your books when you decide to exit, improving the overall value of your business.
An Audience
Rather than sell one-off products and services to customers, a subscription model necessitates gathering the details of the people buying from you. In this scenario you can add additional value to these customers by re-marketing complimentary products to this audience.
Getting Started with Subscriptions:
Determine Service / Product Offering
Startups will probably have a good idea about the product or service they'll be taking to market, but established businesses may need to get more creative to figure out what they can deliver on a regular basis.
Determine Pricing
Coming up with a price might sound easy until you start to think about adding tiers of products & services, coupons to track marketing efforts (how much will you give away), establishment or setup fees and free or discounted trial periods.
Find Good Tools
Sending monthly invoices and waiting for payment is not a sustainable sanity practice for a subscription business, so getting a system to handle the job for you via credit cards is essential. Historically startups have needed to apply for a merchant account and contract a payments provider, however now Stripe is available in New Zealand.
Stripe is easy to setup and does a lot of the heavy lifting including:
- Subscription management of recurring payments
- Signup landing pages
- Plans, trials, coupons & discounts
Other tools are available with more custom requirements such as Chargify, Chargebee, Recurly among others.
Subscription models provide startups and established businesses with another way to grow revenue. Please get in touch if you are considering adding subscriptions to your business, or are looking for the right tools to get started.
Other stuff from the blog:
Using Power BI for a Data Driven Insights - http://www.accountech.co.nz/blog/using-power-bi-for-data-driven-insights
How Lean Canvas Helps Startup Accounting - http://www.accountech.co.nz/blog/how-lean-canvas-helps-your-startup-accounting