​In the past, starting a subscription business would require a lot of up-front investment to procure inventory, find customers, and get things off the ground—but not anymore. Thanks to modern technology and the power of the internet, it’s easier than ever to start a subscription business with little more than an idea, a computer, and an internet connection.
Best of all, starting a subscription business is a great way to build recurring revenue, which is the key to any sustainable and successful business. In this article, we’re going to tell you what you need to know before you start your next business.
What is a Subscription Business?
​A subscription business is a business model in which customers pay a recurring fee in exchange for access to a product or service. The recurring payments can be made on a monthly, quarterly, or annual basis, and the access that customers receive can be either physical or digital.
Subscription businesses have become increasingly popular in recent years as companies have looked for new ways to generate revenue and create recurring revenue streams. There are a number of reasons why customers are attracted to subscription businesses, including the convenience of having products and services delivered to them on a regular basis, the ability to try new products and services without commitment, and the ability to cancel at any time.
There are a number of different types of subscription businesses, including subscription boxes, members-only clubs, and digital content providers. Subscription businesses can be both brick-and-mortar and online, and there are a number of successful subscription businesses in a variety of industries.
The Benefits of Starting a Subscription Service
​There are many benefits of starting a subscription service. For one, it is a great way to generate recurring revenue. This means that you can rely on a certain amount of money coming in every month, which can help with cash flow planning and forecasting. Additionally, it can help build customer loyalty and brand awareness, as customers are more likely to be engaged with your service on a ongoing basis.
Another key benefit is that it can help you better manage inventory and operations. When you have a steady stream of customers subscribing to your service, you can better predict demand and manage your inventory and production accordingly. This can help you save money and avoid waste.
Finally, a subscription service can help you expand your reach and tap into new markets. As your business grows, you can add new features and services to your subscription offerings to attract new customers.
If you’re thinking of starting a subscription business, there are a few things to keep in mind. First, you need to identify your market and what type of subscription service they would be interested in. Second, you need to determine what pricing model makes the most sense for your business. And third, you need to build a robust marketing and advertising plan to attract subscribers.
Developing the Right Pricing Plans
​As a subscription business, you need to have the right pricing plans in place in order to be successful. Here are some tips on developing the right pricing plans for your business:
Know your target market
Before you can develop pricing plans that will work for your business, you need to know who your target market is. What are their needs and wants? What are they willing to pay for? Knowing your target market will help you develop pricing plans that are tailored to them and that will be appealing to them.
Do your research
Before you settle on any pricing plans, it’s important to do your research. Look at what your competitors are doing and see what seems to be working well for them. You don’t want to underprice your products or services, but you also don’t want to overprice them and lose out on potential customers.
Offer different plans
One way to appeal to a wider range of customers is to offer different plans. This way, people can choose the plan that best suits their needs and budget. For example, you could offer a basic plan, a premium plan, and an ultimate plan. By offering different plans, you can cater to a wider range of people and increase your chances of making a sale.
Be flexible
Don’t be afraid to be flexible with your pricing plans. If you find that a certain pricing plan isn’t working well, don’t be afraid to change it. You need to be constantly evaluating your pricing plans and making changes as necessary in order to maximize your profits.
Offer discounts
Another way to entice people to sign up for your subscription service is to offer discounts. For example, you could offer a discount for people who sign up for a year-long subscription. Or you could offer a discount for people who refer their friends to your service. Offering discounts is a great way to increase sign-ups and boost your bottom line.
By following these tips, you can develop pricing plans that will work well for your subscription business. Remember, it’s important to know your target market and to offer different plans in order to appeal to a wider range of people. And don’t be afraid to be flexible with your pricing plans. If something isn’t working, don’t hesitate to make a change.
Subscription Models You Can Offer
​There are a few different types of subscription models you can offer to your customers. Which one you choose will depend on the type of business you have, your goals, and your target market. Here are a few of the most popular options:
Pay-As-You-Go
This is the most traditional subscription model. Customers pay for each month (or year) in advance and receive access to your service for that period of time. This model is popular among businesses that offer services that are used on a regular basis, such as online backup or software tools.
Usage based
With this type of subscription, customers are charged based on their level of usage. This could be per minute, per gigabyte, per month, etc. This model is popular for businesses that offer services that are used infrequently or sporadically, such as cloud storage or web hosting.
Membership
This type of subscription gives customers access to a community or exclusive content/services. This could be a forum, an online course, or a library of resources. This model is popular among businesses that offer content or services that are valuable to a specific group of people, such as an online magazine or an expert consulting service.
Freemium
The freemium model offers a basic level of service for free, with additional features or services available for a fee. This model is popular among businesses that offer digital products or services, such as online games or productivity tools.
Pay-What-You-Want
With this model, customers can choose how much they want to pay for your service each month (or year). This could be a set amount, or a range that you provide. This model is popular among businesses that offer digital products or services, such as online courses or ebooks.
Subscription Boxes
This type of subscription delivers physical products to customers on a regular basis. This could be a monthly box of clothes, beauty products, or groceries. This model is popular among businesses that sell physical products, such as clothes or food.
Donation-based
This type of subscription allows customers to make a monthly donation to your business. This model is popular among businesses that offer digital products or services, such as online courses or ebooks.
Tiered
With this type of subscription, customers have access to different levels of service based on how much they pay. This could be a basic level of service for a lower price, with additional features or services available for a higher price. This model is popular among businesses that offer digital products or services, such as online courses or software tools.
Pay-Per-Lead
With this type of subscription, customers are charged based on the number of leads they generate. This could be a set amount per lead, or a percentage of the total value of the lead. This model is popular among businesses that offer lead generation services, such as online marketing or sales tools.
Pay-Per-Click
With this type of subscription, customers are charged based on the number of clicks they generate. This could be a set amount per click, or a percentage of the total value of the click. This model is popular among businesses that offer online advertising or marketing services.
Setting Up a Subscription Payment System
​Setting up a subscription payment system is a great way to recurring revenue for your business. There are a few things to consider when setting up your subscription system, such as which payment processor to use and how to set up your subscription tiers.
There are a few different payment processors you can use for your subscription payments. PayPal and Stripe are two popular options. You’ll need to decide which one is best for your business. Both have different fees and features, so be sure to do your research before deciding.
Once you’ve chosen a payment processor, you’ll need to set up your subscription tiers. You’ll want to consider how much you want to charge for each tier and what features each tier will include. For example, you could have a basic tier that includes access to your content, and a premium tier that includes access to your content plus exclusive bonus content.
Once you’ve got everything set up, it’s time to start promoting your subscription payment system to your audience. You can do this through email marketing, social media, or even just by mentioning it on your website. Be sure to let your audience know what they’ll be getting for their money, and make it clear why subscribing is the best option for them.
If you’re looking for a way to add recurring revenue to your business, setting up a subscription payment system is a great option. By considering which payment processor to use and how to set up your subscription tiers, you can create a system that’s perfect for your business.
Fulfilling Subscription Orders
​As a business owner, you know the importance of fulfilling orders promptly and efficiently. After all, happy customers are the key to a successful business! Here are a few tips on how to start and maintain a subscription business that will keep your customers coming back for more:
1. Keep good records. This may seem like a no-brainer, but it’s important to keep track of your inventory, your customers’ orders, and your subscription plans. This way, you’ll always know what needs to be fulfilled and when.
2. Automate as much as possible. There are a number of software programs out there that can help you automate your subscription business. This way, you can focus on other aspects of running your business.
3. Stay organized. This is crucial in any business, but it’s especially important in a subscription business. You need to be able to keep track of your customers’ orders and preferences so you can fulfill them quickly and efficiently.
4. Communicate with your customers. Part of providing good customer service is being communicative. If there are any delays in fulfilling orders, be sure to let your customers know so they can adjust their expectations accordingly.
5. Offer discounts. Everyone loves a good deal! Offering discounts on future orders is a great way to show your appreciation for your customers’ business.
By following these tips, you can start and maintain a successful subscription business that will keep your customers coming back for more!
How to Analyze Performance and Optimize Your Subscription Business
​Whether you’re just starting out with a subscription business or you’ve been running one for awhile, it’s important to analyze your performance regularly and make changes to optimize your business. By understanding how your business is performing, you can make decisions to improve your customer experience, increase retention, and grow your business.
Churn Rate
There are a few key metrics you should track to get a clear picture of your business’s performance. Customer churn rate is one of the most important metrics for a subscription business. This measures the percentage of customers who cancel their subscription within a given period of time. A high churn rate indicates that there is a problem with your product, pricing, or customer experience.
To calculate your churn rate, you need to track the number of customers you start with in a period of time and the number of customers who cancel their subscription during that same period of time.
Here’s the formula for customer churn rate:
Churn rate = (Number of customers who cancel their subscription / Number of customers at the beginning of the period) x 100
For example, if you start with 100 customers and 10 of them cancel their subscription within the next month, your churn rate would be 10%.
A good churn rate will depend on your business and industry, but generally, a low churn rate is anything below 5%.
CLV (Customer Lifetime Value)
Another important metric to track is customer lifetime value (CLV). This metric measures the average amount of revenue that a customer brings in during their lifetime. This is important because it allows you to see how much each customer is worth to your business and make decisions accordingly.
There are a few different ways to calculate customer lifetime value, but the most common formula is:
CLV = (Average order value x Average number of orders placed) / Churn rate
For example, if the average order value is $100 and the average customer places 10 orders over their lifetime, and the churn rate is 5%, the CLV would be $1,000.
You can use this metric to inform your marketing and retention strategies. For example, if you know that the average customer is worth $1,000 to your business, you can invest more in acquiring new customers and retaining existing ones.
There are a number of other important metrics to track, but these two are a great place to start. By monitoring your performance and making changes to optimize your business, you can ensure that your subscription business is successful.
Examples of Successful Subscription Box Businesses
Starting a subscription box business can be a great way to earn a consistent income while providing valuable products or services to your customers. But how do you make sure your business is successful? Let’s take a look at some examples of successful subscription businesses to help you get started.
One of the most successful subscription businesses is Birchbox, a monthly service that delivers beauty samples to its subscribers. Birchbox has been successful because it provides its customers with a convenient way to discover new products and receive high-quality samples. The company has also built a strong community around its brand, which helps to loyalty and customer retention.
Another great example of a successful subscription business is Dollar Shave Club. Dollar Shave Club was one of the first companies to offer a subscription-based service for men’s grooming products. The company has been successful by offering a convenient and affordable way for its customers to get the grooming products they need.
There is also ClassPass. They provide monthly membership to fitness studios. ClassPass offers access to a wide range of fitness classes, granting individuals the flexibility to try different fitness programs.
So, if you’re thinking about starting a subscription business, these are three great examples to keep in mind. Each of these companies has been successful by offering a valuable service and making it easy and affordable for their customers to access.
