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The Benefits of a Subscription Business Model


Business Model

Internet Business


If you're putting the finishing touches on your new business before you launch, explore the benefits of the subscription business model.


Are you starting a new business? There are many things about running a business that new business owners dream of.

You donít have a boss anymore and you get to make all of the decisions in your company. What many entrepreneurs donít realize is that they can choose the wrong business model and find themselves working really hard for little money.

Before you start your business up, you should consider a subscription business model. Read on to learn what a subscription-based business is and how it can benefit your business.

What Is a Subscription Business Model?

Itís actually a very simple business model. Your customers pay a recurring fee to use your products or services. This can be done monthly, weekly, quarterly, or annually.

Subscription business model examples can be found in almost every industry. In the fitness industry, TRX offers workouts for a small monthly fee through its mobile app.

Quickbooks is accounting software thatís been around for decades. Itís now offered as a monthly subscription. Adobe now has its entire product line available for a monthly fee.

Of course, who can forget about subscription boxes? You can get virtually anything from wine to games in subscription boxes. Streaming services like Netflix and Hulu all run on a subscription model.

The Top Reasons to Switch to a Subscription-Based Business Model

Can a subscription business model make that much of a difference in how you run your business? It can, and here are the advantages of using a subscription model in your business.

1. Predictable Income and Cash Flow

The most stressful part of being a business owner is knowing where your next client will come from. Itís hard to live when your income goes up and down like a roller coaster. For many small business owners, itís feast or famine.

You donít live that way when you run a subscription-based business. You know how much income you can expect each month.

All you have to do is multiply the number of subscribers by the monthly cost. Youíll then subtract a small percentage, which assumes that some customers will stop their subscriptions.

2. Easy Client Management

A subscription model makes it easier to manage your clients. In most businesses, you have to invoice your customers and then wait until they pay the invoice.

Customers can be late, which puts pressure on your business. An online subscription billing software handles your invoicing, customer relations management, and payments. Thereís no need to contact customers to get money.


3. Business Made Simple

A subscription model allows you to simplify your offerings. The mistake that businesses easily make is that they give their customers too many choices.

They try to customize their offerings to clients, but in the end, they just create confusion. Customers donít truly understand what theyíre signing up for.

With a subscription business model, you give your customers limited choices. That simplifies your business and your customers choose the offer that fits their needs.

4. Easier Distribution

Whether youíre a personal trainer or a software producer, you can benefit from moving to a subscription model.

Personal trainers have always had to deliver their services in-person at a gym or studio. Youíd have to deal with last-minute client cancellations and clients always running late.

Plus, you could only serve so many people because you have a limited amount of time. At most gyms, the most productive trainers probably live there or spend the majority of the time there.

Thereís a trend for online training, especially now that people are at home.

You can move your business to a subscription model, which allows you to work with more people and have a reliable income.

Software companies have traditionally relied on selling a physical product and selling additional licenses to install the software on multiple computers.

Computing has moved to the cloud, where users pay a subscription fee per user, and software providers deliver their services over the internet.



Customers are thrilled because they can pay a small monthly payment.

5. More Upsell Opportunities

It is much easier to sell more to existing customers than it is to sell a high-dollar package to a brand new customer.

When youíre selling a high-dollar package, the sales cycle is much longer and there are more people involved with the decision-making process.

Itís much easier to have a product for a lower price for the customer to try out. Once they experience the benefits of using your service, theyíre more likely to upgrade to a premium model.

Youíll see this often with freemium software or with a free trial. Itís enticing enough for customers to try and then buy.

6. You Focus on Customer Retention

You do need to have a system in place to get new clients on a regular basis. What a subscription model does is that it lets you focus more of your time on customer retention.

If you plan to provide a one-time service or product, youíll sell a customer once and then have to replace that income the next month.

Your focus is always going to be on the next sale. That is stressful and can often lead to entrepreneurial burnout.

Since a subscription-based business has predictable income, you can focus your efforts on delivering impeccable service to increase customer retention.

That eases the pressure of having to scramble to get your next sale.

A Subscription-Based Business Model Works

You may have had a certain image of how your business would look when you first came up with the concept. That initial concept can be flipped around now that you know about the benefits of using a subscription business model.

This model works for many reasons and it benefits you, your bottom line, and your customers. You have a steady stream of income, while your customers enjoy the service for a low monthly fee.

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