Every entrepreneur wants consistent monthly income to fuel their cash flow and business goals. However, between economic cycles and changing customer interests, that regular revenue may be hard to achieve.
I've talked with more and more small business owners lately who use a subscription business model. It involves offering monthly subscriptions for various products and services. Options for these subscriptions cover all kinds of items. Maybe you know someone who receives a subscription box filled with clothing or makeup. Perhaps you've tried making meals prepared by Blue Apron or you receive shaving supplies from Dollar Shave Club. Millions of people enjoy Netflix and Spotify for streaming. Other companies offer toys for kids and treat boxes for pets.
The subscription e-commerce industry generates hundreds of millions of dollars in revenue each year. A 2018 McKinsey survey noted that nearly 60 percent of American consumers surveyed had multiple subscriptions. The monthly subscription economy doesn't show any signs of slowing down. People love the time and money they save, as well as the excitement of personalization and convenience.
Besides attracting and retaining customers who want these benefits, there's a significant advantage for subscription companies: recurring revenue. Instead of a one-time payment, monthly subscription businesses collect a monthly fee (or sometimes a year of fees in exchange for a lower monthly rate) before sending out the product or service.
This revenue model provides an upfront spike in cash flow along with a longer-term outlook for stable income. Moreover, you'll get a better sense of product volume for inventory planning and management.
There is no time like the present to start a monthly subscription business to ride the lucrative wave. Here's how to launch:
Decide on a subscription model type.
There are three main sub-models that can frame your monthly business within the subscription model. The curation model involves creating a personalized box for customers based on interests they share when they sign up. This might include sample-size versions of products related to a hobby or lifestyle.
The replenishment model is the one I use most often. It offers a regular stream of products the customer uses. For example, Amazon offers this under the name, "Subscribe and Save," for many food items, cleaning supplies, vitamins, and more.
The access model provides a feeling of exclusivity for customers who get products and experiences not available to anyone without a subscription. Again, let's reference Amazon. Its Prime program gives members special discounts, offers, and products not accessible to non-Prime members.
Consider a service-oriented subscription model.
You may be wondering how to find your niche. Consider a service-oriented skill set you have that could fit this approach. For example, if you specialize in graphic design, web development, or writing, consider this model for your monthly business.
In contrast to a monthly retainer model, a service-based subscription model provides upfront revenue while giving clients the opportunity to select a pricing tier with accompanying services that fit their needs.
Proceed like any business startup.
I've met many a startup founder that didn't do the basics. Make sure you conduct research, determine a market need or interest, think about what the new product looks like, scope out any competition, and establish pricing.
Create a business plan that outlines your monthly business model, marketing plans, launch timeline, budget, and profitability forecast. Explore technology that helps automate the ordering, processing, and payment aspects of your subscription. I know entrepreneurs who use SaaS companies like Zuora or Zoho here. Also, study how other subscription brands have used marketing tools and platforms to launch and grow their business.
When you are ready to share your subscription business with your audience, consider a no-obligation trial. This entices people to try it on their terms and get excited to sign up for a longer period. In addition, make sure your website or social media promotion has a transparent subscription pricing guide that describes what customers receive at each pricing tier.
Taking all these steps prior to launch can set your monthly subscription business up for success. You want to know that you can attract customers and then deliver an exceptional experience so they maintain their subscriptions and spread the word.
Offer a recurring automatic payment method.
As part of establishing a successful subscription business, it's ideal to offer old and new customers a way to select recurring automatic payments for their monthly subscription service. They can choose where to deduct the money from -- a bank account or credit card.
This model works because it saves them from having to remember to make a payment each month. Instead, they can set up a payment method and comfortably receive the service on a regular basis.