How to know if your business is ready for subscriptions

Amy Hardison White Avatar
Amy Hardison White

Subscription billing is all the rage with many different types of businesses. Formerly limited to newspapers, phone service, and gym memberships, the rise of the internet and the creativity of entrepreneurs has opened up myriad new markets. Just google subscription services and you’ll find a plethora, from in-home massages to monthly toy kits for pets.

Looking at all these services might make you think subscription billing is an easy process with minimal effort, but that’s simply not true. Building a subscription billing model requires a hefty up-front commitment and serious forethought. So how do you know when you’re ready to launch subscription billing?

Let’s face it: you’ll never know when you’re really ready. However, you can do your homework to make sure to understand your business and consider critical parts of the process. Take a look at our checklist below to make sure you cover all your bases.

Analyze your business and understand which parts of it would be a fit for subscription billing. Take a look at your product catalog and ask some key questions:

  • What is your average number of customer orders per unit of time (month/quarter/year)?
  • Do your customers require 24/7 access to your product or service?
  • Would any products in your catalog be good candidates for gift or subscription boxes?

Even if the answer to these questions is no, you might still have an opportunity to create a subscription billing model with some part of your product catalog. Take a look at our beginner's guide to subscription billing for additional questions to ask.

Determine which products you will offer and what you will charge. Now that you’ve performed your analysis, choose the products and services that are the best candidates for subscription billing. Think about what you will charge. If you are already selling on an individual basis, pricing can be based on what you are already charging, with some discount level factored in for repeat purchases. For additional guidance, look at what competitors with similar subscription products are charging.

Brainstorm how you will differentiate your subscription services from other providers in the market. Picking out products and settling on price are good first steps. However, chances are high that you aren’t the first entrant to the market. How will you stand out amongst a sea of similar subscription services?

The most effective way to stand out is to create a unique experience to go along with your subscriptions. This includes the look and feel of your website, the customer service experience, the payments platform, and the branding and tone of any communication sent to your customers - from marketing emails right on down to invoices and receipts. In order to hit all these touch points, you’ll need to look at the entirety of your customer journey. Creating a customer journey map will help get you started.

Once you have your customer journey map created, look for inspiration. This can be as simple as talking to friends and family about their subscription experiences and searching the web for best-in-class lists. Consider what’s working for successful services and how you might plug their tactics into your subscription model.

Plan for a critical piece of the puzzle: payments. This might seem like the easiest part of the process. It’s also the part where businesses fail quickly. If you don’t have a plan for how you get paid, what forms of payment you accept, and how you deal with exceptions, your subscription model could end up failing fast. So what are the most important factors to consider?

  • Will you use a third-party platform or build your own payments-taking platform in-house? Building your own platform can take precious man-hours away from your development team - both up front and down the road for maintenance purposes. There are a variety of established subscription billing management services in the marketplace that can likely address your needs. Remember that Invoiced provides subscription billing services with a variety of features.
  • What critical pieces of functionality are required for customers to complete transactions? Make a list of all the transactional tasks customers need to perform to complete, edit, or cancel a transaction. Which platforms can support all these functions in an easy, user-friendly way? What are some functions you could add that might save you and your customer time, even if they aren’t mission critical? These inputs can inform your evaluation of third-party platforms and/or an in-house build.
  • Will you take payments upfront or in arrears? Collecting payments prior to a purchase - rather than after the fact - can help your business stay in the black over the long term. Consider testing out upfront payments to see if your customer base will tolerate them.
  • How do you plan to manage issues like delinquent payments, declined credit cards, and cancelled subscriptions? As part of your payments strategy, make sure to limit the amount of manual effort required to collect payment. Requiring upfront payment eliminates instances of delinquent payments. Get on top of credit card payments by checking expiration dates ahead of time, and have a proactive plan to update customer payment information before payment is due. Decide on a plan for cancelled subscriptions, including how you will handle proration.

And remember: it doesn’t all have to be set in stone. Once you’ve created and implemented your subscription billing plan, you can iterate as you acquire customers. As you create your plan, think about how you might observe customer behavior and measure success, so you can make changes in areas that are low-performing.

You can get as detailed as measuring activity on your website and in various email campaigns, or as high level as how the subscription service is impacting your bottom line. Refer back to our previous post on how to measure the performance of your subscription business.

All of these factors might make subscription billing models seem overwhelming. But if it works for your business, subscription services can have a huge upside in regular, sustainable revenue. Ask yourself the relevant questions above before launching a subscription service. It could mean the difference between success and failure.

Amy Hardison White Avatar
Amy Hardison White

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