CAN YOUR BUSINESS GROW WITH A SUBSCRIPTION BUSINESS MODEL?

If you are interested in starting a subscription business, thoroughly working out the many details of your model is a crucial first step. The most common catalysts that motivate this pursuit are having a:

• rough idea of a product or service suitable for selling via subscription,
• big pool of customers that would probably be willing to subscribe to the right product or service offered by your company, or,
• a following to some kind of free member or subscription product (for example, a big following to a website blog or free newsletter) and you want to try to monetize that database.

Any scenario along these lines typically leads shrewder minds to seek out expertise- like ours- to help with the next steps rather than trying to do it all themselves. Can you guess your way into a profitable subscription model on your own? Of course you can but doing so typically involves a sequence of wrong guesses- many of which will seem perfectly logical when you make them. Repeating mistakes already made by subscription business trailblazers long before you needlessly wastes time & money.

Don't Waste Money & Time Trying to Guess Your Way Into a Lucrative Model

We've worked with many entrepreneurs that chose that harder path. They almost always have "back in the early days" stories usually including "I wasted hundreds of thousands of dollars in trying to figure this business out." When they reach out to us we are always able to teach them a new thing or two… or five… or twenty+... not because we magically know more than them but because we've already "been there and done that" many times before. The opportunistic entrepreneur taps our kind of expertise to do it right the first time. The smart entrepreneur knows when to cut his "do it myself" losses short and seek out expertise. The foolish entrepreneur believes they can do every business function as good as others who have long careers in those functions. Choose your own entrepreneur style wisely.

Evaluating suitability at the earliest stage is mostly about thinking thorough whether anything you could offer a customer could be consumed over time. That's the key to subscription business seeds: how can this product or service be delivered over time so that it logically makes sense to regularly pay to keep it coming? The obvious examples- like magazine subscriptions- deliver a new magazine every month. The content of each new edition justifies the money their subscribers pay for the subscription.

Many concepts can be packaged for subscription. You need not think in terms of just magazines or newsletters. One could think of their utilities (electricity, water, etc) as subscriptions- you pay a monthly rate for a service consumed over time. Cable or Satellite TV, your internet service, cell phone providers are subscription businesses too. You subscribe to the flow of power from your electric company. A renter subscribes to the steady shelter provided by a landlord. Etc.

The possibilities are nearly endless. For example, Blockbuster and similar dominated the movie rental business for a long time. You rented a movie from a local store when you wanted to watch it. Keep a movie beyond a certain time and it would cost you more money. If you didn't rent any movies for a span of time there was no cost for you (and no revenues for Blockbuster).

Netflix came along in 1999 with a subscription spin on Blockbuster's well-established model. Netflix would get paid every month regardless of how many movies subscribers rented… or did not rent. There were no late fees and no local brick & mortar infrastructure expense. Less than a decade later Netflix grew from no revenues to more than a billion annually… all from recognizing an opportunity to take an older, established business model and monetize it via a subscription arrangement.

In 1999, many found great fault with the Netflix team trying to take on the entrenched goliath of the space… especially with a business model that appeared to involve delivering a higher volume of movies to customers for a net rental equivalent that would be less revenue-per-movie. Nevertheless, the value proposition along with smarter cost management has paid off in a very big way.

As the Internet went mainstream, a huge number of websites were launched with a flawed concept of giving valuable content away to presumably make money later. How that money would be made was not fleshed out at the time though a good number of businesspeople had some concept of justifying the giveaways on the potential of advertising revenues. We are regularly approached by companies or individuals who have built up large followings for free content they produce (blogs, specialized website content, newsletters, E-zines, netletters, etc) hoping to monetize that business. Some are making minor revenues from advertising but all recognize that what they produce is worth more than whatever they make on it now.

It's always a good idea to flip a cost center into a profit center so having a large subscriber following- even to a free service- is a good foundation on which to try to build a lucrative subscription business. If you have some great content consumable over time or a large following to some kind of information or service that might be able to be monetized via a subscription model, you should contact us for a free consultation. We are thoroughly skilled at innovating ways to package valuable education, information and various services into profitable subscription enterprises. We're also quite resourceful at helping entrepreneurs capture revenues in the short term and rapidly growing this kind of business into big successes.

Hire Experienced Subscription Business Experts To Help You Do It All Right

Creating and installing a best-in-class subscription model is definitely an exercise for the experienced. If you lack that experience you need to engage talent that knows subscription models inside & out, ideally professionals who have worked in high-performing models for many years. Your subscription model architects should be masters of both the strategic and the nitty gritty. Capable subscription model consultants can help you fire up a successful business ASAP with minimal costs of cash & time. In short, engaging experienced talent helps you shortcut the path to lucrative, recurring revenues.

Whether you plan to go it alone or use knowledgeable expertise the optimal way to maximize sales of a subscription product is summarized (and over-simplified) in 3 key initiatives:

1. Target a specific niche then develop the most mainstream-appealing product or service to dazzle that niche. This should involve incorporating "best of" features & benefits driven by customers and competitors formalized into a tangible, final, wow form. The new product should be designed to be as broadly appealing as possible yet include narrow detail elements that best address specific wants & needs of a pre-defined target market. Trying to stand out from the crowd with a quality product is always an important key to maximizing sales and subscriber retention. Using OBJECTIVE customer & competitor research is the best way to do it right.
2. Develop a bundle of timeless, quality creative within an impressive website to effectively showcase these "best of" features. More simply, once you've built the better mousetrap (step 1), you capitalize on that work by promoting it as such. Prospects need to be able to easily see that your product is the standout offering in its class- the crucial task of exceptional website promotional content. Metaphorically, your website & website promotional content become a "baited trap" for all of your "prey." It must be great!
3. Once you see that the baited trap is doing a good job of converting casual visitors to buyers the next initiative is to jack up the volume of prospective "prey" flowing into your website. If a website gets 100K unique visitors and the "step 2" creative can move 3% of them to subscribe you add 3K new subscribers. But if you execute some proactive, highly-targeted marketing such that you increase those inflows to 500K or 1,000K, that same baited trap can then add 15K or 30K new subscribers.

These 3 steps are how many subscription business entrepreneurs seeking quick & significant growth make it happen. Step 1 yields the hot (market desirable) product, step 2 becomes the main showcase for that product and step 3 flows a lot of relevant prospective subscribers into that step 2 creative so that it can convert as many as possible into paying customers. Do all of these exceedingly well and this business can flourish.

A Subscription or Membership Model is a Simple Opportunity in Leverage

If you seek to start this kind of business, 3K subscribers paying you your estimated subscription price may appear to yield beyond your short-term hopes. For example, if you believe that whatever you produce could sell for- say- a subscription of $150 per year, 3K times $150 equals annual revenues of $450K. Some virgin subscription entrepreneurs are quite happy at that level of success.

Your ultimate subscription growth potential is a factor of volume of subscribers and revenue-per-subscriber... how many subscribers your business can acquire and how much each will pay for their subscription(s). This table offers some generally popular price points for a variety of subscription businesses and subscriber counts...

Whether you are targeting 3,000 or 300,000 subscribers the fundamentals of how to achieve- and rapidly grow- this kind of business are the same. What works at the micro level can generally be leveraged to work just as well at the macro level. It's typically a matter of testing at the micro level to get something working profitably, then applying cash + time + energy to scale it up to the macro. Cash is the ultimate fuel for rapidly growing subscription models. Time + energy represent the application to make it happen. Each profitable test can contribute to massive subscription model growth when cash + time + energy is applied by experienced professionals like BI.

Can you grow a subscription model on your own without any cash? Yes, but such growth is typically much slower. With a marketing budget you can rapidly buy your way to certain minimum volumes of subscribers. Without a budget all of your growth must be realized from just time & energy, which usually translates into you having to expense a whole lot of energy (working really hard) over a long period of time (years) to grow the business up to a reasonable level of success.

Nevertheless, most subscription businesses start with little-to-no budget. The Internet is heavily populated with such businesses. Most spend many years trying to reach revenues of even $200K per year. We've been approached by a number of companies that have been at it for a decade or more without growing to even $1M per year.

On the other hand, we've worked with capitalized entrepreneurs to rapidly grow small & medium-sized companies from thousands to millions. We helped a small subscription company grow from about $3M per year to $17M per year over just about a 2.5-year term by applying a number of well-proven innovations in many areas of their business. We helped another grow from about $20M to better than $74M over a 2-year term with similar solutions. Again, there's great value in engaging experienced talent to help you.

5 Important Truths for the Subscription Business Entrepreneur

What drives such rapid & massive growth? For those wanting to get into this space (or those wanting to push the accelerator to grow their established enterprise) here's 5 important truths for the subscription business entrepreneur:

1. Like any new business, it's very challenging to create great revenues from nothing and no risk. The entrepreneurs who can use cash to help them grow this kind of company tend to realize their big picture objectives much sooner- and to a much higher level- than those who choose to utilize little-to-no budget. Trying to shift the risk to others (partnering, affiliates, etc) will also shift the upside potential to those others. More simply, he, she or they that take(s) the bulk of the risk tends to also take the bulk of the reward. This is a universal truth in all entrepreneurial endeavors and this particular kind of business is no different.
2. In general, this is not a "build a better mousetrap and the world will beat a path to your door" proposition. While we certainly endorse developing the best possible product, it takes an aggressive, PROACTIVE marketing model to go out and win new subscribers in volume from established competitors. You should not fool yourself into believing that your product is so superior to all others that you won't need to do anything more than hang an e-shingle out on the world wide web. And you can't be passive about the marketing hoping subscribers seek you out (in both cases a few subscribers will come from nowhere at no expense but never in volumes to make you feel very successful). Quick & big subscription model success involves you having to go get them.
3. Trying to put all the pieces together on your own is likely to waste a lot of money & time. Hire subscription model experts like us to shortcut the path to success. In most subscription models there are logical next steps that will completely fail and illogical thrusts that will deliver big gains. An experienced guide knows the correct path because we've "been there and done that" before.
4. Unless your subscription product(s) is likely to generate a massive number of followers, a model that keys it's revenues on advertising dollars is unlikely to yield anywhere near expectations. Most good subscription businesses consider advertising as ancillary- NOT primary- revenues. It's much harder than novices realize to make a lucrative subscription business around advertising revenue alone.
5. Odds are exceedingly high that you are NOT your market. Building a product to your own tastes exactly how you would like it might limit your total market size to as little as none. A very common mistake made by new entrants in the subscription business space is believing that customer & competitor research is not important. Successful business startups rarely work when the market research is based on how ONE person thinks the product should be. Instead, a great deal of good work is in packaging an entrepreneur's expertise or idea for the masses which is best driven by good market research (beyond yourself).

How Much Can I Make With a Subscription Business?

There is no fixed answer to such a question but generally many subscription opportunities offer upsides well beyond what you've imagined. For example, clients are often shocked to learn that a little niche newsletter that they can fully produce themselves can be grown into a multi-million dollar business (that they can still run themselves).

We generally answer the question by asking another: "How much do you want to make?" followed by "over what time period?" When we are given those answers in tangible terms, we have the refined tools to work backwards from these goals to deliver excellent estimations of what it takes in the present to maximize a clients chances of getting there. This "do the math backwards" approach is the best way to estimate a startup marketing budget for this kind of business.

Also note that subscription models have huge asset value for the entrepreneur wanting to grow this kind of business and then cash out. The list (the database of current subscribers) is a very valuable variable that goes into establishing a fair price for the company. Buyers love the idea of acquiring a business that comes with such a predictable base of future revenues (renewals) as they see it as fundamental in reducing their risk (a block of very likely future sales is already built into the acquisition). In many subscription business sale transactions, the list is THE most impacting variable in establishing a price. Make sure your subscription model is built upon a documented planning culture and your cashing out reward can be very impressive.

Big Innovations principals have many years of experience in all facets of subscription model businesses. We can confidently claim mastery-level expertise of all topics therein. If you want to start a subscription business as efficiently as possible and set yourself up to make as much as possible in the short and long terms... look no further. Contact us for a free consultation. We can definitely help the subscription-minded entrepreneur break into the space the right way.

 From Scratch Subscription Models