Is a Subscription Business Model Right for You?

There’s a reason why Blockbuster filed for bankruptcy while Netflix took the world by storm: the rise of the subscription business model.

Essentially, it’s a business model where you pay a recurring monthly fee to access a product or service. It’s relatively easy to deliver this business model online, and it provides both the buyer and the business owner with the added convenience of knowing exactly what to expect — buyers receive a product or service on a regular basis, while business owners earn a predictable amount of revenue.

You’d be surprised that almost all industries can incorporate a subscription model in some way. If you’re wondering whether a subscription model is right for you and your business, read on to find out exactly how it works and what the benefits are.

Will a subscription model work for me?

When you think about a subscription model, companies like Netflix or Spotify probably come to mind. However, you don’t have to be a streaming mogul to provide valuable subscription services to your customers.

One popular way to create a subscription model is by mailing patrons subscription boxes — something that’s become extremely popular in recent years, according to Forbes. An independent bookstore might mail subscribers a few new releases every month, while a clothing store could send subscribers new additions to their wardrobes on a regular basis.

Another popular method is providing some form of digital content. For example, if you run a home decor blog, readers can pay a small fee in exchange for exclusive DIY tips delivered right to their inboxes. Platforms like Patreon make this type of subscription service easy to manage. On your WordPress.com website, you could display a Simple Payments button and create an email newsletter to share special content with those who pay to become subscribers.

Even a freelancer can set up a contract in which a client pays a fee for a predetermined amount of content every month. This will guarantee a steady flow of income from month-to-month, and will help you avoid the feast-or-famine cycle that freelancers often face.

What are the benefits of subscription models?

Now that you know how a subscription model works, you’ll want to know why creating one is beneficial. The following are some of the most common benefits people experience after onboarding subscription business models.

1. Happier customers

For customers, the real value of your business lies in its convenience. The predictability of a subscription-based business can increase that convenience even more, as buyers won’t need to remember to purchase new items on a regular basis. Instead, they’ll be delighted to find something new arriving on their doorsteps or in their inboxes on a regular basis.

2. Better cash flow

The obvious benefit is that you can predict how much cash you’ll earn every month. This means that you can better manage your bills, pay contractors on time, and even budget for any investments you want to put back into the business.

Think about how nice it would be to hire a virtual assistant to handle your overflowing inbox, or to redecorate your storefront to make it a little trendier. If you know what your expected income will be month-to-month, you can put a little bit away to start saving for those things.

3. Built-in marketing strategy

A subscription model allows you to keep in constant contact with your customers. Since they pay you consistently, you know they’re interested in what you have to offer. You could always slip a promotional code into the emails that you send, or put coupons in their subscription boxes for an added incentive to make additional purchases.

Instead of constantly chasing after new business, you can ask your subscribers to refer new customers. Incentives like a free month of your subscription service for every successful referral is sure to elicit some new business bites. People trust the recommendations of their peers over marketing gimmicks, so persuading your dedicated fans to recommend you to their friends and families is a surefire way to get new business.

Incorporating a subscription business model is a great strategy if you want to keep scaling your business. It creates a more regular cash flow for you, while providing a consistent service to your patrons. Both of these things will help your business thrive in the long run.

After all, who would you rather be like: Blockbuster or Netflix?

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Sarah Li Cain

A B2B and personal finance writer who has appeared in publications such as Credit Karma, Magnify Money and Lending Tree.

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