Why Companies are Adopting Subscription Billing Models

Volvo recently announced they will make their cars available on a subscription model where consumers will pay one fixed fee per month for access to a car which includes insurance and maintenance.

Everything from tooth brushes to flowers are now available with subscription billing. Could you offer some sort of recurring plan to your customers?

Here are six reasons to consider offering your customers a subscription:

  1. Predictability: When you have subscribers, you can plan what your business needs in the future. For example, the average flower store in America throws out more than half of its inventory each month because it’s too rotten to sell. At H.Bloom, a subscription-based flower company that sells flowers to hotels and spas, say they throw out less than 2% of their flowers because they can perfectly predict how many flowers are needed to fulfill their orders.
  2. Eliminate Seasonality: Many businesses suffer through seasonal highs and lows. In fact, a whopping thirty percent of a typical flower store’s revenue comes on Mother’s Day and Valentine’s Day — ultimately leaving them to scramble and make a sale in November. By contrast, H.Bloom has a steady stream of subscribers that pay each month. At Mister Car Wash — where they offer a subscription for unlimited car washes — they receive revenue from customers in November and April even though very few people in the Northern east wash their cars in rainy months.
  3. Improved Valuation: Recurring revenue boosts the value of your business. Whereas most small companies trade on a multiple of profit, subscription based businesses often trade on a similar multiple of revenue.
  4. The Trojan Horse Effect: Once you subscribe to a service, you become much more likely to buy other things from the same company. That’s one reason Amazon is so keen to get you to buy subscriptions to things like Prime or Subscribe & Save. Amazon knows that once you become a subscriber, you are much more likely to buy additional products.
  5. The Sale That Keeps On Giving: Unlike the transaction business model where you have to stimulate demand through advertising to get customers to buy, with a subscription based model, you sell one subscription and it keeps giving month after month.
  6. Data & Market Research: When you get a customer to subscribe, you can start to see their spending and consumption habits. This data is the ultimate in market research. It’s how Netflix knows which new shows to produce and which to kibosh.

For more information on how to increase the overall value of your business before you sell it, to avoid leaving money on the table, visit www.valueight.com.

--

--

--

Business Growth Advisor who helps leaders of small to mid-sized businesses overcome their growth challenges. www.valueight.com

Love podcasts or audiobooks? Learn on the go with our new app.

Recommended from Medium

United Way of Metropolitan Dallas evolves for the era

Helium Cares: Charity Auction

Shanghai Auto Show: China car buzz surrounds electric vehicles and Tesla

4 Steps to Strategic Relationships — How to be a true PARTNER!

Paceline: Aligning physical health with financial health

Executive Summary

Britam Microinsurance: Dealing with and planning for immediate and long-term impacts of COVID-19

Battery Study: Electric vehicle battery costs declining rapidly, Tesla leads the way

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
Chris Baisch

Chris Baisch

Business Growth Advisor who helps leaders of small to mid-sized businesses overcome their growth challenges. www.valueight.com

More from Medium

Marketing: We’re going to need a bigger boat

4 Quadrants of Startup Success: Are You Healthy, Survivor, Explorer, or In Danger?

The global challenges we face will be tackled by collaborations across technologies,sectors and…

Innovative Ways to Fund Your Healthcare or Medical Device Company

Medical devices on the table and a paper on a clipboard with medical technology concepts.