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The author discusses how WhatsApp grew to 450 million users and was acquired by Facebook for $19 billion by using a subscription business model where users pay $1 per year. This shows the power of subscription businesses.
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The author admits he should have focused more on recurring revenue in his previous book Built to Sell. Recurring revenue makes businesses more valuable and less stressful to run.
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The author started his own research business which was initially service-based and stressful as he had to recreate revenue every month.
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He transitioned it to a subscription model where customers paid upfront annually. This made the business less stressful and illustrates the benefits of subscription models.
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The book will show readers how to apply subscription models to their own businesses, even if not a typical subscription industry like software or media. The key is making customers “automatic” through subscriptions.
Here’s a summary of the key points:
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Amazon Prime has grown to 16+ million subscribers who pay $99/year for benefits like free shipping and streaming. Prime members spend significantly more on Amazon annually than non-Prime customers.
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Amazon Prime acts as a “Trojan horse” to get customers to buy more products across categories from Amazon rather than other retailers. Even small businesses are losing sales to Amazon due to Prime membership.
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Amazon is now applying the subscription model to other areas like AmazonFresh grocery delivery, requiring $299/year subscription for free delivery. Subscribing makes customers want to order more frequently to “get their money’s worth.”
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Apple has also leveraged subscriptions successfully with Apple Music streaming and iCloud storage subscriptions.
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Many Silicon Valley startups are using subscription models as well, as it provides predictable recurring revenue. Venture capitalists now look for subscription-based business models when investing.
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The book will explore how subscriptions make businesses more valuable, predictable, and enjoyable to run. It provides ideas and blueprints for applying subscriptions to many types of businesses.
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Amazon is pioneering the subscription model across its business, from Subscribe & Save for household goods to AWS for business services. Other retailers like Target are following suit.
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The subscription model has a long history dating back to the 1500s with map subscriptions. It was later adopted by newspapers and magazines.
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The internet disrupted the publishing industry’s subscription model by making content free and more specialized. Some publishers like WSJ and NYT have succeeded by putting premium content behind paywalls.
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Four factors have led to a renaissance of subscriptions across industries:
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The “Access Generation” values access over ownership and embraces the sharing economy.
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Internet reliability makes people more willing to trust online subscriptions.
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Companies now have huge amounts of customer data to personalize and improve subscriptions.
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The subscription model provides companies with predictable revenue and customer engagement.
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Overall, subscriptions are becoming increasingly popular as a business model due to new technology, changes in consumer behavior, and the benefits for both companies and customers.
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Major companies like Amazon, Apple, and Microsoft are adopting subscription business models to increase recurring revenue, deepen customer relationships, and gain valuable insights into customer preferences.
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Subscription models provide several benefits that make them attractive for businesses of any size:
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They increase the value of your largest asset (your business) by providing predictable recurring revenue. This makes your company more valuable to potential buyers.
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They help you weather economic downturns because subscribers are less likely to cancel during recessions.
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They increase customer lifetime value by keeping customers longer. The longer a customer stays, the more revenue they generate.
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They help you charge premium prices by packaging products/services as part of an ongoing membership.
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They build loyalty and make it harder for competitors to steal your customers because of friction costs like learning a new system.
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They provide customer data to help tailor offerings to each subscriber.
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They improve cash flow with predictable revenue versus one-time purchases.
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They scale your business by providing a template for rapid growth.
So whether you’re a massive corporation or a small business, adopting a subscription model can provide major competitive advantages. The key is to determine if your business is well-suited for subscriptions.
Here’s a summary of the key points:
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Discounted cash flow valuation is a way to value a business based on its expected future profitability. The more profit a business is expected to generate in the future, the higher its valuation.
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Subscription businesses are valued at a premium over traditional businesses because their recurring revenue provides predictable future profits. Software companies can sell for 24-96x monthly recurring revenue. Other subscription businesses also command higher valuations than non-subscription competitors.
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The subscription model increases customer lifetime value. One subscription sale can generate recurring revenue for years rather than just a one-time transaction.
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Subscriptions smooth out demand fluctuations. With predictable recurring revenue, subscription businesses can optimize staffing, inventory, and operations. This lowers costs and provides stability.
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Overall, the subscription model results in higher valuations, higher customer lifetime value, and more predictable revenue. These factors make subscription businesses highly attractive to investors and acquirers compared to traditional non-subscription businesses.
Here are the key points on how a subscription model can benefit a business:
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Recurring revenue - Subscriptions provide predictable, recurring revenue streams. This helps with financial planning and smoothing out revenue fluctuations.
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Customer insights - Subscriptions allow ongoing interactions with customers, providing insights into their needs and preferences. This allows for better product development and marketing.
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Increased loyalty - Subscriptions make customers “sticky” by providing convenient, continuous service. This leads to higher customer retention and lifetime value.
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Upselling opportunities - Regular customer interactions provide chances to sell additional products and services to existing subscribers.
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Recession resilience - Recurring subscription revenue helps insulate businesses from economic downturns better than one-time purchases.
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Improved cash flow - Subscriptions mean customers pay upfront, before receiving services or products. This provides immediate revenue and improved cash flow.
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Built-in marketing - Subscriptions include ongoing touchpoints that serve as marketing to subscribers. This is more efficient than one-off campaigns.
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Market research - Subscriber feedback provides real-time insights into customer preferences to help guide product development and business strategy.
In summary, subscriptions allow for predictable revenue, increased loyalty and insight into customers, opportunities to sell more, and resilience in tough economic times - all advantages over one-off sales models.
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The membership website model involves publishing specialized knowledge behind a paywall that requires members to pay for access.
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Advancing technology has enabled the sharing of niche information via membership sites, reflecting the value people now place on specialized information.
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Whereas some once believed information should be free, the reality is that quality content costs money to produce, so people are increasingly willing to pay for online content.
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Membership sites provide subscribers with unique content like articles, videos, webinars, and discussions on specialized topics.
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This model works if you have access to highly specialized, constantly changing insider information.
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The most lucrative membership sites tend to focus on helping business owners master a specific industry or skill.
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People are very willing to pay for expertise that relates to their livelihood.
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The barrier to entry is possessing truly unique and valuable knowledge others lack.
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Benefits include a steady, passive income stream and building authority in your niche.
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Challenges include consistently creating valuable new content and finding enough potential members.
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Kathy Blake built a successful dance studio business over 40 years. She started writing down her expertise on running a studio to help her staff when she was away.
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Her daughter Suzanne realized these notes could be valuable as an online membership site for other studio owners. In 2008 they launched DanceStudioOwner.com, charging $187/year for studio management wisdom.
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The site grew steadily, providing recurring revenue that complemented the cyclical nature of the dance studio business.
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In 2012, Suzanne met the CEO of Revolution Dancewear, who acquired DanceStudioOwner.com to gain insights into their dance studio customers.
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After 40 years just running her studio, Kathy’s membership site was acquired after only 5 years by a leading firm in the industry.
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This demonstrates the power of a membership site - it builds trust and access to a niche audience, which has value on its own and can lead to other opportunities.
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iTunes launched in 2003 as the first legal online music store. It was initially only available on Mac but later expanded to Windows PCs, opening up to a much wider audience. At its peak in 2009, iTunes had 69% market share of U.S. music sales.
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However, iTunes’ dominance has declined in recent years as consumers have shifted from buying individual songs to subscribing to streaming services like Spotify. By 2013, iTunes’ share was down to 63%.
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To compete with streaming, Apple launched its own free, ad-supported streaming service called iTunes Radio in 2013.
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The subscription model has disrupted the music industry, providing unlimited access to music libraries for a monthly fee rather than needing to purchase songs individually.
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Other examples of the all-you-can-eat subscription model include Netflix for movies, Ancestry.com for genealogy records, GameFly for video games, and Lynda.com for online courses.
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The model works by accumulating a large library of content and then allowing consumers to access all of it for a monthly subscription fee. Startups can build their library through creative partnerships with content creators.
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Having a big group of existing fans (email list, social media followers, etc.) helps convert some percent into paying subscribers when launching a new all-you-can-eat service.
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The private club model offers exclusive access to something rare, like a golf club, along with the opportunity to network and socialize with other elite members.
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Private clubs create barriers to entry through high membership fees, limited capacity, and screening of members. This exclusivity increases desirability.
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Members pay not just for access but also for the status of belonging to an exclusive club. Luxury destination clubs are an example.
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Businesses also use private club subscriptions to project an elite image and attract talent, like the Inspirato for Business offering.
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The model works best when you have something in limited supply that is highly coveted by affluent consumers or strivers. It relies on restricting access to create exclusivity.
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Key points are that membership must be mandatory for access, and there is an inherent limit to growth without diluting exclusivity. The value comes from both the service/experience itself and the elite network of fellow members.
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Families on summer vacation can either wait in long lines for everything or pay extra to skip the lines and get faster service. Examples include paying for priority boarding on flights, using premium credit cards to get faster hotel check-in, buying express lanes on highways, and purchasing flash passes at amusement parks to skip ride lines.
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The “front-of-the-line” subscription model involves companies selling priority access to customers willing to pay more. This gives certain customers faster service than others.
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Software companies like Salesforce popularized this model by offering premium support subscriptions, but any company can use it. For example, the counseling service Thriveworks charges $99 a year for 24/7 access to therapists instead of long wait times.
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To implement this model, companies need to think about how to physically handle priority customers, such as through dedicated service counters, phone numbers, or support queues.
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The model works best for companies with complex products/services, less price-sensitive customers, and where waiting can have big consequences. It provides recurring revenue and valuable customer segmentation.
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Dollar Shave Club and Blacksocks are examples of consumables subscription businesses that ship replacement products like razor blades and socks to subscribers on a regular basis.
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They overcame initial logistics challenges to grow their subscriber bases, but face increasing competition from Amazon and big retailers who can offer similar subscription services.
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Differentiation through unique branding and supply chain control is key for the survival of small consumables subscription companies.
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Dollar Shave Club differentiated with branding and personalities like funny YouTube videos. Blacksocks offers identical black socks so you never have to worry about missing pairs.
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Diapers.com competed directly with Amazon but eventually got acquired by them as Amazon could easily undercut them on price.
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Building strong emotional branding and controlling your supply chain rather than just competing on price are important ways consumables subscription companies can survive against Amazon.
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The surprise box model involves shipping curated packages of products to subscribers each month. Part of the appeal is the discovery and surprise element for customers.
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Companies like BarkBox tap into people’s passion for their pets by sending monthly boxes of dog treats and toys. Curation and screening for quality is part of the value proposition.
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Finding enough unique, quality products each month to fill the boxes can be challenging, especially for niche themes. Craft chocolate supplier Standard Cocoa has struggled to get small chocolate makers to fulfill large orders.
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Many surprise box companies use the subscription model as a “Trojan horse” to build an e-commerce business. Samples in the boxes serve as marketing for full-size products available for purchase on their sites.
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Overall, the surprise box model works best when tapping into a passionate niche and when backed by a large, reliable network of suppliers. Curation and surprise are important elements of the value proposition.
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Technology was supposed to simplify our lives, but often ends up making things more complicated with too many options and systems to manage. This can lead to feeling overwhelmed.
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There are now endless entertainment choices, kids’ activities, banking options, etc. that require juggling many different systems. This causes mental overload for many people.
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Productivity apps like Any.do and Wunderlist have grown rapidly by helping people manage their many to-do lists and systems. Tech companies see simplification as a big opportunity.
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The “simplifier” subscription model aims to take recurring tasks off customers’ plates for a monthly fee. An example is Hassle Free Home Services which, for $350/month, assigns a technician to handle home maintenance tasks for busy homeowners.
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The regular customer contact from these subscriptions provides opportunities for upselling and cross-selling. For Hassle Free Home Services, the monthly inspections lead to identifying and selling additional home services.
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Simplifier subscriptions work best for busy consumers, especially wealthy ones. The model provides predictable revenue for the provider, compared to one-off service calls. Overall, it aims to capitalize on overwhelm from too many systems and options.
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The network model is one of the oldest subscription models, dating back to the first telephone subscribers in 1878. As more people join the network, the value of the subscription increases.
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With network models, the users help market the service because they benefit from getting more people to join. WhatsApp grew exponentially thanks to user marketing and word-of-mouth.
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Density is key for network models to be viable. Zipcar struggled initially because it didn’t have enough cars concentrated in each area. Under new leadership, Zipcar focused on building density zone-by-zone in each city.
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Network models need to achieve critical mass in each zone to provide enough utility and availability for subscribers. Once density is achieved, the model becomes very profitable.
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Other examples of successful network models are platforms like Facebook, LinkedIn, and online dating sites. The value comes from the number and diversity of other users.
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Network models can also apply to physical networks like health clubs, coworking spaces, and car sharing services. Density is equally important for these physical networks.
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The peace-of-mind model offers insurance against something customers hope they’ll never need. You make money by charging more in subscription fees than it costs to deliver the service if called upon.
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This model works for businesses that help provide security, monitoring, or protection. Examples include home security systems, vehicle/asset tracking services, website monitoring, and reputation management.
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A challenge is estimating how often customers will need your service. You want to charge enough to cover costs but not so much that competitors undercut you. Look at historical usage data to help set pricing.
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In addition to underwriting profit (subscription revenue - claims paid), you can boost profits through “float” - investing the money from subscription fees before claims are made.
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The model sells the comfort of knowing help is there if disaster strikes. It works for both consumer and business subscriptions.
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Key is understanding how insurance companies profit from premiums, claims, and investing float, then applying similar principles to your industry.
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Switching to a subscription model changes how revenue is accounted for. Rather than recognizing full payment upfront, revenue is spread evenly over the subscription period.
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This can make your P&L statement look bad initially, even though the subscription model leads to more stable, recurring revenue over time.
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For example, a software company selling a $1,000 license would recognize $1,000 revenue upfront. But charging $99/month, they’d only recognize $99 of revenue per month.
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The author’s consulting firm saw a similar drop when switching from $50,000 projects recognized in full, to $30,000 annual subscriptions recognized at $2,500 per month.
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This accounting change can be psychologically difficult as profitability drops drastically on paper. But recurring subscription revenue builds over time.
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New metrics become more useful than traditional P&L, especially customer lifetime value (LTV) - the revenue a customer generates over their lifetime. Focus on growing and retaining subscribers.
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Other key metrics: MRR (monthly recurring revenue), churn rate, CAC (customer acquisition cost), LTV:CAC ratio. Master these to properly evaluate your subscription business.
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The author started a subscription business model but shut it down after a few months of losses, reverting to a project-based model. This was a mistake, as recurring revenue is valuable.
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For subscription businesses, the key metrics are:
- Monthly recurring revenue (MRR)
- Customer lifetime value (LTV)
- Customer acquisition cost (CAC)
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According to investor David Skok, a viable subscription model needs a LTV:CAC ratio of at least 3:1.
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Churn rate is also critical - it needs to be low enough that the LTV remains above 3x CAC over the customer’s lifetime.
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Margin, the amount left over after the costs of serving customers, contributes to LTV.
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An example of HubSpot in 2011 shows how these metrics add up to evaluate subscription business health. Their high CAC and churn then meant a low LTV:CAC ratio of 1.67. Improving these metrics turned their business around.
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In a subscription business, revenue comes in over time rather than upfront. This can create a cash flow challenge as you may spend significant money upfront to acquire customers before seeing much revenue from them.
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The CAC payback period measures how long it takes to recover the cost of acquiring a new customer through their subscription payments. It’s calculated by dividing the customer acquisition cost (CAC) by the gross margin on the monthly recurring revenue (MRR).
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An acceptable payback period depends on factors like customer retention and ability to upsell. For SMB customers with higher churn, 6-18 months may be acceptable. For enterprises with stickier customers, 24-36 months can work.
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If the payback period is very long (36+ months) it may be time to cut back on spending to improve efficiency. If it’s very short (under 6 months) you may be able to invest more in growth.
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Managing cash flow and payback period is crucial in a subscription business to ensure you don’t run out of cash while waiting for subscription revenue to catch up to acquisition costs. Tracking metrics like CAC and payback period helps guide appropriate growth rates.
Here are the key points summarizing the passage:
- There are three main options for funding the growth of a subscription business:
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“Rob Peter to pay Paul” - Use profits from non-recurring revenue sources to fund the subscription business. Allows keeping control but can be slow.
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Outside money - Raise funds from investors like venture capitalists. Brings in needed capital quickly but requires giving up equity/control.
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Charge up front - Flip the traditional subscription model and charge for the service before delivering it. Provides needed cash up front but changes the customer relationship.
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Each funding source has trade-offs between control, speed, and changing the customer relationship. Choosing the right source depends on priorities and circumstances.
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Examples are given of companies like Basecamp and FreshBooks that successfully bootstrapped growth using option 1. Others like Bloodhound Technologies raised VC but with poor founder outcomes.
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Overall, funding sources impact how quickly you can scale, how much control you retain, and relationships with customers. Evaluate trade-offs to pick the best option.
Here are a few key ideas for selling subscriptions effectively:
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Emphasize 10x value over 10% discounts. Help customers see how your subscription delivers way more value than one-time purchases. Give specific examples of how much more value they’ll get.
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Highlight convenience and saving time. Subscriptions can make customers’ lives easier by delivering products/services automatically. Paint a picture of how much easier their life will be.
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Offer a free trial with minimal friction. Let customers experience the benefits firsthand without commitment. Make signing up incredibly easy.
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Create FOMO (fear of missing out). Use scarcity and urgency to make customers feel like they need to subscribe now so they don’t miss out.
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Make unsubscribing easy. Reduce anxiety around being “locked in” by allowing seamless cancellations.
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Share success stories. Social proof is powerful. Feature case studies and testimonials from happy subscribers.
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Focus on retention. Don’t just acquire subscribers, delight them so they stick around. Subscription riches rely on retention.
The key is to show how your subscription delivers recurring value that far exceeds intermittent purchases. Make it a no-brainer decision.
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Subscription services can offer much better value than one-time purchases. GrooveBook provides 100 printed photos for just $2.99 per month, 10 times cheaper than printing them yourself.
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Appeal to customers’ rational side by emphasizing convenience and reliability. Show how your subscription delivers ongoing value and avoids frustrations like constantly buying new razor handles.
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Give customers an ultimatum to subscribe or not do business. Don’t offer both subscription and one-time purchase options. Force them to commit to the subscription model to get your product/service.
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Offer a “freemium” version to let customers sample before subscribing. Give some content away for free to demonstrate the value and intrigue them to upgrade to the full subscription.
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For hard-to-describe products, offer a free trial period so customers can experience the benefits firsthand before committing to subscribe.
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The key is to convince customers of the superior ongoing value of subscribing versus one-time purchases. Make it rational, restrict choices, give free samples, and let them try before they buy.
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Offering free trials, freemium models, and introductory offers can help convert prospects into paying subscribers. Successful examples include BarkBox, Netflix, and Ancestry.com.
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Make it easy for customers to gift your subscription to others. Foot Cardigan gets nearly half its subscriptions as gifts.
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Create a sense of exclusivity or scarcity to motivate sign-ups. Luxury golf club Osler Bluff converts over 90% of trial members to full members by limiting access.
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Focus free trials on getting prospects to experience your product, not necessarily buy right away. Zendesk provides onboarding support to engage trial users.
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Set “fire to the platform” by creating a sense of urgency or limited-time deal for fence-sitters who have already decided to subscribe. But avoid overusing this tactic.
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Selling partners and employees on a subscription model can be tough. Accountant Andrew Gray struggled to convince colleagues of his fixed-fee model despite client interest.
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The key is to emphasize recurring revenue and predictable income streams from subscriptions over one-time sales. This provides sustainability and aligns incentives.
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Scaling up a subscription business requires focusing on two things: consistently acquiring customers for no more than 1/3 of their lifetime value, and reducing churn (customers canceling).
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Churn becomes more problematic as your business grows. Even a small churn rate can require replacing a lot of customers each month to keep revenue flat.
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Some churn is unavoidable (e.g. customers moving or dying). But you want to minimize avoidable churn.
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To reduce churn: improve your product/service based on why people leave, make your service a daily habit for customers, communicate regularly, offer pricing tiers, and make canceling difficult.
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To scale up customer acquisition: expand your market, optimize your funnel, double down on what works, form partnerships, run promotions, and leverage word of mouth.
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Scaling up requires focus and picking the one or two strategies with the most impact potential. Pursue growth thoughtfully and sustainably.
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Salesforce is deeply integrated into the daily workflow of the company being discussed. As a result, it has very low churn of around 1% monthly.
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The first 90 days after a customer subscribes is critical for onboarding them successfully. Get the onboarding right, and the customer is likely to stay for years. Mess it up, and they are much more likely to churn.
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Banks see most account closures within the first 90 days. They have found the window to cross-sell additional products is wide open in the first 30 days.
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Testing has shown that giving subscribers the “best” content in the first 10 days triples lifetime value compared to spreading content out evenly over time.
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The biggest competitor to a subscription is customer inertia - failing to get them to actively use the product. Successful onboarding breaks old habits and gets customers using the product within the first few weeks.
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Steps for good onboarding: do it manually first, test different approaches, automate what works, then integrate learnings into the software itself.
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Markers at 30, 60 and 90 days can be used to assess the health of subscribers instead of waiting years to judge the full impact.
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Like predicting heart disease risk, companies need to identify metrics that predict future customer loyalty. At SellabilityScore.com, getting new users to embed code and generate reports in the first 90 days predicts lower churn later on.
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Constant Contact changed its onboarding to focus first on letting users create campaigns (“the what”) rather than uploading contacts (“the who”). This “quick win” wow experience improved onboarding and loyalty.
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Charging subscribers upfront leads to greater commitment to learning and adopting the product in the critical first 90 days, reducing churn later on.
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New subscribers need more frequent communication, like new lovers. But overcommunication after 90 days can increase churn.
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“Happiness bombs” - unexpected small gifts - can delight subscribers, like BarkBox surprising grieving pet owners.
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Overall, focusing on crafting the first 90-day subscriber experience is key to driving adoption, “quick wins”, and loyalty.
Here are the key points from the chapter on lowering churn:
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Test different pricing and packaging options to find the optimal balance of value, affordability, and margin. Offer discounts for longer commitments.
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Analyze your data to understand why customers churn and target those pain points. Survey churners.
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Make it easy to pause or downgrade subscriptions rather than completely cancel.
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Create a “red carpet” onboarding experience and WOW new customers from day one. Check in frequently at the start.
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Use drip campaigns and lifecycle marketing to engage customers throughout their subscription lifecycle. Surprise and delight them.
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Target larger, more stable businesses to reduce churn, balancing with higher customer acquisition costs.
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Focus on “net churn” by offsetting cancellations with upgrade revenue from existing customers.
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Reduce “logo churn” by cross-selling multiple subscriptions to the same customer.
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Use an “evergreen” subscription model rather than fixed terms unless selling to large enterprises.
The key is to continuously test and optimize based on data to maximize retention, upgrade revenue, and customer lifetime value. Lowering churn boosts growth and profits.
Here are the key points from the excerpt:
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Subscriptions provide recurring revenue, which is predictable and more valuable than one-time sales. The book uses a flower shop as an example - they rely on seasonal sales spikes and trying to “intercept” customers, while a subscription model provides steady revenue.
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The author previously ran a consulting firm which struggled to match employee supply with customer demand, resulting in feast or famine cycles. In contrast, subscription businesses have predictable revenue and smoother operations.
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The book aims to inspire readers to develop subscription models for their own businesses, regardless of industry, to make them less stressful and more valuable.
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It shares examples of companies like H.Bloom, Mosquito Squad, DanceStudioOwner.com, and others that successfully implemented subscriptions in non-tech industries.
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The author wants to spark ideas for how readers can create “automatic customers” through subscriptions for their own companies. Building recurring revenue is an essential first step to building a valuable, sellable business.
Here is a summary of the key points about grocery delivery:
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Grocery delivery services allow customers to order groceries online and have them delivered to their home. This saves time and is convenient compared to going to the store.
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Major grocery chains like Walmart and Kroger have started offering delivery services to compete with startups like Instacart and Amazon Fresh.
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Startups can offer more flexibility and better user experiences than major chains initially. However, chains have the scale, infrastructure, and brand recognition to potentially dominate long-term.
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The delivery model has high operational costs for picking, packing, and delivery. Services must achieve scale and optimize routes and warehouse operations to become profitable.
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The industry faces challenges around thin margins, operational complexities, and competition. But overall it is a fast-growing segment as consumers increasingly value convenience.
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Successful services will offer easy ordering, reliable delivery, competitive pricing, and a wide product selection to gain loyal repeat customers.
Here is a summary of the key points from the referenced articles:
The New York Times article discusses how not every startup founder can expect to become as successful as Mark Zuckerberg of Facebook. Many venture capitalists invest in companies expecting big returns from a small number of huge successes, but most startups fail or have more modest outcomes. Entrepreneurs should be realistic about valuation and giving up control.
The journal article examines how venture capitalists often renegotiate their cash flow rights when selling startups, reducing the payments they receive compared to the founders. This happens because founders have more control and VCs want to encourages sales. It means VCs have less upside than commonly thought.
The Bloomberg article profiles FreshBooks CEO Mike McDerment, who avoided VC funding and retained full ownership of his accounting software company. He believes VC money comes with too many strings attached and unnecessary risks. Bootstrapping let him stay in control.
The corporate fact sheet provides background on Forrester Research, an independent technology and market research company. It was founded in 1983 and offers advice to business and technology leaders. It has several thousand clients globally.
In summary, these articles explore different perspectives on startup funding, control, and selling companies, arguing founders should be realistic and VCs make compromises to facilitate exits. FreshBooks exemplifies bootstrapping for independence. Forrester is an example of a successful services business.
Here is a summary of the key points about using subscriptions to grow a business:
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Subscriptions lead to more reliable revenue and higher customer lifetime value compared to one-time sales. Recurring revenue is predictable and churn can be managed.
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Subscriptions build customer loyalty. Customers are less likely to switch when they are on an auto-renewing subscription.
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There are different subscription models that work for different business types: membership site, all-you-can-eat library, private club, front-of-the-line, consumables, surprise box, simplifier, network, peace-of-mind.
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Measuring metrics like monthly recurring revenue (MRR) and customer acquisition cost (CAC) is important. Focus on increasing MRR and managing CAC.
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Managing cash flow is critical. Recurring revenue leads to better cash flow over time compared to one-time sales.
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Selling subscriptions involves different tactics like offering free trials, gifts, ultimatums. Make it easy to sign up and stay subscribed.
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Scaling a subscription business involves things like nailing the onboarding process, optimizing costs, adding automated upsells, and managing churn.
In summary, subscriptions are a powerful model that lead to predictable revenue, loyal customers, and better cash flow. The key is finding the right model for your business, focusing on MRR and CAC, and using tactics tailored for subscription selling and retention.
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About Matheus Puppe