subscription business model

Mulling a Move to the Subscription Business Model?

The subscription business model is enjoying a comeback. A model once associated with newspapers and magazines is now used by everything from SaaS to grocery delivery.

Perhaps your business is mulling a move towards the subscription model. CFO Magazine published an article on that topic titled Why Transition to a Subscription Business? Some takeaways from the article:

  • The subscription business model nets higher valuations than other models
  • Subscription programs with higher initial purchases from customers are more effective than programs with lower initial purchases
  • Revenue drops early in the transition and rises later (see the SaaS Fish Model)
  • A subscription model’s value depends on customer retention. “The moment of transaction is the starting line, not the finish line.”
  • A successful transition depends on creating enough customer value to justify recurring fees

The authors conclude with a reminder about employees. Consider the knowledge and resources employees might need to successfully adapt to the new business environment.

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