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September 01, 2021

How To Start a Subscription Business in 6 Simple Steps

Should I buy the shoes I have always bought, or should I check out those new shoes?

Will it be worth it?

Shall I buy that top-reviewed software? Will it pay off?

There are tons of similar questions that customers ask themselves on a daily basis. In the end, most of them end up purchasing nothing.

You can bypass that by providing a stress-free and personalized customer experience.

How?

By starting a subscription business.

You can learn how to start a subscription-based business model and access a larger customer base.

You get your customers as subscribers, which lessens customer acquisition costs, increases customer lifetime value, and provides predictable revenue on a regular basis.

UnivDatos Market Insights forecasts that the global subscription ecommerce market will reach $478.2 billion by 2025. Starting from mere magazines and newspapers, it has expanded to bloggers, entertainment platforms, startups, and websites like Netflix and Amazon.

Read on to learn how to start a subscription-based business.

Subscription Business 101

In a subscription business model, customers receive a product on a regular basis through subscriptions, which get renewed — manually or automatically — at the start of every billing cycle.

Customers looking to cancel their subscription can do so after an agreed period with or without cancellation fees.

By learning how to start a subscription business, you can satisfy the varying and specific needs of a wide range of customers.

Benefits of Subscription Businesses

Starting a subscription business provides several benefits to small business owners.

Three major benefits that should get you to start a subscription business are:

Predictable Revenue

Small and new business owners have a hard time managing their expenses. They never know what they will make in the current month before its end, let alone the revenue for the next month.

Subscription-based business models change that and help in predicting cash flow. Knowing the subscribers you have, you can quickly estimate your revenue.

Lower Customer Acquisition Cost (CAC)

Customer Acquisition Cost (CAC) is the cost of getting a new customer to buy your product or service. If you spend $300 on ads and win 10 buyers, your CAC will be $30.

Starting a subscription business to reduce CAC.

Starting a subscription business will lower your CAC by getting you a higher profit from a single acquisition, as retaining an existing customer generates recurring profits.

Higher Customer Lifetime Value (CLV)

By nature, a subscription-based business sells products to its customers for a long time due to convenience and seemingly low costs.

As a result, starting a subscription business not only lowers your CAC but also increases your CLV.

Customer Lifetime Value (CLV) is the total amount of money a buyer spends on your products or services throughout their time as your customer.

Types of Subscription-Based Businesses

There are four common types of subscription-based businesses.

If you’re looking to start a subscription business, you can choose one depending on your industry and your business goals:

Boxes

Many ecommerce businesses have opted for the subscription box business model, in which they deliver a monthly subscription box containing their products to their subscribers.

It is a popular business model among companies selling makeup, food, pet care, and clothing.

Ecommerce

In addition to subscription boxes, some ecommerce businesses offer an open subscription. Customers can specify the products they want and the frequency with which they require it.

Software

Software-as-a-subscription (SaaS) is a popular business model for software companies.

Starting a subscription business as a SaaS involves:

  • Creating software.

  • Coming up with a subscription plan.

  • Increasing customer retention rate by providing great services.

Accessibility

Accessibility is a subscription model that is a blend of software and ecommerce subscriptions.

Entertainment services like Netflix and Amazon Prime use this subscription model to provide access to movies and TV shows and extra shipping benefits, respectively.

Steps in Starting a Subscription Business

Here are the major steps to start a subscription-based business.

1. Develop Your Business Idea

Every great business starts off as an idea.

Person thinking about how to start a subscription business.

For subscription-style businesses, start by:

  • Selecting a niche — Choose a target audience and the product you want to sell to that audience.

  • Market research — Research your customers and competitors.

  • Product sourcing — Decide how you will get the product.

  • Subscription type — Select the type of subscription.

  • Marketing strategy — Develop a marketing strategy that fits your needs.

2. Adopt a Pricing Strategy

Based on your market research, check out the pricing strategy that fits your business.

If you are selling a one-of-a-kind product, opt for a price skimming pricing strategy. In contrast, a freemium model suits you if you are a SaaS company.

3. Build a Website

When your marketing strategies succeed and attract several potential customers, you want your website to be ready to showcase your offers. It will help you to start a subscription business effectively.

While building a functional website generally takes a while, Nexcess’s WP QuickStart for membership sites is an efficient solution to help you create a custom subscription business website in minutes.

4. Plan Out Inventory and Logistics

If you are sending physical products or subscription boxes, you should ensure that you:

  • Source high-quality products from trusted suppliers.

  • Get branded labels to customize your boxes.

  • Streamline and track customer requests from order to fulfillment.

  • Add shipping costs that customers are willing to pay.

  • Deliver products on time and without damage.

5. Market Your Subscription

A major part of starting a subscription-based business is persistent marketing.

To get new customers for your own subscription box business, you need an effective marketing strategy to promote your offers from pre-launch to post-launch.

You can use marketing tactics like influencer marketing, social media, and content marketing to get a successful subscription box business.

6. Keep an Eye on Churn

Customer churn accounts for the customers who stop using your product or service in a specific time period.

Retaining your customers after starting a subscription business is crucial for your business growth.

Monitor subscription cancellations and unravel why customers are opting out. A high churn rate may be a result of credit card issues or economic changes.

Take steps to improve your subscription service and reduce churn.

Final Thoughts: 6 Steps to Starting a Subscription Business

With the ever-changing business landscape, starting a subscription business offers a relatively stable and predictable source of income.

Follow our six simple steps on how to start a subscription-based business and have a bite of the growing subscription-based economy.

Build a fast, functional site that supports your subscription business in minutes. Get started with WPQuickStart for membership sites.

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