The Subscription Business Model: A Startup Guide

subscription business model

From cooking ingredients to self-care supplies, subscription boxes are taking over the eCommerce world. The numbers are staggering: the subscription box industry grew by 890% in only four years and there are over 2,000 of these services in the US alone.

Do you want to take advantage of the ever-growing subscription business model? Whether you have an existing business or you’re starting from scratch, there are a few things you need to consider before jumping in.

Read on to find out how to start a subscription business and get some ideas of what to include.

Market Research

Like any business venture, a subscription service should start with market research. Who is your ideal customer? What demographics do they fall into?

If you’re adding a subscription offer to a pre-existing business, you’ve likely done some of this investigation before. Either way, dig a little deeper and find out what their interests are, what they struggle with, and what pain points your subscription could alleviate.

Offer Ideas and Pricing

Now that you have a good idea of who your target market is, it’s time to work on your offers and pricing. First, start by deciding what type of product you want to offer (we’ll talk more on that later).

Next, do a cost analysis to find out how much you’ll have to invest per subscription. Make sure to include:

  • Product costs
  • Shipping, packaging, and logistics fees
  • Your time
  • Any extras you throw in the box, like business cards or promotional items
  • Other business and operational costs (rent, internet, etc.)

Once you’ve combined these costs, decide on a price per subscription that not only covers them but helps you turn a profit as well. Make sure to keep the cost reasonable so people are inclined to buy.

Build a User-Friendly Interface

The main benefit of subscription services is convenience. Rather than having to go shopping and pay a bill every time you buy the same thing, it’s delivered right to your doorstep for a set, reasonable price. As such, you need to design your website’s user interface so that it’s as attractive and easy for people to use as possible.

Make a Prototype

Now that you have everything set up and ready to go, it’s time to do a trial run. Make a prototype box or service package and set it up on the subscription interface.

Contact a few of your loyal customers or launch a small ad campaign to see if your product is something people want to buy. Let these first customers know that they’re testing the prototype. Offer them a free month of the subscription or discount code that sells the product at-cost in exchange for their honest feedback.

In the survey, make sure to ask them their opinion on all parts of the subscription, including:

  • The packaging
  • Shipping time
  • Ease of purchase
  • Value of the offer

Most importantly, find out whether they would buy this subscription again at the normal price and whether they would recommend it to others. Then, make changes to your offer based on the feedback. Even though it may feel like a time and money sink, this process is an essential way of making sure your subscription business doesn’t bomb at launch.

Managing Subscription Finances

Even if you’re already familiar with billing and invoices in a standard company, you’ll need to take a new approach for your subscription box business.

Unlike one-time bills, subscriptions are identical recurring fees. Whether your customers pay by the week, month, or year, tracking them all by hand is a waste of your time. You need to come up with an automated billing system to either prompt your users to pay or automatically deduct the owed amount from a linked credit card.

If you’re a solo entrepreneur or don’t have a finance department to track your invoices, this billing subscription service can manage them for you. It can take care of even complex recurring charges, leaving you free to work on improving your offers.

Subscription Business Ideas

Now that we’ve covered the basics, let’s dive in and look at some of the best things you can offer your customers. The list of subscription options is endless, so below we’ve highlighted a few that will work with both existing brands and new startups.

Product Samples

People love to be the first ones with access to new products and features. This makes subscription boxes perfect for testing out product launches.

Pack in sample sizes of your new products like food, cosmetics, and beauty products. Like you would with a prototype, make sure to solicit feedback from your subscribers.

Swag Packs

Does your brand already have an established image? Would people be happy to wear your logo on their sleeves? If so, you might be able to use your subscription service as an advertising campaign by selling “swag packs”.

Fill the monthly box with fun branded items like shirts, hats, mugs, and enamel pins. Snacks like chocolate bars with custom labels are also sure to please.

If you want to put a spin on the offer that makes it more attractive, sell it as an editor’s choice deal. “[Your Company]’s Favorite Things of the Month” could feature a different employee, team member, or business influencer’s choices in each box.

Creative Items

Are you an artist or craftsperson looking for a way to get recurring customers? Try offering a “print of the month club” or similar subscription. People who want to support artists but don’t have the finances to buy originals will love filling their home with your products.

To add in some variation, partner with other local makers and split the profits.

Think Outside the Box

Subscriptions aren’t only for physical products. The subscription business model works well with services, too.

If you offer your customers a repeating service, like managed IT or bookkeeping, consider offering them a monthly or annual subscription they can renew at their leisure. This model benefits both your business and the customer. They know that they’re covered in case of emergency, and you can plan on having a more consistent revenue stream.

Are You Ready to Launch Your Subscription Business Model?

The subscription business model is here to stay, and if your business hasn’t capitalized on it, now may be the time to start.

Following the instructions above will give you a solid foundation to work from. Once you’ve covered the basics, the sky’s the limit—if you can dream it up, someone out there will want to subscribe to it.

For more business inspiration, make sure to follow our site.

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