Why You Need to Start a Subscription-Based Business

Start a subscription-based business

Why You Need to Start a Subscription-Based Business

Whether you have to re-think your idea of what a business should look like, or the pandemic has locked you inside your home or community—a subscription-based business could be your ‘freedom’ solution.

As with any business, the subscription business model is a lot of work, and if done wrong, can be many hurdles to overcome. But once you set it up, you only have to acquire the customer once.

Theoretically, if you do your job well, that one customer will pay you month-after-month for many years.

Subscription-based businesses are perfect options for location-independent entrepreneurs. Fulfillment houses pack and ship the physical goods, while you can operate a knowledge-based business from anywhere you have a wifi connection.

There are multiple business options for the subscription model. I’ll attempt to highlight each one in this article—along with the pros and cons of each.

While a subscription business may not be the best choice for a beginning business venture, this recurring income model makes a great addition to your overall portfolio.

There are a lot of moving parts, but once you have your infrastructure in place, subscription businesses are a great way to scale your efforts from one to many.


Paid Newsletters

While paid newsletters might feel out-of-date, or something only your accountant might subscribe to, you’d be dead-wrong.

Paid newsletters have been around for decades and they’re making a serious comeback, both digital and in-print.

Using your targeted email list of niche subscribers, you’ll encourage a small percentage of your email subscribers to upgrade to paid newsletter subscribers.

As long as the value of the content you provide is greater than the cost of the monthly membership, you keep a customer for life.

Many entrepreneurs are going the traditional, print route. Not only does a print newsletter feel more valuable (as this takes up physical space on the customer’s desk), but print newsletters are more work for digital thrives to pass around the internet.

New subscribers may get access to a couple back-issues, but I recommend having most back-issues disappear.

Disappearing issues make it fair to long-time subscribers. You don’t want a new subscriber to join your newsletter, only to vacuum two years of content, then quit the following month.

Pros:

  • You write the content once, then sell it to many
  • You can pre-schedule the newsletter, allowing you much freedom in your day to day life
  • You now have a dedicated list of buyers, who you can also sell additional products to

Cons:

  • Customer management and payment management. There will be a steady stream of subscribers and cancellations to contend with, as well as expired credit cards
  • You must keep a strict publishing schedule. If you choose print, you’re at the mercy of the printer’s publishing schedule
  • You must address customer service issues ASAP. There will always be something to address

Apps and Software

Software as a Service or SAAS businesses are the holy grail of Silicon Valley. A subscriber joins the service, makes the service an integral part of her life or business, and must continue paying forever, if she wants to continue using the software.

Pros:

  • You can build a fiercely-loyal base of fans who will promote your software for you
  • You can automatically update the software at any time without having to sell new versions
  • The model has built-in loyalty. If a customer leaves she loses all the data and benefits too

Cons:

  • You must constantly update and upgrade the software as customer service issues arose, operating systems change, and digital preferences change
  • If you’re successful you’ll be in constant defense against copycats, pirates, and competition willing to do anything to steal your customers
  • As you grow your audience you must also grow your staff/team, which could lead to large monthly overhead costs, which must be covered by an adequate number of subscribers

Subscription Boxes

If you sell physical goods, or you like to broker the products of those who do, subscription boxes may be your business. You sell a pre-packaged box of physical products or food, to a niche list of people who appreciate your ability to curate what’s new, trendy, or appropriate for their demographic.

Subscription boxes can be:

  • Clothing
  • Food
  • Office supplies
  • Toys
  • Cleaning products
  • Health supplements 
  • Art
  • Socks
  • Games
  • Books
  • Pet supplies
  • Baby gear
  • Gift wrap 
  • Survival gear
  • Workout of the month
  • Collectibles

Monthly subscription box ideas are almost limitless. As long as the numbers work in your favor, you can build a scalable, recurring business over time.

These box services seem to be the most-vulnerable of all subscription models because of their novelty and luxury-factor. In most cases we don’t need the subscription box to the same degree as we need to keep up our accounting software payment.

Pros:

  • Social media makes it easy to create buzz-worthy box businesses
  • You can test your model with a small handful of initial customers, even buying the goods and shipping the boxes yourself
  • Loyal fans will spread the word of mouth for you

Cons:

  • If you don’t have 100% control of your timelines, product quality, and overhead costs a single bad box could put you out of business
  • Fulfillment and purchasing the goods must be perfectly orchestrated
  • Unless you have a large number of customers, the tiny margins may not be worth the hard work required to operate the business

Mastermind Groups and Forums

These aren’t free Facebook groups. When you operate a virtual (or in-person) mastermind or forum, it’s your job to curate the members.

There should be a strict membership policy where only high-quality members are allowed inside. Some of these groups pay $10,000 or more per year to join.

The members will want a return on investment. One bad member could ruin the dynamic of the group. It’s also important to make sure if anyone leaves the group, they are never allowed back.

This permanent exit policy is the way to avoid churn. And it forces members to weigh the consequences of leaving, before they unsubscribe.

In addition, you can create annual mastermind retreats in exotic locations, providing you with a fantastic vacation destination while your customers find the entire retreat.

Mastermind groups are one of the fastest ways for business owners to collectively help each other solve problems and help each other grow their businesses.

You can launch a new product and have your entire mastermind help promote it to their own customer lists. You’ll do the same in return.

Pros:

  • You can make a lot of money from a very small group of people
  • These members tend to be very loyal if you deliver on your promises. There are many groups like this, where members stick around for a decade or longer. You only sell them once!
  • You will benefit from the collective wisdom of the group just by being the facilitator

Cons:

  • You must deliver. And you’ll likely have to sell each person one-on-one via a phone call, at a minimum. If someone wants to spend $10 grand with you (or more), they want to know you’re the real thing
  • You will spend a lot of time serving this special team. High-performers want results. If they spend that kind of money with you, they’ll also want access to you—more than you may want to give
  • One lost customer is expensive. If you serve a small handful of high-ticket customers, of one person leaves it could affect your livelihood instantly

You Only Need One Core Product

With a subscription business, since you sell the same product repeatedly, you only need one core product.

You start with a free email list. Over time, you convince readers to trust you.

You prove you can help people by actually helping them with your free content first. Those who want more will join your subscription program.

With subscriptions you don’t have to constantly come up with new procure to serve your core following.

The margins can be huge.

Also, if you build a newsletter-based, or content-based subscription model you can re-package older content into single-volume books or courses for the same audience.

There’s an old marketing saying that goes, “the best customer to sell watches to is the person who already owns a bunch of watches.”

The same is true for paid subscribers. They already love your work. They already give you money. These are the folks who will buy your packaged content, even if they’ve seen it before.

We love paying for curated content, even if we can get it free by reading all your blog posts or past articles.

Never underestimate the power of repackaging.


Add a Subscription Option to Your Current Business

Even if you offer multiple products in different forms, a subscription model should be part of our overall portfolio.

Whether it’s your only business, or an additional income stream, a subscription model will help you bring a steady stream of predictable income into your business.

This is not a path to automatic riches or even the easiest business to operate. But subscriptions are a great way to multiply your efforts—one to many. You no longer have to trade working time for money.

Whether you make a physical or virtual subscription model, this recurring, monthly income is a long-term way to ensure your business will thrive no matter the economic conditions outside your doors.


Tap here for August’s free, Tribe 1K list-building masterclass. Get your first 1,000 subscribers (or your next 1,000)

August Birch is an author, email expert, and entrepreneur from Michigan, USA. As a self-appointed guardian of writers and creators, August teaches indies how to make more work that sells and sell more work once it’s made. When he’s not writing or teaching, August carries a pocket knife and shaves his head with a safety razor.

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