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Moving from services business from traditional to subscription model.

Discussion in 'General Business' started by Shadowpro, May 31, 2015.

  1. #1
    Hi,

    I am planning to transition my main services from traditionally billed web services to a fully packaged subscription model, and I'm interested in hearing from folks that have done this, are thinking about it, or in the process of it.

    Current state is that we bill for websites over two months, and have internet marketing services that are monthly billed.

    Future state is a packaged service which is billed monthly at a fixed cost, allowing us to make recurring revenue and to take greater responsibility for client success.
     
    Shadowpro, May 31, 2015 IP
  2. cronik

    cronik Well-Known Member

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    #2
    This is exactly what I am working on now, feel free to contact me if you want to share tips.
     
    cronik, May 31, 2015 IP
  3. Shadowpro

    Shadowpro Active Member

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    #3
    Sounds good, but not sure I can PM yet - I certainly can't see how to, but if you ping me, I'll ping you back :)

    Have you read The Automatic Customer by John Warrillow?
     
    Shadowpro, May 31, 2015 IP
  4. cronik

    cronik Well-Known Member

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    #4
    No, but it looks like a good read so I'll have to download it on my tablet soon. I presume you read it, so can you share some tips or advice that we can find in the book?
     
    cronik, May 31, 2015 IP
  5. Shadowpro

    Shadowpro Active Member

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    #5
    Certainly.

    The book aims to define and cover all possible subscription business models and to then go into detail about each one. Obviously it's extolling the virtues of the subscription model, but also points out the difficulties. Unlike a lot of business books, it's worth reading the whole book (last few pages are troubleshooting so only required when your in production) Too many business books have a core set around a brilliant idea, that's then padded out with meaningless fluff and statistics.

    There are some great examples of businesses that have moved from standard to subscription and what challenges they faced, and what gains they saw. Typical gains being sustainability, and the ability to forecast revenue. Not so obvious; subscription model businesses tend to sell for higher amounts than standard since the purchaser can have far greater confidence of future performance.

    There are also some great formula in there too, to allow you to set and use the correct metrics to allow running and scaling. Things like churn rate, customer acquisition costs etc can be put into formula to show a ratio that indicates the business health.
    Basically you need to be getting new customers at a cheap enough price (all things considered), and your churn rate needs to be low enough. Lowering churn rate in particular makes a huge difference.

    Without that knowledge I think it would be difficult to know you were on the right track.

    One challenge is that while the customer pays a fixed price over the term, the service provider has a very front loaded service to provide, so break even point can be months away from initial engagement. That also means that we should expect to see a temporary reduction in revenue while transitioning.

    One major pay off that I've seen with a local business is that they don't need to recruit as many customers as I do. Every time I finish an engagement I have to replace the customer, or work on keeping the engagement going. They don't have that problem.


    Link: The-Automatic-Customer-Creating-Subscription
     
    Shadowpro, May 31, 2015 IP
    cronik likes this.
  6. cronik

    cronik Well-Known Member

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    #6
    Please visit the link in my sig and send me a message, I would PM you but if you can't respond yet then I won't waste time. And I don't think I can share that info here or I would. I have something to ask you but not here obviously...


    Thanks for sharing this info I am going to buy the book tonight and start reading tomorrow.
     
    cronik, May 31, 2015 IP
  7. Shadowpro

    Shadowpro Active Member

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    #7
    Interested in your opinion of the book.

    I've emailed you.
     
    Shadowpro, May 31, 2015 IP