Want to start your own subscription business but need help figuring out where to begin?
Here’s a procedural guide on how to start a subscription model business from scratch
Unlike other businesses, subscription businesses offer their products and services to customers on an ongoing or recurring basis.
Subscription businesses are also referred to as paid clubs or membership businesses.
Generally, the subscription-based business model has become increasingly popular among new and existing business owners because of its profitability.
This industry is projected to be worth 473 billion dollars in 2025.
Therefore, read on if you’re an existing or aspiring business owner looking to tap into the high revenue-yielding industry by setting up your own subscription business.
How to Start a Subscription Business in 5 Simple Steps
Step 1. Come Up With a Business Idea for Your Subscription Business
You’ll need to decide on the subscription service or product to offer customers regularly, either based on a monthly fee or an annual plan.
If you’re looking to turn your existing business into a subscription business, this shouldn’t be much of a problem.
You need to analyze your business to determine which part of your products and services would fit into the subscription services industry.
Also, pay attention to the aspects of your products and services with high customer demand.
These are products/services your existing customers need the most and would be willing to buy consistently. If you’re starting your subscription business from scratch, you need to pick a subscription idea.
It should be an essential need so your customers will be willing to subscribe.
Here are some tips for developing a subscription offering for your business:
Identifying Your Target Market’s Pain Points
Research your target market to understand their needs, wants, and pain points. Consider what skills, interests, or passions you have that could be used to solve a problem for your target market.
Offering Solutions to Your Target Market
Think about how you can make your target market’s life easier by offering products or services that solve a problem or meet a need. Consider offering your products or services on a recurring basis to provide ongoing value to your customers.
Providing Convenience and Cost Savings
Successful subscription box businesses often thrive by offering convenience and cost savings to their customers. Consider offering discounts or other perks to encourage your customers to sign up for a subscription.
Researching Competitors and Identifying Gaps
Research competitors or other top subscription brands to understand the market and identify any gaps you could fill with your products or services. Use this information to narrow your list of potential subscription box ideas and identify the most feasible option.
Step 2. Pick a Profitable Subscription Model
Next, you’ll need a business model to start a subscription business. A subscription business model is how you intend to deliver your products and services to your customers.
There are three standard subscription business models that you can pick from to inform your subscription business ideas.
Curation Business Model/Subscription Box Business Model
This is also called a subscription box business or subscription box service. Subscription box business works best for companies that sell physical products. It involves sending a box of specially curated products to your customers on a recurring basis, either weekly, monthly, quarterly, or seasonally.
For instance, you could offer a snack subscription box if you own a local pastry shop or an online store. You could deliver seasonal-inspired snack subscription boxes to your customers, such as Mother’s day cakes, Valentine’s day cakes, etc.
Replenishment Business Model
This works best for businesses that sell essential items that need constant replacement, such as office supplies, personal care products, pet foods, baby care products, etc. With this subscription business model, your customers would subscribe to having their essential supplies replaced before they run out.
Access Subscription Business Models
This subscription-based model works best for service-based businesses. In this model, customers subscribe to gain exclusive access to your premium services and several perks.
Overall, the right subscription business model for you will depend on the nature of your business.
Step 3. Decide on a Pricing Strategy
Next, decide how you’ll price your subscription service. As a rule of thumb, you’d want to offer a discount to your subscribers to make an irresistible offer.
But ultimately, you want to ensure that you’re pricing your services well to generate recurring revenue and profits for your business.
So, when deciding what your subscription cost will be;
- Research the industry/competitors to see how other businesses like yours are pricing their services.
- Factor in production, packaging, and shipping costs, mainly if you sell physical products.
- Consider how much value you’re offering to your customers.
- Finally, consider your target customer base.
Are you targeting high-profile customers or low-profile customers?
You’d want to build a subscription business that your target customers can conveniently and consistently pay for.
Step 4. Decide on a Platform to Host Your Subscription Business
If you sell subscription boxes, you’ll need a subscription box platform to sell. Likewise, e-commerce businesses also need a platform to sell their subscription service.
This platform is where subscription companies manage subscriptions and inventory and engage customers, among other things, to allow their business to run smoothly. You could build your website from scratch and set up your own subscription box business.
Alternatively, you could sign up with any eCommerce platform that offers subscription management apps to help you manage your subscription boxes and analyze your business performance.
Many subscription businesses use platforms like Shopify, Woocommerce, Bigcommerce
Step 5. Develop a Marketing Strategy
You’ve taken the pain to start a subscription business. However, you need to develop a marketing strategy to create awareness around your new business.
If you already have an existing customer or loyal customer base, this can be as simple as updating them on your new services via text, call, newsletter, or mail.
However, if you’re starting your business from scratch, this can be a challenge.
Final Thoughts on How to Start a Subscription Business
Now, that’s how you set up a profitable subscription-based business. This unique business model allows you to offer customers more convenient, personalized, and automated services.
This improves customer retention and assures business owners of predictable revenue. Aside from predictable revenue, subscription-based businesses also help businesses reduce customer acquisition costs and increase customer lifetime value.
Customer acquisition, customer retention, and increasing customer lifetime value are some major challenges business owners face. However, subscription businesses are designed to overcome these challenges.
Now, while the subscription box industry has seen a consistent upward trend in recent years, it has downsides. First, it is becoming increasingly saturated and competitive due to many business owners adopting this model.
If you can develop a unique selling proposition and offer value consistently to your customers, you can overcome these challenges.
Paul Martinez is the founder of EcomSidekick.com. He is an expert in the areas of finance, real estate, eCommerce, traffic and conversion.
Join him on EcomSidekick.com to learn how to improve your financial life and excel in these areas. Before starting this media site, Paul built from scratch and managed two multi-million dollar companies. One in the real estate sector and one in the eCommerce sector.