Understanding the Landscape: The 5 Things You Need to Run a Subscription Business
I’m going to show you a mindmap and it could be worth over a million dollars.
Why?
Because this is the exact mindmap I used to make $1.7mm last year on a subscription box.
You can apply it to any subscription or ecommerce business too.
It’s a great checklist. It’s magic. It’s the best guide you can find for recurring revenue.
(insert full mindmap)
So you want to create a subscription business but need a game plan of everything that goes into creating one.
You’re in the right place.
Two years ago when I created my first ecommerce subscription business I wrote out these five things you need before you can safely take your first few sales.
They are all operational. Some are boring, but they are all mandatory.
Product
This is one of the most exciting parts to me because most likely the exact spin you put on your product offering doesn’t currently exist in the marketplace. You are going to create something from nothing.
And even if similar products and services exist, none will be exactly like yours. You can let your creativity run wild on this in terms of what your whole product offering will be, how you bundle it, how you present it, package it, etc but there are some important questions to ask yourself.
Are you going to offer a physical product or digital product?
I’ve had businesses with both digital and physical products. I even had a mobile subscription product. Whichever option you choose, you’ll want to execute very well. Both digital and physical product subscriptions can make you a lot of money.
Are you going to source the product from a wholesaler or manufacture it yourself?
I recommend you start by sourcing the product from a wholesaler. When you start, you might even have to buy it at near-retail price on eBay or Amazon just to test and validate that you can successfully sell these items.
It’s much better to overpay a little for 10 – 15 items and sell those at break-even, than to pour in hundreds of hours and thousands of dollars buying at wholesale prices but in bulk without first knowing or validating that you can get customers for it.
So I recommend you find wholesalers who can get you your desired product and ask them for samples. But do not buy your first 10 – 20 items from them because the wholesaler most likely won’t sell you such a small quantity. You also don’t want to spend thousands of dollars on it prior to validating that you can get sales.
Will you get creative with your product bundling?
For example, I have a friend who was selling video workout courses digitally but through testing learned that if he also mails each customer a physical DVD to go along with their online material, his refund rates drop by 50%.
Fulfillment
You always want to start product fulfillment by doing it yourself. Fulfilling products is relatively easy for your first hundred orders or so.
It’s important to do it yourself when starting so you can get a good grasp on how your packaging looks, what type of box you should use, confirming your postage printing is working correctly, etc. And that’s not to mention the fact that it’s most economical to do it yourself.
Eventually you can outsource this by hiring employees or to a fulfillment house but either way you’ll have to know how your packaging works inside and out before you can give the task to someone else.
Product fulfillment includes the packaging of your product and connecting your CRM to your postage printing.
I recommend using Shipstation which uses Indicia to print your postage. Shipstation connects to most CRM’s.
CRM
It used to be difficult to find a reliable CRM to handle all your subscription needs but with the rise of subscription businesses in the last five years three great solutions exist:
- Cratejoy – least technical knowledge needed
- Shopify – excellent for pure ecommerce but you need to integrate with subscription apps to make it work.
- WordPress + WooCommerce – if you have technical knowledge this is the best and most customizable set up but it’s the most difficult because it requires programming knowledge.
If you have programming knowledge go with WordPress + WooCommerce. If you don’t have technical expertise and want a quick solution you should go with CrateJoy.
Payment Processing
Prior to Uber coming on the scene, Stripe was my favorite company. And Stripe is hands down the best payment processing solution available to you. All good CRM’s and programs integrate with it, you can open an account with them in five minutes and the ease of use is amazing. Plus they deposit money into your bank account every two days now.
Customer Support
Customer support is an often overlooked part of a subscription business. Do you want to offer customers email support, phone support or ticket support?
I’ve offered all three in the past and my main subscription ecommerce business right now offers a contact form and phone support options. I only give out my company phone number to customers who get the number as soon as they subscribe and again in every package they receive from me.
If you don’t mind fielding inquiries all day over the phone then you can put your number on the website. Depending on how clearly you explain your product and all questions online, you may or may not get a lot of calls from non-customers.
Overall it can never hurt to talk to your visitors so if you don’t mind answering calls and have time during the day, I’d give out a company phone number on your site to everyone. If your time is limited or you don’t like being on the phone, then only give your phone number after a purchase is made. Everyone else can reach you through a contact form or email address.
There you have it – the five basic operational components you need to have in place before you launch.
We’ll talk about minimum viable products in another article but the only time you don’t need all five of these pieces is during your validation phase where you are looking to get 10 – 20 customers at breakeven cost to see if you should invest more time and money into building out that particular product or service. In these situations you can use Excel as a CRM; Stripe to process the payments; and Stamps.com to print postage.
