Here is what I love about recurring revenue – you pay to acquire a customer once (and as long as you deliver a good product), you collect money from the customer every month going forward.
Recurring revenue has made a lot of people very rich. It has skyrocketed the values of companies like Amazon, Dollar Shave Club and The Honest Co. And it has created amazing lifestyle businesses for many others.
So how do you pick a niche for your subscription business?
My criteria is four-part.
- It must be an industry people spend money on (ie: fitness, arts and crafts, parenting, children).
- It must be an industry that doesn’t have a ton of competition PPC’ing for your keywords.
- It must be an industry where you can create a product offering with high margins.
- It must be a product or service you can deliver on.
You can use all four criteria points or pick just a few of the points but the important thing is making a brainstorm list of potential products and narrowing down the list until you are left with a product you are excited about.
Hopefully you have some ideas in mind already but if you don’t here are a few places you can look:
- Sign up for brand’s email lists and see what they profile in their email newsletters.
- Go to your local mall and walk around looking inside of department stores like Macy’s and pay especially close attention to the mall kiosks.
- Turn on QVC and see what sells well.
- Check out MySubscriptionAddiction for ideas (read comments and reviews on different products to see what customers say).
- Attend trade shows and walk the floor.
Now that you have decided on your product it’s time to find wholesalers you can buy your product from.
You can check general product sites like DollarDays as a first step but you should also Google search by typing in “[your product] wholesale”.
Most wholesalers will require that you make large quantity purchases. This is referred to “MOQ” or minimum order quantity.
At this point you are just looking to find that you can buy your product at low enough prices to make a healthy margin. You will not make your purchase yet.
Validation
Validation is the most important thing to do before you go all-in.
You have to validate the fact that there is demand for your product.
You have to validate that you can acquire customers and sell your product.
You do this by creating a Minimum Viable Product offering.
We’ll go into this in another article but for now you have chosen your product and know what your subscription is. You should roughly think about pricing and what you want to charge every month.
