What to Consider When Adding Subscription Services

Founder University

The subscription business model is growing rapidly. With 75% of companies that sell directly to customers having implemented or are in the process of implementing a subscription plan, this pricing method is only going to grow.

But, before you start Implementing a subscription plan for your own startup, here are a few things you might want to consider.

What Pricing Model Should You Use?

Subscription plans come in various pricing models. It is important to determine what model you would be using right off the bat.

A flat pricing model is one of the most common and most successful in the market. This is the model used by platforms like Netflix and other such platforms where a specific amount is charged on a monthly basis for the subscription.

A few other models include:

  • Per user/module base: Here, there is a fee for each user and extra functionality added to the subscription.
  • Tiered model: Here, prices vary depending on the features provided. Data storage providers use this model a lot, where payment varies depending on the amount of space offered.
  • Variable model: This is often a mix between the flat pricing model and the other models listed above.

How to Manage Billing?

You would also want to identify your billing cycle. How would you want to bill users? When would you want to bill? How many billing options would you be making available? Here are important questions you want to ask before integrating a subscription plan.

You could go with just a monthly subscription plan, or you could provide options for users to choose between a monthly subscription, quarterly subscription, or yearly subscription. Consider your choices properly before deciding your billing option. Here is a subscription billing guide for businesses that might help.

Will There Be Tax or Accounting Implications?

You would be surprised how often businesses get in trouble, simply because they do not ask this simple question. Subscription plans impact your accounting process, so before integrating subscription services, ensure that you are well-educated on the implication of subscriptions on your accounting and taxes.

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