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How to Start a Subscription-Based Business

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The GoCardless content team comprises a group of subject-matter experts in multiple fields from across GoCardless. The authors and reviewers work in the sales, marketing, legal, and finance departments. All have in-depth knowledge and experience in various aspects of payment scheme technology and the operating rules applicable to each. The team holds expertise in the well-established payment schemes such as UK Direct Debit, the European SEPA scheme, and the US ACH scheme, as well as in schemes operating in Scandinavia, Australia, and New Zealand. See full bio

Last editedApr 20222 min read

Customer retention is a high priority for most businesses. It’s common knowledge that acquiring new customers can cost businesses up to 10 times more than retaining their existing customers. With that in mind, it’s easy to see why the subscription model has become so popular of late.

Why take one single payment from a customer when you can take recurring payments from them all year long?

Setting up a subscription-based business can potentially provide your company with a more stable revenue stream and more opportunities to build value into your relationship with your customers. Over the past 10 years, the subscription economy has grown by more than 200%. If you’re ready to take advantage of the benefits of a subscription-based business model, we have some tips to help you make sure you do it right.

Refine your product

The subscription-based model isn’t necessarily suited for every business, product or service. As such, your offering may need to be tweaked slightly to ensure that it lends itself well to a monthly subscription.

Most subscription services are based around products that consumers use frequently. Food and drink are the biggest, accounting for more than 30% of the market. Razors and shaving products, cosmetics and clothing are also popular offerings.

That’s not to say that your product can’t find success if it doesn’t fall within the above categories. If it’s something that your customers use regularly and will benefit from direct delivery, it could be successful as a subscription service.

Pinpoint your target market

As with all business models, it’s essential that you know your niche when offering a subscription service.

Will you target individuals, families, or businesses? How will your offering be different from other subscription services on the market? In some cases, a little specificity can make all the difference. For instance, a smaller streaming platform like Shudder isn’t going to be able to compete with Netflix or Amazon Prime in terms of variety. Instead, it focuses on delivering a diverse range of horror programming to cater to that specific audience.

Establish your pricing tiers

Pricing is always a thorny issue when launching a product. You want to ensure value for the customer while also ensuring that you are left with a reasonable margin once your overheads are accounted for.

Try not to overcomplicate your offerings. Start out with two or three tiers. You can always expand from there. Tier your offering based on features, functions, length of subscription, or whatever else best suits your product or service.

Get your payments system in order

If you’re going to be taking recurring payments from customers, it’s advisable to do so by direct debit rather than accepting credit or debit card payments. Direct debits have lower fees than those associated with credit or debit card transactions.

GoCardless enables businesses to collect payments directly from their customers' bank accounts in a way that’s both easy and cost-effective.

GoCardless can be used both for recurring and one-off payments. It’s quick and easy to get going, with no setup fees (unlike setting up via a bank).

GoCardless provides high converting payment pages during the checkout experience, available in a variety of formats to fit your branding and payment flow. These include hosted pages, drop-in modules, and custom options.

We also make it easy for subscription businesses to managecash flow with advance knowledge of incoming payments and visibility of who has and hasn't paid through the dashboard.

GoCardless also offers seamless integrations with more than 200 partners, including major invoicing software like Xero and QuickBooks – integrating payment visibility into your business’ workflow.

We can help

If you’re interested in finding out more about incorporating a subscription-based business model into your existing operations, then get in touch with our financial experts. Discover how GoCardless can help you with ad hoc payments or recurring payments.