Subscriptions are more than just recurring revenue and invoices
What's the first thing that comes to mind when you think of Usain Bolt? I'm pretty sure you've heard of him. He's probably one of the most famous runners of our time. I'm sure you also think of the records he has set. Perhaps the 2009 World Championships in Berlin, where he ran the 100 m in 9.58 seconds? Faster than any other runner!
The second thing you're probably thinking about is the years of hard training it takes to achieve such success. We are good at looking at the results. But sometimes we tend to ignore the long road it took to get there.
The same applies to subscriptions. The result of a subscription is a recurring bill, but there is so much more to consider.
Reason 1: Gain agility with subscription management systems
Subscription Management Systems give you the agility to react more quickly to changes and are more volatile than transactional ones, for several reasons.
In Subscription Management, you set up your Customers at the center of your business modelwhich means that changing customer needs can mean changing your business model.
If your industry is new to the whole subscription management thing, you need to find a model that works for you and your clients, which can be quite challenging. The subscription business is trying to build an ongoing relationship with their customers - the model changes from ownership to usage - so you need to find a model that makes sense for both you and your customers.
Another reason is to decouple your subscription management system from your transactional system. Decoupling is something we often do in software development.
- Why do we use REST APIs? Because they are loosely coupled.
- Why do we prefer microservices to monoliths? Because they are loosely coupled.
- What are the advantages? Problems in your subscription management do not affect your transaction business and vice versa.
Suppose your subscription management generates more load and it needs to generate more invoices. You may be offering a usage-based subscription, so you also need to communicate and evaluate the usage data. Overall, this could have a negative impact on your existing system.
Another example could be that you are working on your transaction business and your subscription management at the same time. Both business areas would change the system, which could cause major headaches. Some of our customers understand the importance and benefits of decoupling. They use multiple instances of a subscription management system to manage their different types of subscriptions.
A brief note on agile software development: We think it's a good way to get started with Subscription Management. The goal is to go live as soon as possible! It doesn't have to be 100 % functional. Accept some limitations. Instead of having a system that has all the features but nobody uses it, it's more important to test your business model.
Let's take an example. Finally, all transactions need to be transferred to the general ledger. Depending on your system, there may be different ways to do this. You could either post a summary once a month or every single transaction that occurs. It may be enough to choose the easy way and use the better supported solution before implementing your desired solution.
Reason 2: Maximize efficiency and flexibility
Automation is a major topic in many different industries. Whether you produce physical goods (car manufacturers) or digital goods (software): You want to automate your business as much as possible. The same goes for subscriptions.
In "Reason 1: Agility" we have already assumed that we will generate more load and therefore more invoices. We can also assume that their total invoice amount will be lower compared to the invoices in our transactional business. The automation of a subscription model also makes us more economical. You can save a lot of time by not having to manually adjust invoices and your colleagues in accounting can focus on other issues instead of making manual corrections to invoices.
The most successful subscription models offer customers the flexibility to choose between different plans. You should embrace the flexibility of subscriptions because change will happen. Now you're dealing with issues you may not have encountered before in a business world based on individual transactions.
- Can users upgrade or downgrade their plan?
- Can you change it immediately?
- Or only at the end of their term?
- If a device is included in the subscription, does your device support this plan?
These are the questions that a subscription management system helps to automate.
Another example: Let's say you offer a subscription that includes a device and a digital service. Your main customers are workshops that belong to a large chain, i.e. B2B. Sometimes workshops change ownership. The old owner has a few other workshops that he runs and the new owner already has a few other workshops that use your product. Nothing has really changed for you, except that one of your customers now has an extra device and another one has one less. This small change could only mean a two-digit change. Nothing you want to do manually. You want to automate it.
Reason 3: Save time and stay focused
Using a dedicated system designed with subscription businesses in mind will help you focus on your service or product. Leave as much as possible to the subscription management system. A dedicated subscription management system has a whole product team behind it. There are developers and consultants who can help with your specific case.
You'll probably get to a point where the system is missing a feature you really need, but it's easier to develop a single missing feature in an existing system than to develop the entire system itself. It could also be a sign that you've lost your way. However, this decision should not be determined by a system, but you could use it as a hint to rethink your approach.
Improve your business with subscription management
Take advantage of automation, flexibility and focus for long-term success
These are three reasons why you should use subscription management software. Subscriptions are more than just a recurring bill. They bring a whole new level of complexity.
One Subscription Management Software will give you the agility and automation you need to grow your business and make you happier in the long run. Almost as happy as Usain Bolt must have been when he set a new world record.
