With no signs of slowing, subscriptions remain a popular revenue model across a growing number of industries. In fact, subscription billing is forecasted to reach a whopping $1.5 trillion by 2025, more than double its current estimated worth of $650 billion. As with all revenue models, there are advantages and disadvantages – and subscription billing is no different. With its inherent complexities, companies face a variety of challenges that can lead to customer churn, low acquisition rates, and loss of revenue – the complete opposite of what you’re trying to achieve when implementing subscription billing solutions.
Subscription Billing Solutions Deliver a Bounty of Benefits
Attractive to both businesses and customers alike, subscription billing solutions give companies a predictable revenue stream and customers get what they want on a regular basis for a set price. However, implementing a successful and profitable subscription billing revenue model takes more than sheer luck. Before diving into the considerations that will help ensure revenue growth, let’s look at its key advantages.
Key Business Benefits
Consistent cash flows: Calculating revenue is as simple as multiplying the number of customers by how much each customer pays per month (or year). As long as customer churn remains low, revenue loss isn’t a concern. With a consistent cash flow, you’re better able to plan for the future and invest in new growth areas, without worrying whether you’ll have the necessary capital on hand.
Higher collections and customer retention: With subscription billing solutions, concern over outstanding invoices gets reduced. As long as customers keep their payment methods up to date, you’re able to automatically collect the revenues owed. Unlike companies that rely on one-time payments, you’ll benefit from a higher percentage of invoices paid. Additionally, subscription revenue models tend to build customer loyalty faster, meaning higher customer retention rates.
Automate billing: One of the most valuable aspects of subscription billing is that companies can set their billing to run automatically. Essential billing tasks such as invoicing, collections, and dunning, can be executed with automated workflows to simplify billing management. With the right subscription billing solutions, you’re able to focus less on administrative tasks and more on how to stay ahead of the competition. Key to this advantage is that your subscribers are repeat customers that over time become familiar with your platform and won’t require as much hands-on attention.
Key Customer Benefits
Predictable expenses: In the same way that subscription-based revenue models give businesses cash flow consistency, customers enjoy predictable expenses. They know exactly when and how much charges will be for the same set of services each billing cycle. Bill shock becomes a thing of the past and customers are in a better position to budget around their fixed subscription payments.
Cost-effective access: In the past, customers had to pay large upfront licensing fees for many services and products. Subscriptions opened the door giving customers access to products and services that would otherwise be unaffordable to some potential customers. With subscription billing solutions, customers don’t have to shell out sky-high payments to access or own high-quality, sophisticated offerings. They can spread their costs out with smaller, bite-sized charges. Additionally, customers incur fewer penalties because they’re less likely to miss payments when they opt for automatic payments.
Higher convenience: Once a customer signs up for your products or services, subscription billing is extremely easy and convenient. With autopay, customers don’t have to worry about writing checks, mailing payments, or calling/going online to pay via credit card. Instead, they maintain access to the products and services they value without having to manually make payments.
Putting yourself and your customers on the path to receiving the above benefits and more starts with the right subscription billing solutions.
Drive Revenue Growth with Subscription Billing
Before taking the plunge into subscription billing, check out the six elements that you need to consider before implementing new subscription billing solutions.
1) Automate Processes
While billing automation is important for virtually all revenue models, it’s critical to help drive subscription revenue growth. As your business grows, manually handling the billing process becomes too complex, time-consuming, and error-prone, which can lead to revenue loss. Subscription billing solutions automate processes, including billing alerts, payment reminder emails, dunning management, payment reconciliation and more. They remove the complexities, providing your staff with the time needed to focus on revenue-generating activities. Additionally, legacy billing platforms remain siloed and don’t integrate easily with your other systems. With cloud-based subscription billing solutions, you’re able to easily integrate with up or downstream systems or extend the platform to accommodate any business process.
2) Manage Dunning
Dunning is a fact of life, especially for subscription billing companies. Although dunning can occur for a variety of reasons such as credit cards that have expired or maxed out or even connectivity issues, subscription billing solutions can help you to mitigate involuntary churn. When dunning management is automated, reminder emails with the appropriate details are automatically sent, enabling you to reduce customer churn due to dunning.
3) Reduce Churn
While providing the products and services customers desire and offering flexible business models is a step in the right direction, keeping customers over the long term requires a frictionless billing experience. Purpose-built, automated subscription billing solutions enable you to reduce the risk of managing sensitive customer interactions, invoicing, and payments, providing customers with exceptional experiences that will increase lifetime value. Additionally, when it’s renewal time, an automated subscription billing system can proactively deliver personalized renewal notices, automate recurring payments, accommodate payment retries, and send notifications of payment errors. By automating collections, you’ll not only simplify the renewal process but decrease revenue leakage.
4) Be Agile
In an environment where change is the only constant, companies require the agility to quickly innovate and bring new products, services, and pricing models to market faster than the competition. Unlike traditional billing solutions, cloud-based subscription billing platforms provide the tools needed to react to market changes in real-time. The flexibility provided enables you to make changes to products, packages, and pricing on the fly – in hours instead of days or weeks.
5) Track Metrics
Unlike companies with one-time sale or perpetual license business models, where tracking financial performance is relatively straightforward, subscription businesses require additional insight to gain an accurate view of their financial health. In addition to monthly recurring revenue (MRR) and annual recurring revenue (ARR), subscription billing companies need to have their finger on the pulse of other metrics like average revenue per user, renewal rates, days sales outstanding, etc. Having a clear view of your overall business health requires having the tools to extract meaningful information at scale, being able to translate those findings into actionable strategies, and having the ability to share insights within the company. This is where reporting, dashboards, and analytics can help.
6) Transform Usage Data into Revenue
If you can measure it, it can be monetized! You may start with simple subscription-based offerings, however, to maximize your revenue potential and set yourself apart from the competition powerful yet easy-to-use subscription billing solutions enable you to collect and convert raw usage data from multiple sources. This data can then be leveraged to diversify product offerings and develop new pricing models. The right subscription billing solutions give you the power to easily transition from simple subscription-based pricing models to creative metered and usage-based plans.
Creating a subscription-based based business isn’t a straightforward process. However, with the right subscription billing solution, you can alleviate roadblocks, get regular recurring revenue, innovate to profit from new opportunities and position yourself for future growth.
Put Subscription Billing Revenue Growth on Autopilot
From product inception to revenue recognition, you need the ability to monetize any and all revenue opportunities and deliver a frictionless customer experience. BillingPlatform delivers a complete cloud-based solution that supports any product, any service, and any business model. With us, you receive unmatched agility to support ever-changing business and customer needs. Unlike other cloud and legacy billing solutions, BillingCloud offers an array of capabilities that enable you to run your business with greater efficiency, accuracy, and control. Ready to find the subscription billing solutions that fit your organization? Get in touch with our experts to start the journey!