How to Setup a Subscription Payment Business Model For Your Clients

6 min read • 6 May 2020

Are you a freelancer, service professional, small business owner, or anyone with clients who sells subscriptions, memberships, or payment plans in your business? From health & wellness specialists, beauty experts and pet professionals to accountants, marketers, life coaches, and therapists – if your business model relies on charging your clients a monthly subscription or membership fee, this article is for you.

In fact, a recent article from Stanford Business suggests in a rather grandiose fashion that nearly every business in existence will eventually become a subscription payment business.

The Guardian and the Harvard Business Review have both raised awareness about the virtues of companies with a subscription payment model.

Hitwise put out a study recently that found the number of companies with subscription payments grew by a staggering 3000% over the last 3 years.

Today, we’ll be investigating how subscriptions work, how you can improve the different parts of your business to include subscriptions, and best practices to follow when doing this.

If you charge your clients a subscription fee, keep reading, as it may change the way you run your business forever.

HOW SUBSCRIPTION PAYMENT BUSINESS MODELS WORK

A subscription offers a period of access to a product or service. In the case of service businesses (such as gyms or life coaches) the payment is collected on a monthly basis, although the frequency can also be yearly or seasonal.

If you’ve ever had a gym membership or received regular cleaning services, you’re most likely familiar with a subscription payment model.

However, this type of payment is now being used more and more by freelancers & service professionals, which is driving an increase in their revenues as well as client loyalty.

It makes sense that more and more professionals are exploring subscription payments as there are so many advantages to a subscription payment-based model.

GUARANTEED REVENUE

For example, if there are contracts involved, the business is virtually guaranteed to bring in the agreed-upon amount of revenue for the duration of the subscription payment term.

This reduces riskiness and uncertainty (i.e. “How am I going to pay my bills next month?” is no longer a pressing issue)

CONVENIENCE

Subscriptions can also help to increase client retention and build client loyalty by offering the convenience factor.

A client doesn’t have to worry about purchasing the service every month or have to consider another service provider, because everything is already ‘taken care of,’ so to speak.

In other words, if you’re already paying for a gym membership, you’re less likely to go searching for an alternative, especially if you’re locked into a good rate or even better, a long term contract.

A repeat client that has a subscription with your business is more likely to stick around, which increases your LCV (lifetime customer value) – more on that below.

This in turn gives you the ability to spend more money acquiring that client (and thus broadening the range of different advertising methods you can invest in as a business owner).

This also means you have better cash flow, which allows you to hit your income goals and immediately begin making a profit.

Service Level Satisfaction
Source: Chief Outsiders

HOW TO OPTIMIZE YOUR SUBSCRIPTION PAYMENT BUSINESS MODEL

FIGURE OUT YOUR PRICING STRUCTURE

According to Zuora, you can tweak your pricing in the following ways:

Your subscription pricing model can be “tiered according to functionality, discounted to incentivize bulk purchases, metered according to usage levels, or optimized to reward loyalty.”

Zuora goes on to share that pricing can be “adjusted to incentivize activity from particular geographic regions, term-based to lock in long-term commitments, or adjusted in cooperation with partner promotions.”

If I’ve lost you, just stick to the basics and offer two or three different tiered pricing models based on a scale that make sense for your industry – for example, if you’re a trainer, you could have a basic subscription for group training class access and a higher fee for one-on-one training subscriptions. If you are a life coach, you could offer an entry level subscription plan and price for those doing group coaching and meeting with you once a month and more one on one access for those in the higher priced plan. For beauty professionals, it could be that you offer a low price option for those just looking for basic bi-weekly hair/nail/skin maintenance while the higher priced option is for more involved treatments and add on products.

Know Your Numbers

KNOW YOUR NUMBERS

The three key metrics you should be paying attention to in terms of subscriptions are the following:

  • Lifetime Customer Value (LCV) – The expected amount of income your client will pay you (a quick and dirty way to calculate this is to multiply the average monthly revenue per client by the average number of months they tend to stick around)
  • Cost Per Acquisition (CPA) – How much are you paying to acquire a new client (or lead)?
  • Retention Rate – What percentage of your clients actually stick around past a certain time period? (This is often measured on a month-over-month basis.)

Measure your numbers regularly and improve them by testing different things in your business.

COLLECT PAYMENT AUTOMATICALLY

Use an app like PocketSuite to automate your billing, so you’re not having to manually charge customer’s cards every billing cycle. This also eliminates the need to store credit card information, as everything is self-contained in the app.

Collecting Payments Contained in App

Simply specify the $ amount, payment period, and # of payment periods in the subscription.

Then you can send out the subscription with 1 tap.

You can also attach a contract to the subscription so when the client receives the subscription payment plan, all they need to do is e-sign it from their phone or online and confirm the subscription with a credit or debit card (which can also be done in the app) and off you go!

Your clients simply confirm the subscription payment by entering their credit / debit card details at which point the subscription begins.

The subscription payment will automatically be auto-charged every billing cycle, leaving you to focus on growing your business and finding more clients.

This is a double whammy of convenience for both you and your client:

  • You can sleep tight knowing that your subscriptions are being billed automatically, which eliminates the need for you to invoice or manually charge clients.
  • Your client can rest easy without having to worry about forgetting to pay you.

Don’t forget, if you are offering special promotions you can discount the first client payment or choose how many subscription payments to apply the discount to. There is nothing like a discounted membership offer to attract new clients. Try it out, works like a charm.

For those that have to do some setup work to onboard new subscribers or members, you can charge a subscription setup fee or activation fee or membership enrollment fee. That fee will be charged immediately when the subscription is confirmed. That covers your costs for creating the subscription payment plan for the client.

Some freelancers and service professionals, including personal trainers, life coaches, consultants have an early cancellation fee to encourage clients to complete the full term of their subscription. You are welcome to include a cancellation fee that will be charged if the client cancels the subscription before the plan expiration date.

Including Cancellation Fees

BONUS: CLIENT SIDE APP

With PocketSuite you literally give your clients access to their own version of the app, where they can track their calendar, status of their appointments, packages, subscriptions, and things like their payment history, update their credit card information, and contact you if they have questions about their subscription.

With all of these convenient features, it’s no wonder that thousands of Pros use PocketSuite to manage their subscription businesses.

The best part is, everything is self-contained in 1 app, so there’s no need for extra software or running to open your laptop or boot up your desktop.

Client Side App Texting Feature

You can run your entire business from your phone – it’s the independent professional’s, freelancer’s, and small business owner’s dream come true at last.

What are you waiting for? Download PocketSuite today – there’s even a free plan to get you started!

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