Moving your business towards a recurring revenue model can be challenging when you consider your existing customer base as well as new customers you will entering into agreements with.
If you’ve traditionally sold your products or services outright, it can be difficult to navigate the pitfalls of trading ownership for experience. Managing various subscription types can be daunting: How do we transition our existing customers to a new subscription type? How do we manage various subscription types from a financial perspective without overburdening our finance team? How can we ensure accuracy?
To navigate these complexities, we explore 3 key financial areas that can streamline the process between outright ownership and subscription success.
There are so many subscription types to consider and you might have several that you need to manage: it could be based on per-unit or consumption. It could be software subscriptions or linked to a physical asset or product. It could include the provision of a service linked to mileage or hours used from equipment or facilities, provided by project resources or locations. It’s imperative that the underlying billing technology can support your subscription types. It also needs to provide the flexibility to handle a change in approach should you decide to adapt your subscription offerings over time as your business evolves.
This is where many businesses get stuck. Typical recurring technologies can’t take “legacy” customers into account where the provision of goods or services on your existing customers aren’t aligned with your new offerings. For this reason, it’s important in your selection that existing customers’ perpetual agreements can be translated to a subscription type.
A good example includes the historic purchase of software licenses. Many companies traditionally offered software as a once-off upfront purchase with a recurring annual fee. To streamline this process of transition, you need to align this annual fee with an end-date in order to transition your customer to your new offering (with the ability to pro-rate if you’re working with a fixed start date on the new agreement). The subscription technology should be able to support this alignment of your existing customer base to prevent errors and manual intervention which can hamper your revenue efforts.
Billing periods is often a topic which causes many headaches. Depending on our offerings there could be a combination of calendar periods and rolling periods. Whilst calendar periods are generally easy to manage some per-unit subscription or consumption-based subscription types could require rolling periods. As the core concept of subscription models are rooted in the notion of “it never ends”, it can be really hard for businesses to transition their existing customers easily from an existing billing period (pro-rated) to a new billing period or billing period type based on the new agreement.
In order to ramp-up your subscription business, adequately planning your subscription road map provides you with the blueprint you need to define key factors that will play a large role in your success as a subscription-based business. When you consider a technology road map for your subscription model, you need to focus on customer billing, the complexities of your subscription and the related financials with your business strategy in mind.
Contact us here for a meaningful discussion about supportive technologies that drive subscription success.
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