Changing how you charge, combined with automation tech, could help your income become more dependable.
Several industries have been transformed by a switch from individual transactions to subscriptions, but most small businesses haven’t given serious thought to applying this model.
There was a time when people would visit video stores when they wanted to watch a movie or two. Companies such as Netflix disrupted that by allowing customers to watch as many as they wanted in return for a monthly fee – and then caused further disruption by eliminating the need for physical media, but that's another story.
The idea of selling perpetual licences for business software and then waiting until new versions became sufficiently compelling for customers to pay for upgrades is becoming increasingly replaced with subscriptions that include the latest versions for as long as customers keep paying.
And instead of having to find a suitable tradie to deal with a household emergency such as a burst pipe or broken window, it's possible to subscribe to a service that will promptly dispatch someone to fix (or at least secure) the issue.
The big attraction for these service businesses is that subscriptions provide a steadier and more predictable income stream rather than the peaks and troughs associated with individual transactions – and potentially improve cash flow, late payments and bad debts in some circumstances.
It may also help with customer retention, if only because the default position is to continue the subscription – customers have to choose to leave rather than choosing to come back again. Depending on the nature of the business, administration costs can be reduced.
Payment services provider IntegraPay thinks more Australian businesses – even small businesses – could take advantage of the subscription model.
“Take a business that usually provides a one-off service, say hairdressers or wholesalers, and instead of asking clients to make one-off bookings when they need you, think about ways you can create a recurring offer in your business,” said IntegraPay CEO Chris Urry.
“Moving from a ‘when needed’ traditional business model to a recurring business model makes sense for most service-based businesses. If you can smooth out the way you offer your services throughout the year, you have predictability."
The trick, he said, is to make sure that your clients benefit from being subscribers.
“We have had innovative clients move to ongoing subscription services in the beauty and health industries where clients book their appointments for a whole year in advance and know the budgeted amount monthly comes out of their account without even thinking about it. They secure the appointments they want and it’s easier on their wallets,” Urry said. “It can be done in any industry with some creativity.”
It can work in retail too, he suggested, pointing to Bellabox which delivers samples of beauty, grooming or ‘mum and bub’ products once a month.
Making the subscription model work requires automation, Urry said. Apart from anything else, you don't want to be in the situation of having to manually process direct debits (from customers cards or bank accounts) every month. IntegraPay's own software, perhaps in conjunction with other business software such as accounting systems, can take care of that.
“Automated systems help to break the cycle of getting bogged down in the time consuming, administrative components of business and help business owners get back to doing what they do best, taking care of their clients,” he said.
“Business owners have peace of mind knowing that the technology is doing all the heavy lifting and in turn, clients receive a more streamlined and seamless payment experience, making them more likely to pay and creating a win-win for everyone.”