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I N S I D E T H I S I S S U E : Entrepreneurism / Management Toolkit / Economy Central by Falcon Bank ENTREPRENEURISM
Sign Me Up Recurring revenue models, like subscriptions and memberships, are a win-win for consumers and businesses. By Ari Kaufman
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hile the subscription business model has been a staple of industries for decades, during the past few years, recurring revenues have seen a resurgence. Whether groceries, fashion or car washes, few can avoid it. The subscription revenue model benefits both customers and companies. Customers enjoy the convenience of auto-renewals and access to a good offer for a low, ongoing investment. Since the average repeat customer
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spends nearly 70 percent more than a new customer, companies offering subscriptions can enjoy predictable revenue streams, improve cash flow and establish relationships and retention with their customer base. Research from business consultancy Manifesto Growth Architects, shows that 70 percent of businesses believe that recurring revenue models are the future of their industries. Despite the evidence of success, according to the same report, only one
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in 10 businesses implement subscription models. The concept receives contrasting reactions among business owners, possibly because they are uncertain how to apply it to their business. Maraya Robbins, advanced practice esthetician with WELL & Company in Sartell, says her company offers recurring revenue plans through monthly memberships in both their clinic and med spa. She says membership options are designed to “provide ongoing value to our clients” and help them stay consistent with their treatment plans, while also benefiting from a range of exclusive perks. “Overall, the shift to a subscription-based model has given us more financial stability and operational efficiency,” Robbins said. “With a steady flow of monthly payments, we have a clearer picture of our financial outlook, allowing us to plan and allocate resources more effectively,” she said. The consistency of the subscription model helps the company forecast demand for services, manage staffing, and optimize inventory levels. Having that improved cash flow also allows the WELL & Company team to reinvest in the business more easily. Taylor Feero works in
operations for Cooper Collective, a St. Cloud-based coworking space for small to medium-sized businesses. Cooper has annual contracts that are paid monthly, such as rent. “Because of annual contracts, we can project with incredible accuracy what outtake will be annually and even further,” Feero explained. Minnesota’s Crew Carwash introduced “Unlimited Club” memberships several years ago, which gives customers the opportunity to pay a monthly price and wash as often as they want at any location, with dedicated lanes and faster service. “There are no contracts or fees associated with the membership and customers have the ability to manage their plans anytime,” Crew Marketing Coordinator Clara Wieland said. “This business model is a win-win formula, as we are able to offer customers a tremendous value and create a more predictable revenue stream and customer retention.” Aside from the benefit of predictable income and demand cited by area businesses, a Forbes. com article also listed benefits of a recurring revenue model, including: Cost savings: Much of the subscription process can be automated, reducing the administrative needs overall.