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Subscription based businesses

Discussion in 'General Business Chat' started by Simon Hampel, 17th Sep, 2016.

  1. Simon Hampel

    Simon Hampel Founder Staff Member

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    Does anyone here run a subscription based business generating recurring revenue?
     
  2. Jerry_O

    Jerry_O New Member

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    Up!
    Keen to learn more about this type of business as well.
     
  3. Moyjos

    Moyjos Member

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    Not yet, But am working on one in conjunction with a friend.
    It is a membership training site/blog
     
  4. KYu

    KYu Member

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    Just got one. It is invoiced annually at the moment, trying to change it to monthly direct debit so I don't have to do the manual work.

    It provides member to the website services both on and off website. It is for a niche industry, and really acts like an extend arm for the companies in the industry.

    I'm planning to make some changes to the website, so not going to share it now. But I'm willing to share how I operate it if anyone has a question.
     
  5. Bullion Baron

    Bullion Baron New Member

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    Yes, but only around 10 months along with our journey.

    We built a web based platform connecting two types of users (who have an existing relationship, we don't introduce them to each other on the platform), providing them with a suite of tools for an ongoing subscription fee.

    It is a niche area. A positive being that we have no real competition, negative meaning we have to educate potential customers that these tools are available...

    We have only generated a small amount of income so far (<$5,000), however we are still working on polishing the service and getting it ready for a more international market. The operational costs are relatively small too (once build cost is out of the way)... e.g. hosting, admin & insurance are our major costs, with very little else. Subscriptions are all automated.
     
  6. Simon Hampel

    Simon Hampel Founder Staff Member

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    Nice @KYu and @Bullion Baron

    Is your subscription management system custom built or do you use off the shelf software (sounds like it is manual in @KYu's case) ?

    Back when I was evaluating CRM systems I started looking into subscription management systems - but I wasn't overly impressed with what was available - it was either too inflexible or too expensive, and given the complexity of my needs, was going to require so much custom development, I decided I was probably better off just building something myself.

    For the moment I'm just using the built in tools in the XenForo forum platform - but they are fairly basic and most of the work (invoicing, billing other than PayPal, reminders, etc) is still very manual.

    Very interested in both the technical side of things as well as the business side of subscription businesses - business model, subscriber management, acquisition, etc.
     
  7. Bullion Baron

    Bullion Baron New Member

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    Ours is through a custom designed website (so nothing built in to speak of) and using PayPal renewing subscriptions. I suspect we may need to increase payment options with time, but at the moment this was a low cost and easily managed option to start with.

    Hopefully as we grow over the next year or two I will be able to contribute more to discussion on cost of customer acquisitions, etc.

    Of the trial subscribers who have signed up, around 15% have upgraded to paying subscribers, with vast majority continuing to leave their subscription renewing (which I believe is a positive sign).
     
  8. Simon Hampel

    Simon Hampel Founder Staff Member

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    The biggest issue I've found with using PayPal for subscriptions is that it is 100% customer driven - we cannot provide any support for updating or changing anything. The most we can ever do is cancel their existing subscription and ask them to start a new one (and pray that they are prepared to put the effort into doing so).

    You can't do partial charging (ie pro rata for part of the year), it's whole periods or nothing. You can't extend their membership - for example give them a 1 month extension on their annual membership as a bonus.

    I've found it very limiting when trying to accommodate upgrades or other special requests.
     
  9. KYu

    KYu Member

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    It is all manual for me at the moment.

    I'm planning to use Xero for automated monthly billing and Ezidebit for monthly direct debit. Works for me cause 90% of my customers in ANZ and monthly $ amount is high enough. There is only going to be a hand full of subscriptions changes per month, so no need for automation in the website. It will cost me more to built it into the website
     
    Last edited: 16th Feb, 2017
  10. Simon Hampel

    Simon Hampel Founder Staff Member

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    Do you mean sending out an invoice automatically from Xero each month with payment instructions? As opposed to storing their credit card details and automatically billing them each month (which I didn't think Xero could do?).

    I allow my members to pay annually by direct credit (ie EFT into our bank account), PayPal or by credit card (either manually via eWay, or online via Saasu+eWay), but monthly has to be via PayPal at the moment - but I do plan on adding eWay or Stripe support for regular billing once the new version of XenForo is released which will support extending the payment functionality.

    I haven't looked into Ezidebit (although I notice in our bank statements that our kids swim classes are charged via Ezidebit) - is that credit card only or can it do EFT direct debits too? How much does it cost?
     
  11. KYu

    KYu Member

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    On Xero, yes sending out invoice with payment instruction only.

    Ezidebit is really the largest direct debit provider out there, my kid's child care uses them and I know a few more businesses I've been talking to uses them too. They can do everything, online payment, direct debit from credit card or bank, EFT and BPAY. Cost depends on the payment type used, payment via bank statement is a fixed cost, probably around $1.1 or $1.25 per transaction, I can't remember. Payment via credit card is based on a percentage, charges might vary depending on your usage. There is also a minimum monthly spending, which is pretty low.

    There is a Ezidebit + Xero integration which allows you to automatically reconcile the transaction. It is easy to tell who has paid and who has not from the report, and saves on accountant/bookkeeper cost too. If the number of transaction is high, you might be able to run a daily cron job to check via Xero's API, not that I require it. Bad news is, I've been told that the integration doesn't work with direct debit (yet?).

    Overall, the cost is less then $100 per month and once setup, it is almost automated. Coding that into the website is going to cost me 20~50 times that, and you still need to pay for an accounting software and a different payment gateway.
     
  12. Simon Hampel

    Simon Hampel Founder Staff Member

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    How flexible is Ezidebit in making changes?

    For example, extending an annual membership by 1 month so that you start the next annual billing cycle a month later? Or giving someone a bonus month, or changing from monthly to annual billing and so on?
     
  13. KYu

    KYu Member

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    It is all web based. You can change that yourself. Just contact them and ask for a demo login
     
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