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The Pros and Cons of Subscription-Based Businesses

Updated: Dec 29, 2023

Not all companies are the traditional type of business but instead some are built on regular recurring revenue. If you’re thinking about starting a subscription business and are wondering if it’s a good idea, this is for you! We’re here to explain the pros and cons of subscription-based businesses so you can be prepared for what’s ahead.


Subscription-Based Businesses

A subscription-based business model can be used for an array of ventures- things like gaming, education, software, general services, premium access, curated boxes, etc. are all examples of what a subscription-based company would be. And like with any type of business, there are distinctive pros and cons to think about.


Pros

There are a lot of good reasons to have a subscription-based company, and these are some of the best of them…


· Consistent and predictable income: easily the top reason to own a subscription business is because of the predictable income. Knowing when and how much money you’ll be bringing in on a consistent basis can be hugely advantageous for any business owner.

· Extensively developed product or service: since most subscription-based businesses are focused on only one product or service, they can really concentrate on developing and innovating their goods into a specialized, sought-after commodity.

· No market fluctuations: being able to depend on regular orders means not having to worry about what time of year it is, how close the holidays are, or even what the weather outside is doing. Basically, a subscription service is a year-round affair.

· Quicker business growth: because your customers are returning repeatedly by default, growing your company will be much faster than if you were to sell products or services that would only be purchased once.


Cons

There are fewer cons than pros, but they can be just as important…


· People’s dislike of contracts: one of the biggest cons really comes down to customer’s distaste of contracts. Being committed to something financially for the foreseeable future can be intimidating. Be sure to reiterate the ongoing value that your product or service offers to help ease those hesitant feelings.

· Risk of cancelations: with as reliable as the income can be, there is always a risk of cancelations. These are often unpredictable and so receiving several contract terminations at once can devastate a business- but by keeping the product fresh and maintaining good customer relationships the unforeseen cancelations can be mitigated.

· Strong competition: subscription ventures are growing faster than the traditional type of business- which means there will always be challengers. Maintaining a high level of product, with competitive pricing, is the best way to stay ahead of the game.


From steady income to specialized product, owning a subscription business can truly be beneficial when done right. And when you’re ready to get set up with reliable subscription-based payment processing options, call Align eCommerce! We’ve got the tools and technology to support all your payment needs.


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