Subscription Profits Scaling

Many merchants use subscriptions as a key to scaling their business. The underlying economics are simple: more revenue equals more resources to re-invest and grow. But is there a way to quantify the scaling potential?

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Meet Our Simple Subscription Profit Builder Tool

I’m a big fan of spreadsheets, so I’ve built this model and am making it available here.

Use the yellow cells for your inputs, the metrics it asks for should always be at your fingertips.

If you implement your shopping cart UX correctly, your site’s conversion rate should be relatively similar, whether they elect for a one time purchase or a recurring subscription. So adding a subscription check box is free money, right? Almost, but not entirely.

There are several constants that apply to a one time purchase or subscription buyer: the cost per conversion and the cost of goods sold. Only the subscription discount is truly variable and this is the bait on your hook to turn a one-timer into an all-timer.

How Much Should You Discount Subscriptions By?

That’s driven entirely by your competitive situation but more importantly by your economics. That’s why I built the model. Try out different subscription rates to see what the lifetime value of your customer could be. A/B test at what threshold subscription conversion rate stops improving. Don’t give away any more margin than you have to.

Empowering Merchant Scale With Margin

Back to quantifying how subscriptions empower scale. In additional to highlighting the margin $ and margin % earned in one time purchase and recurring subscription scenarios, the model also flags how higher margins could be reinvested into relevant ads (search, social) to expand your customer base.

The default model inputs suggest the return on a one time customer is enough to help you find 0.14 more customers. One subscription customer however, gives us enough revenue to find 13 additional customers. All it takes is the right UX, bait, and a checkbox. That’s exactly how subscription empowers scale.

Other Ways To Scale Your Merchant Business

Swapping out your shopping cart’s payment processing is almost as simple as adding subscriptions for your business. The savings are amazing too. Reach out to see how we can help your merchant business scale.