28 Mar Measure the right numbers when you adopt a subscription model for your business
Subscription model for your business
Your business numbers matter. The specifics of those numbers are the difference between profit and loss, success or failure, and they mean that your business either succeeds and grows or stutters and stalls.
How well do you know the numbers in your business? How often do you use these numbers to measure your progress and plan for the future?
When you adopt a subscription model for your business, the success measures are slightly different from those used by conventional businesses.
John Warrillow does a brilliant job of explaining these in his book, The Automatic Customer – Creating a Subscription Business in Any Industry. He suggests 6 measures that indicate whether a subscription business is considered successful:
In John’s book, we also hear from David Skok, who evaluates subscription businesses for the venture capital firm Matrix Partners. The subscription business example above looks very promising because their LTV to CAC ratio is over Skok’s recommended figure of 3:1.
Warrillow feels very strongly that, if you are going to take the subscription model seriously, you must become very familiar with these 6 measures. For more information, please see Chapter 12 of John’s book.
“This emerging subscription economy offers huge opportunities for businesses that know how to turn customers into subscribers…the lifeblood of your business is repeat customers… the ones who pay you without having to resell to them every time. They subscribe and agree to a regular billing relationship or sevice contract” – John Warrillow, The Automatic Customer.