6 Challenges to Overcome in Effectively Scaling a Subscription Based Business

In a subscription world, companies that emerge winners have proven that healthy growth is all about scaling. Adopting a scalable subscription model is critical to generate profits, without getting bogged down by budgetary constraints that plague traditional growth models. Scaling your business is an exciting process, and has the potential to bring substantial benefits, both to your business and your customers. Yet, most organizations find themselves in a fix while trying to scale their business – even a small degree of growth causes a sea of challenges, including incapable systems, inadequate budget, and lack of expertise to meet the growing needs. This is especially the case for subscription-based businesses, where an increase in the customer base translates into an increased overhead. Listed below are 8 challenges in effectively scaling a subscription based business.

1. Scaling too Quickly:

When you are on the road to success, the changes that you bring to your subscription business are widespread – you hire more people, build new partnerships, enter new markets, and acquire new customers. While it’s good to be motivated and excited about the growth and increased revenue, scaling too quickly (or too soon) can spell disaster. When reality hits, you might realize you’ve hired impulsively, and spent hastily – going back from that situation can be very difficult, if not impossible. Make sure to scale your business in an iterative manner; take one step at a time – empower your staff to keep up with the growth, cater to the needs of your new customers, and ensure you continue to deliver value.

2. Dealing with Outage:

For any subscription based business, services need to be on 24×7. However, while effectively scaling your business, service levels might get affected, that might translate into a high influx of customer complaints. Make it easy for customers to voice their concern, or stand the risk of diminishing revenues. Hear out each customer complaint, and use it as a guide to understand where you need to drive your focus and where you need to fix a problem. After all, having customers who are heard is incredibly valuable, as it will help you improve satisfaction, reach more new customers, and boost your brand.

3. Tracking Important Metrics:

With thousands of customers using a host of services across product categories, scaling the business without ensuring it works for a majority of those customers would mean thousands of dollars in lost time: time lost in integrating capabilities that are not required, and designing workarounds for surging issues. With your teams spending more time in managing issues, they get less time to work on driving customer satisfaction – this shift in focus can greatly impact your bottom line. As you scale your business, make sure to have a team to drill down on metrics across growth and churn rate, lifetime value and more to address issues more effectively, predict future growth and make better decisions.

4. Controlling Costs:

As you experience continued growth in your subscription business, and seek to scale your business, controlling costs across advertising, marketing, sales, and installation for each new customer becomes a big challenge. Add to it the cost of additional servers and infrastructure, analytics, and back-end software needed to support them. If the cost of acquiring customers is greater than your revenue, it can put you out of business. Hence, while scaling your business, make sure to look beyond acquiring new customers. Pay more attention to the cost of acquisition, along with the lifetime value and payback periods. It is when you are able to get substantial revenue from a customer over their entire lifetime working with your business, can you really translate the acquisition into increased and continued revenue.

5. Handling Rapid Growth:

In the early days of your business, it was easy to be aware of the needs of your customers, and engage with them in ways that could drive higher satisfaction. However, as you scale your subscription-business, thousands of new customers will be looking to be serviced; each looking to buy a tailored mix of products and services, each with a different billing cycle, and billing method preference. Figuring out how to handle the rapid growth, how to set boundaries while staying involved and engaged, and appointing additional roles to take care of new customers is key. This will help in ensuring comprehensive invoices are generated, customers are accurately charged, and the satisfaction is identical among your existing and new customers.

6. Catering to Additional Revenue Channels:

While a scalable business model will enable you to cater to the needs of a broad segment of your audience, you will always have customers who have unique needs in terms of service bundles, discounts, support, or additional products and services. As you scale your business, it is crucial to explore the opportunities to serve your audience in ways that open up additional revenue channels. You can do this by integrating self-service modules that allow customers to manage their own subscriptions, and upgrade/downgrade, purchase new plans, update payment methods, view orders and quotes, and pause/resume/cancel/renew subscriptions as per their needs.

7. Competing on Price:

As you begin to scale your business, competing on price can seem lucrative; after all, ramping your business while cutting your price will still result in profits, right? Wrong! While this might work for a while, competing on price more often results in your business going downhill – both in terms of profit and quality. Make sure to compete on quality, and customer service and not position yourself as a low-cost provider. If you can drive value that customers expect, you can keep prices reasonable without having to stress about losing customers to low-cost competitors.

8. Getting rid of Unprofitable Services:

Many subscription based businesses assume scale to only be about growing skyward. However, the truth is, as your company grows, you may find things that no longer work, departments that are no longer needed, products that don’t sell, and staff members that don’t gel. Getting rid of aspects that no longer work is crucial for building towards things that work. As you scale your business, don’t be afraid to clear the mess so that your company can grow effectively.

9. Achieve Increased Profits:

Scaling a business is an important part of growth; however, not everyone who is associated with a business has an appetite for change. As subscription based businesses experience continued growth, and new services, new trends, and new markets open up, scaling becomes a necessity. It is through effective scaling that you can cater to more customers, open up additional revenue channels, and achieve higher profits. Avoiding these 8 pitfalls can help your business scale successfully, fetching you the returns, progress, and longevity you desire.

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