There has been a proliferation of businesses based on subscriptions in recent months and years. As an example, you can enjoy wines, beers, fresh food, even razors delivered to your front door on a regular basis. Convenient, simple and cost effective.
I’ve often asked myself why this ‘sector’ is expanding so rapidly. Have all these companies found a niche in the market? Are we getting lazier? Is it simply the next stage in the development of e-commerce and online shopping.
Perhaps, but there is one very striking theme that all of these businesses share: direct debits.
Direct debits – supporting a subscription based business model – are fantastic. They allow a business to predict their income with almost pin point accuracy. They make investment decisions and forecasting much more straightforward. And, of course, the ability to demonstrate regular, sustainable income flows significantly increases the value of any business.
Of course maintaining a direct debit scheme used to be expensive and administratively speaking, a nightmare. There are a lot of rules to follow. Perhaps you’ve heard the horror stories of big refunds and compensation payments. Maybe you’ve heard about all those letters and notifications that you have to send. Completely inaccessible for the small business.
Absolute tosh. Modern direct debits supported by modern platforms are simple, completely online and most of all cheap. GoCardless are by far the most impressive I’ve seen so far: a system that is a dream to operate with plenty of functionality and fees of just 1%, capped at £2 per transaction.
By the way, I’m very happy to plug GoCardless because of my sheer delight as one of their customers. I’ve spent many happy hours working with the West End Dental Group to build a subscription business of over £10,000 per month and more than 500 monthly transactions, completely run by a team of… 1. And no, I’m not paid to refer to them.
If you are a subscription based business and you still rely on card processing or, much worse, standing orders (shudder) then it might be time that you caught up and embraced direct debit.
If you are B2B, and thinking this isn’t for me, then have a look at your cashflow, have a look at your receivables, cost up the costs of your credit control and then consider how pleasant it would be for all of them to evaporate.
And if you don’t have a subscription model, then perhaps you need one. I would challenge any business to consider how they can deliver their product or their service via subscription. With a little bit of creativity, you could steal a march on the market and boost your business significantly.
If you’d like to discuss how to develop your business, embed direct debits or anything else with no obligation then please get in touch on 0161 464 7162.