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If you are starting a recurring revenue venture, avoid these mistakes launching subscription service businesses. They can keep you from reaching success, or even getting started!  Read on for our expert-advice and the 5 biggest errors to avoid.

You are a business owner who has a killer service offering for your clientele, a business plan, staff to implement your service, and messaging for new clients is ready to go.  You are ready to launch your subscription business for your service and gain recurring customers who are billed monthly.  You are primed for success and a passion to get out there and make it happen.

What could go wrong? There are many mistakes launching subscription service businesses that can be made along the way.

As an experienced entrepreneur and business owner, I was once an idealistic 25-year-old just starting out with her dream of owning a music school.  I have been there with bright eyes and a bushy tail, ready to manifest my destiny. I was going to slay it.

But alas, reality always enters the picture for new owners within 1-2 months of developing their new operation, and I was no exception.  You start to realize, “if it were easy, then everyone would have already done it – of course!”  You also say things like, “I didn’t realize ‘x’ was so important, or ‘y’ would be so hard.  Had I known, I would have done this so differently!”

Those moments of subscription-launch-failure are rites of passage, and there is no sparing an owner from them all.  In fact, when launching any type of new business, or venture, leaders learn the most from all the things that do not go well and improving, learning, and growing from them.  Not hiding away from all risk and new-ness. 

All this being said, an extreme amount of research and preparation has to go into any new venture, and subscription businesses that offer a service have their own rhythm and growth pattern that is unique – especially at the start.  Though every specific service is different within this business model, what they share as ‘subscription services’ is in the way the billing and ongoing nature of the engagement work. 

Automatic recurring billing, flat-rate fees (typically charged monthly / annually), and the ability for a business to grow by increasing the number of subscribers are typical through-lines these operations have in common.  In the case of my particular niche – traditional music lessons that are taught in the home of the student – service was given to each client on a weekly basis and a fixed, reserved schedule.  The billing was a flat-rate monthly amount. 

Exchange out music lessons with personal training, but also in home for the client.  The same billing and scheduling model work!  The same is true with on-location life coaching, or even in studio classes in any discipline.  The benefits of working within a subscription framework fit well with services of any scale (one provider, or multiple providers in an agency), so it makes sense that the same best-business-practices would also be universal.

Whether you are in the conceptual phase of starting your business, or have already launched, the tips below will help you succeed and avoid important pain-points.  Our expert-insights are from over 15 years of experience successfully starting and developing a service business as a subscription .

Here are five of the classic mistakes service businesses make when launching subscriptions:

Whether you are in the conceptual phase of starting your business, or have already launched, the tips below will help you succeed and avoid important pain-points.  Our expert-insights are from over 15 years of experience successfully starting and developing a service business as a subscription model.

Mistake 1: Failure to complete Competitive Research

The market your business exists in matters!  A first step in the creation and business planning process should be evaluating others who perform your same service within the same geographical area.  These are your competitors, and it is important that your business fits in the landscape your industry-peers create.

The insights you gain from competitive research are foundational and priceless as you begin.  You learn if your pricing is relatable for consumers and if it accurately reflects the level of service you perform.  You are able to develop the best service menu that aligns with local trends and other providers your potential customers will see.  Most importantly – you will be able to assess where you have a competitive advantage within your market and can highlight why subscribers should choose you.

PRO TIP:  If you are feeling nervous about contacting other businesses to ask what they charge and for a service menu, I have some simple advice for you: be yourself, be transparent, and be brave – embrace the true reason you are calling.  Say you are starting a similar business and want to learn about others who do the same in your area.  Anyone can appreciate that. 

Years ago, a fellow music school owner called my school saying exactly who he was, his studio name, and that he wanted to make sure his pricing was in line with the local rates.  I gave him our info straight-away and wished him well. 

Good business owners do not fear competitors.  They understand it takes more than just their organization to create a market for their service, and we all have a place in this shared eco-system. 

Mistake 2: Over-investing in business assets before generating revenue

This is a tricky balance for owners of a new subscription service business, or one that is launching.  In the preparation phase, there are certain business assets you will need to invest in to some degree – like a website, payment processing, various web / business-related subscriptions for your essential applications, advertising, your team…the list could go on and on.

There is a difference between preparing and over-investing, though.  If you have the option between building a $5K website that has the basic functionalities you need at the very start, or a $10K option that looks much fancier and has added functions you will be able to integrate over the next 5 years programmed in…

…our conservative advice is to go with the $5K option for now, and do a site-expansion after you are profitable.   That is typically the objective consensus too, but in practice, things change.  When it is YOUR site and your product, you have a vision for what it can do, how you will market it, and how you want the future to look. You are emotionally connected to the potential, which widens your wallet a bit.

What you need at the beginning of a new operation is your MVP – minimum viable product.  You just need to be functional and START MAKING MONEY.  Get out there and start doing, rather than prepping, and you will have revenue to reinvest back into growing. 

This is a big secret of success for subscription services – scale as you go, or one to two steps ahead if data points to continued growth.  You cannot scale faster than new money is coming in, or than your business will ever need. 

In the metaphorical Monopoly game of launching your business, you have to collect that dollar before you can “pass go” to the next level.

Mistake 3: Failure to outsource time-stealing business development tasks

When you are starting a new subscription service business, there will be something you need to produce, but is outside of your wheelhouse.  The items critical to your launch vary by industry, but trust that you will need help along the way.

Yes, it is possible to do many things completely by yourself and create success organically.  That process is long, though, and it requires a tremendous amount of sweat-equity to learn new things, apply them, then keep building your business at the same time.

Instead, if you are driven to learn and apply that passion to your business, save it for the parts that you want to keep total control of and are most important to you, or the business.  Outsource the items that take up mental space and are not a huge investment.  More importantly, though, outsource the complicated tasks that are out of your skill set – but necessary – to professionals who specialize in that area. Both simple and complicated tasks can eat up your time.

An easy example is a business logo and having one created for your brand.  Many successful DIY-entrepreneurs do it themselves with AI!  They are saving the $100 it takes to get it done by a freelancer, and more power to them.  But for many owners like myself, we are getting on a site like Fivver.com to outsource it.  We spend the $100, and that developer can use the AI tools available to design it and produce all the files we need at the end in different types / versions.

Why is it worth the outsource in this example?  The time-saved and peace of mind that it was done correctly, up to professional standards, and everything we needed with the logo design was taken care of is a huge relief for $100. It was one thing off our plate during a busy time that could have become a distraction.

A more critical example is a subscription business’s paid advertising campaigns.  This is a foundational item for attracting customers to a service, and if you are not in marketing, setting up your paid advertising poorly could be a costly mistake.  You could waste valuable advertising budget quickly due to the gap between informed-DIY and professional-level insight.

The moral of the story is to be wise about how you outsource, but plan to do so with the tasks that fit best with you plan and strengths. It will be well worth the investment and peace of mind to know this is being taken care of, and you are supported.

Mistake 4: Compromising standards to gain (poor) business

One core philosophy we have at AstroCat Consulting is “there are no shortcuts…” and I will die on that proverbial hill as a business rule.  The origin of that belief for me came from doing exactly what I am warning you NOT to do here.

Never compromise your policies, standards, or operating procedures in order to maintain a poor client…or worse, gain the wrong client.   No amount of good customer service can fix a scenario where you are not the right match for a specific subscriber, especially if they take issue with the way you do business and the terms.  There will likely be a solution out there that fits this customer’s needs, but as an owner, you must recognize when you are not the right solution for them.  Avoid the temptation to bend in order to keep them enrolled as a growth tactic.

In my own experience, I was not pursuing a short-cut, per se, but I would actively chase bad business with all the red flags poking out when I was early in the launch of my music school.  When we had around 30-40 clients that I largely taught myself, I would do just about anything with exceptions to keep every student enrolled, as well as acquire every student interested.  I would say “yes” to giving credits to cancellations that should have been charged due to our school’s policies.  I would pander to senseless complaints around billing policies and customizing our rules to make it work for a needy family. 

All this effort to “keep what I had,” in terms of my small book of business, was based in fear.  I was afraid of what would happen if our policies filtered out a bad student, because I didn’t want to lose the progress with that number inching up.

Even though the mentality was not centered on seeking a short-cut, that’s still exactly what compromising our policies was, and it bit me just like all short-cuts do.  Keeping on bad business and bending to appease demanding clients will eat up your time and ability to serve those who do appreciate exactly what you do – and will likely piss you off at some point too. 

In the end, the time and effort you lose pursuing bad business mitigates any gains they bring by remaining a subscriber.  WRITE. THAT. DOWN. You can literally scale a business on this concept.

Know when to let go, and be confident in your policies.  If you would not work with that same client at a size of 200+ enrollments, then you should not compromise when you are at the first 20 milestone.  Focus on acquiring the business you can actually help, and you will create a strong foundation to build upon.

Mistake 5: Chasing new sales over client retention

Our final caution for owners launching subscription service businesses is to avoid chasing new sales over client retention, and plan this from the start.  In other words, make sure you prioritize the subscribers you have already enrolled and serving this current base over your new acquisitions.  Your current subscriber group is equally, if not more important, than any incoming customers…and they need attention throughout the engagement.

Why are existing clients a higher priority than new sales?

Those who have already committed to your subscription service are proven customers and patrons of your business.  They are your base and successfully enrolled.  It is far easier to keep the clients you already have and maintain that foundation than it is to rotate in a new client and exit a previous one.  The new customer, or subscriber, is unproven.  They have no retention history, and during the sales phase, we are unsure if they will even sign up! 

Though it is important to acquire new business, it is not more valuable than keeping what you already have, especially with a recurring revenue model.  Building retention leads to sustainability and making big strides in growth and scalability.  And yet, this point is very easy to overlook at the launch of a new service, because the upward and new momentum is so strong, and everyone is technically ‘new’. 

Working towards retention actually begins at the onset of the relationship, so there are some immediate measures owners can take to build a long-term customer-mindset from the start.

At the beginning of an engagement, think of the retention indicators for your service and what perspective a long-term client would have.  When proposing your service, be very transparent about the intended term for your engagement to be effective, or what the annual outlook is.  Answer policy and cancellation related questions clearly and without sales-spin. Minimizing billing and term questions may get you a sign up now, but will lead to some level of fall-out later – at least in a portion of clients.

After starting, don’t drop the ball on client engagement and building meaningful connections, even if it is a subtle and gradual effort.  You do not have to wait long to feel the impact of this investment, though! The results from keeping your current client base can be felt immediately.  You’ll start to see your subscriber numbers trend upwards when you have a strong foundation established. In the future, your established ‘legacy clients’ can become an important referral network.

Avoiding Subscription Launch Failures – In Summary

For service businesses, launching a subscription business model is a popular framework that is well-suited to many industries and offerings.  Within this, getting started is the toughest part, but if you make it through the initial base of subscribers, an amazing synergy can happen for your company.

Based on our expert, hands-on experience, we encourage you to avoid these 5 classic mistakes owners make when launching a service business as a subscription: 

1. Failure to complete Competitive Research
2. Over-investing in business assets before generating revenue
3. Failure to outsource business development tasks beyond your skill-set
4. Compromising standards to gain (poor) business
5. Chasing new sales over client retention

Though these top 5 are key points, there are many other pitfalls to watch for as you start your venture.  We would love to share our advice for your specific field and discuss how we can help you reach for the stars! 

Our virtual coaching sessions are a perfect way to receive targeted advice as a single, one-hour meeting, or as a recurring weekly, or bi-weekly package.  Contact us to learn more!

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