Subscription based businesses are not new, magazines, utilities, and the ubiquitous (you fill in the blank)-of-the-month clubs are all time-honored solutions to consumer buying habits. Today, businesses offering subscription based experiences are taking new industry segments by storm, and changing how people buy products and services. Last year, per a March 2015 Entrepreneur article, "Dollar Shave Club was expected to generate $60 million in revenue, nearly tripling its 2013 revenue and even more impressive, Honest Company, a Santa Monica company selling natural and eco-friendly baby products, was expected to bring in $150 million in revenue in 2014, landing the business a $1 billion valuation." As usual, consumers and their buying habits …show more content…
According to a November 2015 Gartner article, "By 2020, more than 80 percent of software vendors will change their business model from traditional license and maintenance to subscription." It appears that the market is shifting away from perpetual to subscription models and the majority of new revenue for SaaS will be derived from software subscriptions with revenue coming from payments made over time or based on …show more content…
Deployment in the cloud is faster than on-site as the provider, rather than the end-user, controls the enhancement phases. •Provider Growth - Customers and prospects can be reached in new ways through creative licensing models based on the number of seats and users or usage based models. •Broader Customer Base - Because of the lower up-front cost, subscription based companies are attractive to a larger consumer pool. •Value Building - The value of a subscription based model is the ability to predict revenue. In fact, according to John Warrillow, creator of The Value Builder System, "recurring revenue is perhaps one of the most compelling factors in a company valuation. The more guaranteed revenue you can offer a potential acquirer, the more valuable your business is going to be," Warrillow says. "Because a high percentage of the revenue of a subscription-based business is recurring, its value will be up to eight times that of a comparable business with very little recurring