|Chapters Links||Summary Text|
1. Valuation is largely based upon what our systems are to both acquire and keep customers.
Nine Subscription Business Models
As we look at these, ask “How could this model apply to my industry?” and “What part of this model could I borrow for my company
2. All-You-Can-Eat Library Model
3. Private Club Model
4. Front-of-the-Line Model
5. Consumables Model
6. Surprise Box Model
7. Simplifier Model
8. Network Model
9. Peace-of-Mind Model
You can go relatively quickly from handling a few customers to juggling a larger group of subscribers.
Idea: Ticketing system will be needed
The New Math
MRR = Monthly Recurring Revenue. The amount of revenue generated from the service on a monthly basis. A yearly subscription must be divided by 12.
CAC = Customer Acquisition Cost. The amount of money spent on sales/marketing to win a new subscriber. It’s revealed AFTER you pick the low hanging fruit, meaning after the “love and guilt” subscriptions.
For Viability, must meet this: LTV > 3 x CAC. Only when you hit that benchmark is it time to step on the gas. Otherwise, tweak the system until you reach it.
Churn = amount of lost MRR in the month / MRR at begin of month (will be a percentage)
Must look at Churn in relation to how much it costs you to win a customer.
Margin: Must consider costs of serving each new subscriber. Support department, servers, etc.
Your revenue begin of month is then 47x$99 = $4653. (This is the MRR for end of month)
$99 x 0.495 / 0.0213 = $2301
LTV to CAC ratio = $2301/ $500 = 4.60
If the cost to acquire a customer is bigger than what you get up front, you’ll be sucking cash as you grow.
CAC Payback Period is how many months it takes you to make back the cost of acquiring a customer.
to onboard and any other hard costs when adding a subscriber
CAC PPs of 6-18 months for SMB with higher churn rates, as it will depend upon your churn rate what this needs to be. A CAC PP of under 6 months means it’s time to step on the gas.
CUF:CAC Ratio = Customer Up Front Fee: Customer Acquisition Cost.
* your LTV:CAC determines whether or not someone will want to invest in your business.
1. When selling a subscription you’re proposing a relationship over time.
1. Selling Point: Think 10x vs 10%
2. Selling Point: Appeal to their rational side
3. Selling Point: Give Customers an Ultimatum
4. Selling Point: Give them a “Freemium” option
5. Selling Point: Offer a Trial
6. Selling Point: Offer subscription as a gift
7. Selling Point: Set Fire to the Platform
must find a way to consistently acquire customers for no more than a third of their lifetime value
First step to reduce churn is understand why customers leave.
2. Churn Lowering Idea 2: Watch the 90-day onboarding clock
3. Churn Lowering Idea 3: Reduce Your Time to Wow
4. Churn Lowering Idea 4: Charge up front
5. Churn Lowering Idea 5: Communicate like a Giddy Lover
6. Churn Lowering Idea 6: Drop a “Happiness Bomb”
7. Churn Lowering Idea 7: Target Larger Businesses
8. Churn Lowering Idea 8: Focus on “Net Churn”
9. Churn Lowering Idea 9: Reduce “Logo Churn”
10. Churn Lowering Idea 10: Go Evergreen