SMEs embracing subscription model

It will come as no surprise to those operating as managed service providers (MSPs) across the channel to have it underlined how subscription models benefit small and medium-sized enterprise (SME) cash flow and flexibility.

Research from Uswitch.com has discovered that 86% of business owners view subscription services as a benefit for cash flow. As a result, almost half of UK businesses have adopted some form of service.

The shift to a subscription model has seen 22% of SME owners using that approach to generate income, with many keen to increase their recurring revenues.

The Uswitch findings add to the research gathered across the channel, generated around events such as MSP Day, that has shown a continual growth in the portion of partners – often SMEs themselves – that are relying on recurring revenues to grow the business.

Uswitch found that as well as the financial benefits, SME business owners reported improved customer retention from providing subscription services and enabled improved business planning because of higher levels of predictable revenue.

The research underlined the appetite of business owners, particularly those under 35, to move away from one-off business and go down the subscription route.

The advantage of pitching subscription services is that most users have adopted them in their personal lives and understand the model and its benefits.

Across video-on-demand platforms such as Netflix, music options including Spotify, as well as gaming and food options, the concept of paying a monthly fee is a popular one and should easily translate into the SME world.

Andy Elder, Uswitch business savings account expert, said that the subscription model was one that should be embraced by the SME community.

“Recurring revenue models aren’t just for big tech companies. We’re now seeing small businesses across retail, consultancy and services adopt subscription models to create predictable income streams and strengthen their cash flow,” he said.

“For many small businesses, managing cash flow is one of the most difficult tasks, especially when payment cycles are unpredictable. Subscriptions could give SMEs more control, helping them to plan and reduce reliance on traditional lending or experiencing last-minute funding gaps.”

Although there are benefits around cash flow and flexibility, there are hurdles preventing more SMEs from adopting subscription services.

Uswitch found that these included uncertainty about getting ROI, struggles with the billing and tech setup, as well as dealing with a legacy business model that simply does not support pay-as-you-go services.

Identifying what services would work, how they could be delivered and if the existing systems could cope were keeping many small businesses away from taking the plunge.

Uswitch provided some advice for those small business owners looking to embrace more subscription services, with it being recommended to start small and add it as an option to test the levels of interest.

Beyond that, the key is to identify services that add value, including maintenance that require regular contact with the customer. Automation was also recommended to get technology to do some of the heavy lifting and to make recurring payments smoother to bill and to track.