Do you have subscription revenue?
Subscription revenue is a wonderful thing. When done right, subscription revenue can give you a very predictable, and steady flow of cash into your business. This business model is quickly becoming one of the most prefered models in the U.S. with subscription-based revenue for all companies nationwide reaching more than $300 billion! Check out all of the stats HERE.
It’s also a model that investors and private equity firms love to see. If you aspire to sell your company one day, then this is a great model to implement. But its not without its disadvantages. And the most sinister of these disadvantages is without doubt, credit card declines. You are never more at risk than when you encounter these 3 most common times for failed payment in your subscription-based business. Consider it a fair warning:
Risk #1: Free Trial Ends
Tell me if you have ever experienced this before. A customer signs up for your 10-day free trial, and when their trial ends after the 10th day, what happens? Their payment fails. You did the hard work of getting them in the door, but as quickly as they walked into your business they are now walking out. Do you know why they left? Do you know why their payment failed? Do you know how many times this happens each month? Most business owners don’t, so don’t feel bad. But if you want to sure up the back end of your business you need to dig into the numbers and start finding the answers to these questions.
Risk #2: The Witching Hour
If you sell annual subscriptions then you may have noticed that you are most likely to lose a customer in month 5 or 6 of your subscription cycle. The reason? This is the time when the initial excitement and desire for your product or service has waned, but there is still a significant amount of time, and therefore money, that the customer has committed to their subscription. The result is usually a decline in payment.
Risk #3: Renewal Time
This can be for subscriptions of any length. Regardless of the time frame, when it comes time to renew a subscription you are guaranteed to see failed payments and credit card declines. This is not a knock on your product or your service, it’s just that customers require consistent engagement to understand the long-term value of your product.
What To Do:
Here’s what you can do to address these times of risk. One best practice for all of these scenarios is to simply anticipate. If you know that this is going to happen you can get ahead of the payment failures before they happen. Make a plan and have someone on your team dedicated to following-up with these customers. A timely and personal response can yield amazing results.
Just keep in mind that it is not enough to ‘have a plan.’ You need to have an ‘effective plan!’ So if you are not measuring the effectiveness of your payment recovery efforts than its all a waste. Be sure to have someone on your staff dedicated to the metric of payment recovery. They should be reporting these numbers to you every month. It is so important to have visibility of these credit card declines so you know exactly how much money this is costing your business.
We Can Help You
If this sounds like more time and effort than you are willing to dedicate to this problem. We get it. You have a million things to do, and your team does as well. But you should know that the only way to really solve this problem is to have a full-time focus on the issue. That is, a full-time employee dedicated to the one metric of payment recovery. It’s an expensive solution to be sure, but this is by far the most effective approach.
We realize that most small businesses just simply can’t afford a full-time employee to address this issue. This is why we started Gravy. Our company can implement our proven systems to your payment failure problem, give you immediate follow-up for your credit card declines, and give you all the advantages of a full-time employee for a fraction of the cost. In fact, we don’t get paid unless we are adding money to your bottom line!
We’d love to connect with you. Click the link below to schedule a call and see how we can help your business.