To convince outside investors or the board of directors that subscription trading is the way forward, you need to be convincing and clear on why the company should adopt the new commercial through a strong business case.
why, what, when and how
A subscription model brings with it recurring revenue, new market opportunities, new revenue streams, and a differentiated offering, among other benefits.
Still, other executives or stakeholders are likely to have other views on the future direction the company should take. A well-prepared and structured analysis and business case is the necessary support to describe the opportunities, benefits and vision of subscription business in such a way that the strategy and model are extended, not only in the sphere of decision makers, but also by all organization members.
The business case presented, in addition to explaining the benefits of the new model, must convey what will happen if the decision to adopt this model is not made. It presents the justification for the investment and justifies it so that the decision makers approve this strategy.
The way of thinking to structure the business case is to answer the questions: why, what, when, how and how much? As you continue to develop and refine your business case, revisit these issues to see if they are factored into each statement in the report:
- Why is subscription commerce the best way for the company to achieve all or part of its vision?
- What is subscription commerce and the specific opportunity for the company?
- When should the business move to subscription trading and how long will it take?
- How can the company execute a subscription trading strategy?
- How much will subscription commerce affect the business outcomes most important to company leadership?
- How much investment will be required?
Home: the Corporate Vision
For your business case to be relevant, it must be based on how the subscription commerce offering helps the business achieve its vision and where it wants to be in the next three to five years.
The business case justification is not with the product or subscription-based offerings you want to bring to market, but with the company's direction and vision.
As you describe the vision in the analysis, indicate the measures that will be most affected and how. That is, what are the main objectives and key performance indicators (KPIs)?
It's best to choose one or two of the most relevant, but no more than three of these KPIs to focus on as you develop the business case. These will be the metrics where you think you can show clear and measurable model improvement.
| GOALS | KEY INDICATORS (KPIS) |
|---|---|
| Increase the value of the company | - Market capitalization – Shareholder value / share price – Percentage of recurring income |
| Increase revenue | – New net income streams – Income from existing customers – Customer lifetime value |
| Improving Customer experience | – Reduce the abandonment rate - Customer satisfaction – NPS improvement – Use of the product |
| Reduce costs | – Cost of sale – Customer acquisition cost – Efficiency in the product launch process |
| What makes us different of the product and the brand | – Capture ratio – Use of the product – Start of testing phase – Product adoption |
| Expand market share | – Number of clients – Number of new clients captured – Market percentage – Ranking with respect to the competition |
Model Understanding
The people who have to make the decision may not know or see the difference between e-commerce and subscription commerce.
Therefore, it is not possible to understand why and how the company should change the current single transaction model. Even with understanding it may be the case that the value of moving to subscription commerce is not perceived at this time.
To do this, the first thing is to disclose the new business strategy and ensure that everyone is at the same point of understanding.
The concept of recurring income and all its advantages is one of the most attractive and important aspects that must be promoted at each point of the business case.
Once the model of subscription trading is understood, data on the opportunity, starting at the top level with general industry trends and then working your way up to your own offering. This section is reinforced with market reports from the last two years and analysts who provide information on:
- Industry growth and trends
- Market opportunities in the business sector
- Opportunities in adjacent industries if relevant
- Potential market size
- Valuation of similar companies in the sector or adjacent, comparing those with recurring income with those that only have traditional and unique sales.
The opportunity must be completed with the situation of the competition, differential position of the same in the market and the new competition that appears when introducing the subscription model. With these data, the importance and urgency of moving to subscription trading can also be conveyed. Areas to cover in competitive analysis include:
- Who are leaders in the market?
- Which competitors already offer subscription-based products and/or services?
- How are these products perceived in the market?
- What are the growth rates/market share of competing subscription products?
- Does the company have a defensible position?
- Is the offer differential? How?
Strategy Definition
Having identified the vision, the key metrics for leadership, and the opportunity, you can now outline what the company's strategy should be to move to subscription commerce.
This is where you need to convey to decision makers that you have identified the best way to capture the subscription trading opportunity. The strategy must be clear and concise showing the final objectives of the company thanks to this model.
At this point, it is not the small details that can deviate from the final objective that are important, but the main activities and the time frame, including:
- Solution Description
- Phases or stages of the plan
- How the solution is marketed and sold in the digital environment
- Necessary technological and operational platform
- Detailed plan and relevant milestones
- Management Roles and Responsibilities
Result
The estimated impact of the strategy should be shown with clear and quantifiable benefits and when they can be achieved, through the most important KPIs identified above.
The aspects to include are:
- Costs
- Expected Results
- Return of investment
- Potential risks and their impact on costs and results
The financial model must reflect a three to five year perspective in order to be credible.
The contributions of analysts and other experts from the same company strengthen the model and allow it to reflect an accurate picture of current and future finances.
This should be balanced by modeling different scenarios that show the impact of getting to market as quickly as possible versus launching later than 12-18 months.
Non-financial benefits must also appear, such as differentiation from the competition, alignment with the company's strategy, the ability to improve the incorporation and retention of talent, and others.
Leverage best practices
During the work in the development of the business case (why, what, when, how) it is logical to come into contact with the best market practices that provide questions to assess within the use case.
Key aspects for the business case to be a success are as follows:
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Are there executive sponsors within the organization?
The sponsor provides important information and guidance to the business case before presenting it to a broader internal audience.
Is there a good summary of the business case highlighting what is most important to stakeholders?
Reduce the core focus of the business case to one or two core metrics to keep it concise and compelling.
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Is information available from different areas of the company, such as finance?
Consensus must be built across departments for cross-functional alignment as the strategy and business case are developed.
Is there a long-term vision?
Subscription trading is strategic and visionary, so the results begin to materialize at least after 18 months, with full maturity in three to five years.
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A sustainable use case must take into account the appropriate characteristics to select the right partner that can accompany the organization towards the subscription model both technologically and operationally.
