There are dozens of software options that allow companies – from the tiniest startup to the largest enterprise – to add on, or convert sales to, a subscription model.
However, the process for choosing the software, and implementing it, is more complex than many anticipate. In fact, many companies go about it in entirely the wrong way.
Often, the decision to begin offering subscription sales triggers an RFP (request for proposal) for software vendors, or for smaller companies – research and direct outreach to vendors.
Unfortunately, in the face of urgency many companies miss the crucial need to step back and map the broader ecosystem, connecting where they are now to where they need to be.
So, instead of a smooth journey, they end up with costly detours that take them down the wrong path, wasting time and money.
Before you can identify what tools will get you to where you want to be, you need a clear understanding of your requirements, how the software you chose communicates with and compliments the software you already have, and most importantly the business processes that will need to be rearchitected to ensure the success of your implementation.
The process becomes more complicated the larger the company is and depending on what goods or services the company sells.
For a small start-up company selling subscription goods or services, you might find a simple solution comes ready made from the payment gateway – the provider who processes your credit card payments. These can be as cheap as no cash upfront and a percentage of your sales.
Some examples to look at are:
There are other gateway providers too, but you get the idea. Choose one that offers the most functionality and charges the lowest transaction cost. Make sure you confirm currency support, card type support and other features like account updaters and retry logic.
In terms of complexity, this is a quick trip to the shop. They are not complicated to enable and you are unlikely to make a costly mistake that you can’t get out of relatively simply. Later on, as sales grow, you will likely want to re-evaluate your system.
For a growing small-or medium-sized business, the next level up are low-cost subscription billing vendors. They are limited in terms of the charge models they can support but are much cheaper than the enterprise class applications.
They have lightweight customer relationship management (CRM) and sales force automation (SFA) capabilities but are not at all a replacement for a true CRM application like Salesforce or Microsoft Dynamics, which most large businesses use.
The most common of these software packages are pretty similar to one another. They each have some strengths and weaknesses or are known for a specific industry focus. Those packages are as follows:
These vendors are tuned for low complexity but high-volume consumer subscription models. Pricing is usually fairly transparent on their websites but there will also be some setup costs and additional costs.
In terms of the voyage, think of these as a day trip down the coast.
You don’t need to do much more than think through the basic preparation such as: Which is best suited for your sector? Which price point suits your business? Which one provides other capabilities that you aren’t currently paying for?
All of these software packages are fairly easy to set up and might not even require outside help to enable – something that is in stark contrast with the software used for the largest businesses.
Nonetheless, selecting a software package means you need to think ahead. If you are growing rapidly, or have increasingly complex needs, you might want to take time now to think about how your software decision will impact growth.
Medium-to-large businesses are the category where planning and forethought is absolutely essential.
The stakes are high because the cost for getting it wrong can be punishing – lost sales, high costs of manual processing cutting into profit and redundant features that you are paying double for, just to name a few.
So, think of this as that once-in-a-lifetime trip, where every detour or unplanned mishap can delay your arrival or ruin your entire trip. Where are you headed? How long will you stay and how will you support yourself? When you get there, what will you do and will it be what you wanted?
Whether your company is small or large, your first inclination might be to consider whether Enterprise Resource Planning (ERP) can meet your needs.
Unfortunately, more often than not, the answer will be – No – ERP is not the right solution to solve your subscription billing issues.
The reasoning starts with the legacy of ERP applications being designed and built to handle the planning, fulfillment and billing of physical goods. This design has worked exceedingly well for the last 30 years or so and has led to a clear delineation between the front and the back office.
However, subscription models break this wall between the front and the back office and ERP applications have been slow to respond.
Some ERP applications, including SAP, Oracle, Oracle NetSuite and Sage Intacct have introduced subscription management capabilities, but they still have issues because the actual management of the subscription (upgrades, add-ons, etc.) happens in your CRM tool – often making ERP tools built to manage subscription irrelevant.
That is not to say ERP will never be the right application to manage your subscriptions, but you should do significant investigation prior to attempting this route.
The software needed by large companies has many features and typically has the ability to integrate with the rest of your systems — CRM, ERP, and ecommerce packages.
Your subscription management package should have the ability to scale and handle high daily transaction volume. Setting up these systems is complex and typically expensive.
If you are looking at these applications you need to ensure you know how you are going to support the implementation – either with an outside firm or with internal staff – or you could end up paying for a large failed implementation.
These software systems can be broken into two categories, those that work with Salesforce for subscription and usage billing and those that are vendor agnostic and focus on more complex pricing and rating information for high-volume usage:
Your team should have a very good idea of what is needed before even starting a conversation with one of these vendors. In fact, we always advocate a “vendor agnostic” approach – where the end game is not which car you drive but where you want to go.
Issues you should consider include how and where these systems connect with your existing CRM and ERP systems and how the sales, marketing and finance teams will use these packages to grow revenues.
Any software expense that creates lots of manual work because it doesn’t communicate or interchange well with your CRM or ERP is wasted money.
Selling subscription-based goods and services is very different from traditional one-off sales. Instead of focusing on net new accounts, subscription sales are driven by customer lifetime value.
In a subscription model closing an initial deal is often quicker as initial license values are comparatively small and have a lot of opportunity to grow the value of the customer.
Teams will be looking to sell add-ons and upgrades. To do that, they will need constant and accurate information about what the customers have and what they are using.
So, you really need to ensure your strategy provides the most robust and up-to-date customer install base and usage information possible so you can build successful account based marketing plans.
Most enterprises already use either Salesforce or Microsoft Dynamics. Salesforce has done a good job of creating a subscription management system that coordinates well with its CRM software so you should start with Salesforce CPQ & Billing if you are already on Salesforce.
The major ERP vendors have packages but too often they don’t include tools to manage the subscription in your chosen CRM and often don’t integrate well.
For the largest companies, the success of your recurring revenue journey will depend on the quality of your three-to-five year technology and business architecture plans. Your plan needs to be solid enough to guide you and flexible enough to get to your final destination if the market changes dramatically.
Always start with getting an understanding of what your CRM and ERP technology anchors can do as they will be part of the solution regardless of what you use to manage subscriptions, calculate invoices and optimize collections.
Start with ensuring your sales process is structured to lead to automated downstream billing and revenue recognition. You can’t automate a process that has no structure up front.
And lastly, always start with looking at the simplest solutions and investigate what the vendors you already work with for CRM and ERP have available to solve your subscription management challenge.
With the proper time and energy dedicated to front end planning, a large company should be able to deploy new software within a relatively painless timeline.
While it’s difficult to offer an estimated budget required to implement these tools, given various dependencies, I can say that the better your plan, the lower the long-term cost.
Last, remember that while it’s important to know the differences between these software packages, it shouldn’t be your starting point. Start with your end goals and map the technology and process optimizations that will get you there.
The post Choosing subscription software that’s right for your business appeared first on ClickZ.Reblogged 3 months ago from www.clickz.com