Subscription Based Business

A subscription based business is a type of a business where a customer pays a subscription price to have an access to the product or service. This model was pioneered by magazines and newspapers, but currently, it is used by many businesses and websites. It became an extremely competitive market, thus and so together with the increasing success comes the risk of the failure. If you are just wishing to open such company, you should choose very carefully and elaborately company concept and idea.

Benefits of subscription model

It is not a novelty: Businesses have been selling monthly subscriptions for all sorts of goods and services for years–magazines like US Weekly, Harpers, Inc., Entrepreneur, and New Yorker come to mind. But since recently, different sudden industries started to use subscription based business model, offering anything from online software to socks by accident or by design for a monthly user charge. Nowadays there are many baby, handmade, beauty, pets products’ boxes, e.g. BarkBox, Julep Maven, Club W, Tea Sparrow, Escape Monthly, Foot Cardigan, JewelMint, Candy Japan, Yuzen and many others.

The subscription model is beneficial to both the company and the customer. When a customer subscribes to a service or a product, he/she gets the convenience of a regular supply of your product or service your company offers. The business owner enjoys regular income without needing to lead the customers through a checkout process again. Subscription based companies can have fixed labor costs for creation of products, customer service, shipment, promotion, and other business needs.

This is especially important for small organizations today, as they have the same ability as enterprises to deploy subscription models, potentially giving startups a competitive advantage. Switching from a traditional business model to a subscription one a company can have increased sales as the concept appeals to many of today’s customers.

Great success of a small company

But not every subscription based company can boast about a great success. Let’s have a close look at Foot Cardigan, a bright representative of subscription-based business with $2.5 million in sales last year. Haven’t heard their story yet? They send their customers a new pair of delightfully unique socks for just $9 a month.

Foot Cardigan, LLC filed as a Domestic Limited Liability Company (LLC) in the State of Texas on Sunday, July 1, 2012. Since this day they sold thousands upon thousands of socks. But in the distant 2012, Foot Cardigan offered socks with a gun design. It was the only inventory item available, but after the horrific shooting in Sandy Hook, Connecticut, people started to complain and cancel threads. The owners of Foot Cardigan explained the inventory mess and offered a refund, since then they required additional working capital and in 2015, after several failed attempts at obtaining funding from the local banks, Foot Cardigan CEO Bryan DeLuca and Chief Technology Officer Matt McClard got financing from an alternative investor. The banks did not believe that risky ventures can achieve much success and pay the debt back.

Working capital for subscription-based business from

Working capital is the amount of money small company needs to stay in operation. Having enough working capital means that the company is able to pay for all short-term expenses and debt, but, on the other side, too much working capital means that not all resources were put into use in helping a company amendment. Subscription based companies are not the exception. provides working capital to fund the resulting inventory and accounts receivable buildup for subscription based companies.

If you still have any questions, contact specialists at 212.865.3863

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