The Customer-Funded Business: Start, Finance, or Grow Your Company with Your Customers' Cash

5Recurring Revenue: Subscription and SaaS Models

For many of us, subscriptions are something we rarely pay much attention to, but benefit from every day. We get our videos from a subscription to Netflix, and many of our newspapers and magazines by subscription, too, in print, online, or delivered on our mobile devices. Our cell phone service and our cable or satellite TV programming come via subscriptions. The gas and electric utilities that heat and light our homes come that way, too. Even organic vegetables, in some places, arrive each week by subscription, in a box delivered to our doorstep.

“subscriptions are something we rarely pay much attention to, but benefit from every day”

Why do people choose to obtain such goods and services via subscription, rather than renting DVDs from a store or grabbing periodicals from a newsstand or organic produce from the local supermarket? Three major reasons:

1. Their demand for what they subscribe to is regular and predictable: They want it every day, week, or month (though in some settings, like utilities, the quantity may vary).
2. It's easier than having to remember to get it another way, or to make a special trip to get it.
3. Often, it's also cheaper than buying the goods or services individually.

Subscription models are those in which the customer agrees to buy something—a good or a service—that is delivered repeatedly, whether physically ...