Page 159 - The $100 Startup_ Reinvent the Way You Make a Living, Do What You Love

Principle 3: Get Paid More Than Once
The final strategy for making sure your business gets off to a good start is to
ensure that your payday doesn’t come along only once—you’d much rather have
repeated paydays, from the same customers, over and over on a reliable basis.
You may have heard of the terms continuity program, membership site, and
subscriptions. They all mean roughly the same thing: getting paid over and over
by the same customers, usually for ongoing access to a service or regular
delivery of a product.

Back when people read newspapers (actual paper ones), they would subscribe
to have them delivered to their doorstep or office. These days, iTunes and
Netflix offer subscriptions to your favorite TV show or a regular series of
movies. The utility company has a recurring billing program; every month you
pay it for the ability to turn the lights on and heat your water. For decades, the
Book of the Month Club (in various forms) has delivered new books to its
members on a recurring basis.

Almost any business can create a continuity program. Speaking of book clubs,
there is also a Pickle of the Month Club, an Olive Oil of the Month Club, and a
Dog Treat of the Month Club. In Portland, my friend Jessie operates a Cupcake
of the Month club. If you like bonsai plants but aren’t able to keep them alive
very long, the Bonsai of the Month Club is for you, but you’ll have to choose
among four competing companies that offer different versions.§

Why is getting paid over and over such a big deal? First, because it can bring
in a lot of money, and second, because it’s reliable income that isn’t dependent
on external factors. Let’s run some quick numbers, assuming you offer a
subscription service for $20 a month:

100 subscribers at $20 = monthly revenue of $2,000 or
yearly revenue of $24,000

1,000 subscribers at $20 = monthly revenue of $20,000 or
yearly revenue of $240,000

You can tweak either the number of subscribers or the price of the recurring
service to see dramatic improvements. For example, adding 50 more subscribers
generates $1,000 more per month, or $12,000 more per year. Raising the price to
$25 a month with a subscriber base of 1,000 generates $5,000 more per month,
or $60,000 more per year. Adjusting both options—attracting more subscribers
and raising the price—generates an even greater increase.