This transcript was generated from the episode audio and may contain minor errors.
[Music]
What's good, friends, listeners? Side hustle school, I'm so glad you're here. Hope you had a great Thanksgiving for those who celebrate. Hope you ate some pie, even if you're outside the US. Look, you can still have pie.
I'm a big fan of pie, in case you have not been listening for a while. I talk about pie from time to time. But of course, I don't wanna overdo it, both in terms of eating pie and talking about it. So let us jump into today's question. Today's caller is hoping to set up a service with a low service fee and a renewal payment every three months.
He's wondering about how to do this, the mechanics of it, the logistics. Is there an easy way to do it? So we're gonna talk about that. But before we do that, a reminder about why you might actually want to do this. Like, why might this be a good approach?
So there's a bit of strategy, not just the mechanics, but strategically, why would you wanna do this? Well, number one, because recurring revenue is so important. Number one, first and foremost, it's really great to get paid on a recurring basis, as opposed to just constantly trying to get new customers. If you have this base of customers, you can say, okay, every month or every three months, whatever the term is, you know that money's gonna come in. That then allows you to forecast your cashflow better.
It allows you to not be seasonally dependent, to have like swings and highs and lows. Recurring revenue is so important for lots of reasons. But also specifically here, setting up the service with a low introductory fee and then a renewal payment every three months. This approach to generating subscribers is really common and for a good reason. And that's because it works, or at least it typically increases the conversion rate, compared to not having the low introductory offer.
Now there are pros and cons to everything, of course. And one potential negative with doing it this way, is that you're going to have a higher churn rate. So the more people who sign up for a very low introductory fee, are more likely going to cancel later, as opposed to people who might sign up without that introductory offer. But you'll get more of them signing up. So as I said, pros and cons, that's a bit of the strategy.
Let's talk about the mechanics, how to set up payment plans with auto renewal. That's our question and answer for today, right after this quick message from our sponsor. [Music]
Hey Chris, this is Ken from Fresno. And I've been following your work since the $100 startup. So I just want to say thanks for all the great advice and support you've given us, side hustlers to begin with.
So I'd like to offer a service that has a low signup fee, but then every three months it renews for another payment. And my thought is that the low signup fee will encourage people to join without hesitating too much. And then since they have three whole months before a renewal comes to, they won't manually cancel the way they would for a more limited trial offer. So I'm wondering about the mechanics of how to offer this. How can I accept an initial payment and have the next charge, and then all future charges go through automatically?
Thanks, and I look forward to your response. [Music]
Ken, what's up? Thanks so much for the message. So glad the work has been helpful. And I also think you're on the right track with this idea.
As I mentioned in the introduction, this is a very common approach. It's common because it's good, it works. It can be very effective as long as you have the right offer, as long as you're providing good service, et cetera. I mean, those of course are the prerequisites, but in terms of strategy, good plan. And the mechanics are actually not that complicated.
So a key point here, a good payment processor will have an easy way to do this. So if for some reason yours doesn't, then you should change payment processors. PayPal and Stripe and probably Shopify system, number of others now, they all offer this functionality. I'm most familiar with PayPal and Stripe. But for any of them, what you wanna do is go into the settings and choose how payments will be charged.
There's gonna be an option called subscriptions or recurring or something to that effect. And almost always, you're gonna have a way where you can set a payment to be charged immediately. That's gonna be that introductory fee. And then you choose what payments are charged later and on what schedule. So for example, there's gonna be an option for a monthly charge.
You should be able to set the number of days. So in this case, it could be three months later or 90 days later. And then you choose 90 days after that. So in other words, there should be a way to choose how often those payments are charged. You can structure it however you like, or at least there should be some good options.
If it's not 100% customizable, you should be able to find what you're looking for more or less. Now that's the technical side. But one more point here, communication. So I mentioned strategy in the introduction. We just covered technical stuff, but communication is also important because customers don't like to be caught unaware with subscription payments they aren't expecting.
So you really do wanna create that enticing offer to get them to sign up. Again, you're on the right track with that. But don't hide the fact that they'll be billed later because that never goes over well. You can probably think of times that you've been charged for something that you weren't expecting and it's just not fun. So if you do that, you start getting into customer complaints and potentially charge backs and so on.
But assuming you're clear in your communication, this is definitely a good idea to pursue for lots of different businesses. Recurring revenue is a wonderful thing and setting up an introductory offer and then charging whatever the regular price is later can be a very effective approach. So good luck and listeners. Good luck to you as well. If you have a question, come to sidehustleschool.com/questions.
I'm so enjoying this process of hearing what you're up to. Let me know as well about your projects, your struggles, your successes, all those things. I look forward to hearing from you and potentially sharing them with the rest of our audience as well. So thank you so much and have a wonderful day. My name is Chris Guillebeau, this is Side Hustle School.
[Music]
From the Onward Project.
