Q&A: "I'm running the numbers on a subscription service…"

You probably know already that being able to count on money coming in next month is better than the possibility of money coming in—that's why subscription services are so powerful. Recurring revenue is the goal!

Today's listener is running the numbers on an idea. How does this look in a specific scenario where she's figuring out her pricing, how many people might sign up, and then what that all looks like in terms of the bottom line.

I'm getting ready to launch my app, which will help people track the correlation between nutrition and productivity. Naturally, I'm using a subscription model, since I like the idea of recurring revenue. If I price at $5/month, that will be something close to $3/month in profit after Apple takes its cut and I pay for hosting expenses. I don't know whether it will be really easy or incredibly difficult to build this to a sustainable level—what do you think? On the one hand, I could see myself struggling with just a handful of customers (each bringing in net three dollars a month) ... but if it took off and I had 2,000 customers at $3 net per month, that would be amazing!

The challenge comes in when you just have a small number of customers paying a small amount of money. This is why growth rate matters so much. If you have 3 new people signing up every day at $5/each, yes, that's slow, but it's growth. In 3 months you have $1,350 every month, and hopefully it keeps going. Most likely by then something will have changed and you'll have figured out how to get more people in—and of course, on the other hand, some will leave.

If it stagnates at a very small number, that's when you need to make a more drastic change, possibly including putting the whole thing on pause. But Lisa isn't there yet … first she needs to launch her service and see what's possible!