Your Company Could be the Next Big B2B Subscription Commerce Success Story
What you need is a compelling, and educational, business case for why your company not only needs to adopt a subscription commerce model, but why you need to do so as quickly as possible.
We’ve taken the lessons from more than a decade of helping companies adopt B2B subscription commerce and compiled the following best practices and recommendations to help you develop a hard-hitting, yet realistic business case.
Convey the Why, What, When, and How
You know that moving to a subscription model is the right step for your business, bringing with it a range of financial benefits, from recurring revenue, to new market opportunities and revenue streams, to a differentiated offering, and more.
While the reasons and benefits of adopting subscription commerce may be completely obvious to many, chances are that executives, board members, stakeholders, and other decision makers in your company have differing views and competing ideas on the future direction of the company. A well-prepared business case can help you describe the opportunities and benefits in a way that gets executive and board-level approval, buy-in from other parts of the company, and a higher priority within the company for investing in your initiative.
This chapter covers:
- The importance of buy-in
- The core components to build your business case following a “why, what, how, when, and how much” model
Your business case should tell the story of what will happen if your company does or does not make the decision to move forward now on subscription commerce. It presents the justification for the investment and a convincing rationale for decision makers to approve.
One way to think of how you should structure the business case is answering the questions: why, what, when, how, and how much?
As you work through the development and refinement of your business case, ask yourself whether you’re addressing these questions:
- Why is subscription commerce the best way for the company to achieve all or part of its vision?
- What is subscription commerce and the specific opportunity for your company?
- When should the company move to subscription commerce and how long will it take?
- How can the company execute a subscription commerce strategy?
- How much will subscription commerce impact the business outcomes most important to company leadership?
- How much investment will be required?
The Important Components of Your Business Case
To achieve company vision and goals
The subscription commerce opportunity and specific solution
An overview of the plan for bringing a subscription-based offering to market
How fast you can bring your solution to market
An analysis of the costs and benefits of your subscription commerce solution
Start with the Corporate Vision
The best place to start when developing the rationale for your business case is not with the subscription-based product or offerings you want to bring to market, but with the top-line direction and vision for the company. To make your business case relevant to top executives, you need to ground the rationale in how a subscription commerce offering can help the company achieve its vision for where it wants to be in the next three to five years.
As you describe the vision in your business case, drill down into the most important measurements for achieving that vision.
In other words, what are the top goals and key performance indicators (KPIs) that leadership cares about? Below is a list of common goals and KPIs. It’s best to choose one or two, but no more than three of these KPIs to focus on as you develop your business case. These will be the metrics where you believe you can show measurable improvement from a subscription commerce offering.
Common Goals and KPIs that are Top Priorities for Company Leadership
KEY PERFORMANCE INDICATORS (KPIS)
Increase company value
- Market capitalization
- Shareholder value/share price
- Percentage of revenue that is recurring
- Net new revenue stream(s)
- Revenue from existing customers
- Customer lifetime value
Improve the customer experience
- Churn rate
- Customer satisfaction
- Net Promoter Score
- Product usage
- Cost of sales
- Customer acquisition cost
- Efficiency in bringing a product to market
Differentiate the product/brand
- Win rate
- Product usage
- Trials started
- Product adoption
Expand market share
- Number of customers
- Number of net new customers acquired
- Market percentage
- Ranking compared to competition
Real Estate, Radically Transformed by Technology
In a perfect example of how to link the company vision with adoption of subscription commerce, consider Keller Williams, the world’s largest real estate franchise. The company’s vision is to redefine itself as an agent-driven technology company for the digital age. To achieve this vision, it created the industry’s first cloud platform to support the entire real estate value chain, with subscription commerce powering the platform and the vision.
Educate Your Audience on the Opportunity
Executives, board members, and other stakeholders may not know the difference between ecommerce and subscription commerce, let alone why and how your company should be thinking outside of the traditional, one-time transaction model. They may understand the value of moving to subscription commerce, but don’t believe that now is the right time to do so. That’s why your business case must first educate the audience and help everyone get on the same page.
The concept of recurring revenue and all its advantages is an important distinction to make as you lay the foundation of your business case and define the opportunity. For help in defining and differentiating ecommerce and subscription commerce, see chapter one "Hidden Complexities of Subscription Commerce".
Once you’ve defined subscription commerce, then you can present data about the opportunity—starting at the highest level with overall industry trends and then working your way down to your offering.
Look for industry analyst and other objective sources of recent (within the past two years) data on:
- Industry growth and trends
- Market opportunities within your industry
- Opportunities in adjacent/other industries if relevant to your offering
- Size of the addressable market for your subscription offering
- Valuation of similar companies in your industry or adjacent ones, comparing those with recurring revenue to those with only traditional, one-time sales
Round out your research with the competitive landscape, comparing your competition and ranking them objectively against your company. Identify and analyze any new competition you’ll face as you launch a subscription offering. This information will be an important component of conveying the importance and urgency of moving to subscription commerce for executives and stakeholders. Areas to cover in your competitive analysis include:
- What companies are the leaders in the market?
- Which competitors already offer subscription-based products and/or services?
- How are those products perceived in the market?
- What are the growth rates/market share of the competitive subscription products?
- Does your company have a defensible position?
- Is your offering differentiated? How?
Resiliency in Times of Uncertainty
Many organizations will have to rethink their product-market focus, customer engagement, or pace of technological innovation. During this period, a board should encourage management to undertake a broad strategic re-evaluation that could entail embracing some bold moves.
Describe Your Strategy for Subscription Commerce
Once you’ve identified the company vision, the top metrics that leadership cares most about, and the opportunity, now you can describe what you believe your company’s strategy should be for moving to subscription commerce.
This is where you convince stakeholders that you have identified the best way to capture the subscription commerce opportunity. Present your strategy using concise language that demonstrates you have a clear vision of how to achieve the company goals you’re focusing on.
Briefly describe your proposed solution and your go-to-market plan for launching it. Don’t go into too much detail at this point but convey the main activities of your initiative and the timeframe, including:
- Description of the solution
- Phases or stages of the plan
- How you will market and sell your solution using a digital marketplace
- Technology required to support the solution
- Schedule of major milestones
- Stakeholders and their responsibilities
Investors Reward Companies with Recurring Revenue
Investors value companies with recurring-revenue models 8 times greater than comparable companies with transaction-based business models.
Consider the example of Salesforce which has a market capitalization of more than $165B, more than 12 times its recurring revenue ($13 billion in 2019).
Describe Your Strategy for Subscription Commerce
Now it’s time to focus on the estimated impact of your strategy on the most important KPIs you identified earlier. For your business case to be convincing, you’ll need to show clear, measurable benefits and when those benefits can be expected to be achieved.
To answer the “how much” question, executives and other stakeholders will want to know:
- Forecasted outcomes
- Return on investment
- Potential risks and their impacts on costs and outcomes
To provide credible forecasts, your financial model should reflect a three-to-five-year outlook. Seeking input and assistance from financial analysts and other experts within your company can help you make sure that your model is grounded in reality and reflects an accurate picture of your current and future company financials.
Demonstrate the urgency of implementing your subscription commerce strategy by modeling different scenarios that show the impact of getting to market as quickly as possible versus a delayed launch of 12 to 18 months or more.
Also describe non-financial, softer benefits of adopting a subscription commerce model. This could include competitive differentiation, alignment with company strategy, the ability to improve recruitment and retention of talent, among others.
Check Your Work Against Best Practices
As you work through the development of your business case and answer the why, what, when, how, and how much questions, take the opportunity to consider and incorporate the following best practices into your effort:
Do you have an executive sponsor or sponsors on board?
An executive sponsor can give you important insight and guidance for the business case before you present it to a broader audience.
Did you distill the business case down to what’s most important to stakeholders?
Narrow down the main focus of your business case to one to three core metrics to keep it concise and compelling.
Did you get input from different areas of the company such as finance?
Make sure to build consensus across functions and gain cross-functional alignment as you develop your strategy and your business case.
A compelling business case shows why your plan for subscription commerce is worth the company’s investment in time, money, and resources. While preparing a winning business case requires considerable effort and coordination, it will ultimately help everyone involved in the decision understand the strategic importance of your initiative and why the company needs to get started now.