We perform business valuations regularly for clients and look for ways that they can provide a subscription based offering for either part or all of their business. Why?
Well it's no secret that people will pay much more for a business with recurring revenue than one than doesn't. John Warrillow in his book "The Automatic Customer" talks about why a subscriber based business gets a much higher sale prices and how to go about it.
A good example of this is the WhatsApp founders who decided to provide a messaging platform that used the internet instead of expensive mobile carrier networks. They didn't want users getting bombarded with annoying ads when they decided to charge only a $1 per annum subscription fee. This may seem too cheap but because they only do messaging, only 55 employees were required to handle 450,000,000 users.
This led Facebook to acquire the company for $19 billion!
What are some of the attractions of a subscription business then?
Figure 1: Even Bert can't believe the price paid for a business that has subscribers!