Why Contractors Should Consider Subscription Model Billing

How To

When you think of subscription model billing, you might think of movie streaming and delivery services. But it’s a billing trend that’s becoming more common.

Today, you’ll find home services contractors that have embraced this model. They offer maintenance and scheduled repairs for a monthly, quarterly, or seasonal fee.

This business model is convenient for customers. But is it worthwhile for contractors like you? How will it affect your bottom line?

In this article, we’ll look at subscription model billing. You’ll learn what it is and the benefits it offers. Then, we’ll dive into the different subscription services you can offer.

You’ll also read about how to set up recurring billing. Finally, we’ll give you tips on how to get started on your subscription plans.

What Is Subscription Model Billing?

Subscription services are common in media and entertainment. Customers pay monthly for a membership. Then, they can watch anything on the streaming platform for the next month. They have access as long as they continue to pay. If they stop paying, the provider cuts off the service.

As a contractor, you too can provide subscriptions for a set fee. Customers get specific services for this price. They might pay monthly, quarterly, or yearly. After sign-up, they can make appointments for any services included in the subscription. They only pay more for a visit if you perform services outside the subscription agreement.

Customers get this arrangement as long as they continue to pay the subscription fees.

Imagine that you are an HVAC contractor with a subscription model. Customers might pay a fee for each quarter. Then, in the spring, you will come and tune up the air conditioner. During the summer, you’d check the coolant and change the air filter. In the fall, you might clean the ducts. Then, in winter, you could give the furnace a tune-up.

Customers who paid the subscription fee would get that season’s services at no added cost.

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Advantages of Subscription Model Billing for Contractors

Is subscription model billing good for contractors? Yes, it gives you some advantages over traditional billing and invoicing. Here are the benefits of providing customers with a recurring membership option:

Predictable cash flow: Customers pre-pay for the month or season. You will know how much revenue to expect. This knowledge helps with planning and budgeting.
Strong client relationships: You will serve and interact with clients regularly. These monthly or seasonal face-to-face meetings help build rapport. The ongoing relationship can lead to long-term business.
Reduced admin work: You won’t be creating invoices for each job. And you will not need to chase down late payments. You can set up recurring billing to reduce admin work even more.
Scalability of services: You can add services or have different price tiers. You can offer premium packages and add-ons or build subscriptions for new services. Your business can continue to grow without adding billing complications.

You can also consider offering discounts or waiving service fees to subscription customers. This rewards them if they need services outside the subscription.

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5 Services Contractors Can Offer on a Subscription Basis

Some services fit well with subscription model billing. Scheduled non-emergency services are most compatible with such recurring payment arrangements. Here are five options for subscription packages that you can offer:

Maintenance services and tune-ups: This service might include seasonal inspections. You would also perform necessary maintenance and cleaning. The package could involve changing filters, replacing parts, and adding lubrication or coolant.
Home improvement subscriptions: This package may include a range of home improvement services, such as painting, siding repairs, or driveway sealing. Your customers could choose any one listed service monthly or quarterly.
Consultation or project management: You can give free consultations or project management services. For example, you can offer to coordinate subcontractors without markups or service fees.
Inspections and repairs: You can offer packages for seasonal inspections and minor repairs. Examples might include roof or exterior checks, as well as shingle or siding replacements. This package would be popular in areas with many storms or harsh weather.
Cleanup services: This package could include seasonal cleanup or storm debris pickup. For example, in four-season climates, you can add leaf pickup and snow removal.

You might also consider themed subscriptions. These can vary by specialty. For example, you might offer energy-efficiency packages. This subscription might include seasonal appliance inspections. You would adjust settings or make repairs to ensure efficiency.

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How to Set Up Subscription Billing for Your Contractor Business

You need to take care when setting up your subscription services. Without proper organization, payment management can become complicated. Also, you need to plan carefully. You’ll be committed to performing the services offered in your subscriptions. You need to make sure it is profitable to do so.

A step-by-step approach to setup can limit potential mistakes and pitfalls. Consider each aspect of your subscription and ensure that it will work as you expect.

Here are six important steps to take during setup:

Choose the Right Billing Software

Billing software is essential for your subscriptions. You need to ensure the software provider complies with payment processing laws. For instance, they must meet the Payment Card Industry Data Security Standard (PCI DSS). This ensures proper encryption and protection for payment processing.

You also need to find software with the features and controls you need. Ideally, you will find a product that integrates with your bookkeeping software. This will help streamline and automate your accounting.

Create Flexible Subscriptions

Choose software that allows you to create different subscription plans. For instance, you can offer tier options.

Basic service could offer seasonal tune-ups or maintenance.
Standard service might include extras like free repairs or parts replacements.
Premium packages might allow customers to get free emergency service calls. These would be in addition to all standard services.

Your subscription and billing software should allow customers to upgrade. They should have the flexibility to switch between tiers from one billing period to the next.

Automate Billing and Payments

Subscription plans can add a lot of extra admin and bookkeeping work if you are not careful. One of the best ways to avoid spending hours in the office is to automate billing and payments.

Find billing software that sends out reminders to customers. It can tell them when the subscription payment due date is approaching. Also, allow them to set up recurring payments. This feature lets them pay automatically. Then, they don’t have to remember each month or quarter.

Finally, find a system that tracks payments in real time. That way, you can see who has paid and who hasn’t.

Set Clear Payment Terms and Conditions

Clarity and transparency are essential with subscriptions. Your definitions need to be clear so that customers understand what they’re getting. They also need to grasp payment requirements.

First, you need to clearly state what they’re paying for. List the services included in each package. Try to be as detailed as possible to avoid misunderstandings.

Then, put the payment terms in writing. For instance, your terms could say that the subscription is suspended if they don’t pay the fee by the due date. They can activate it again by paying the balance due.

These terms need to be in writing so you can refer to them if the customer has complaints.

Choose Add-ons

Flexibility can go beyond offering tiered plans. You can choose add-ons for subscribers. These additional services or perks can work in two ways.

First, you can offer specific add-ons. These might include specific services that customers might want. For example, if you have a roof maintenance subscription, you can offer a gutter-cleaning add-on.

Second, you can consider offering subscribers discounts on regular services. For example, you might waive service charges on repairs or installation projects.

Offer Incentives for Sign-ups

There are three options for convincing customers to use your subscription services.

First, you can make subscriptions cheaper. Each service should cost less than if the customer paid for it individually. Then, it will be clear that they will save money overall by getting the subscription.

Another option is to charge the full amount for subscription services. Then, you can add more services at no additional cost. For instance, add free duct cleaning or filter changes to your seasonal HVAC service.

A final choice is to offer discounts for subscribers. In some specialties, this choice might make sense. If you offer emergency repairs, you can waive the service charges for subscribers.

These incentives can help with marketing. Use them to convince customers to choose your subscription. Otherwise, they might not have a practical reason to get the subscription.

5 Quick Tips to Get Started with Subscription Model Billing

Subscription model billing requires a methodical setup process. It takes time to perfect your packages and find the right billing platform. Luckily, you can start laying the foundation for your subscription model today. Here are five tips to begin the process:

Ask your customers. Talk to your current clients. See what types of subscription services they would like. Offer suggestions for seasonal maintenance or home improvement and listen to their feedback.
Research competitors. Are any other contractors in your area offering subscriptions? See what’s included in their packages and how much it costs.
Look for demos. Find payment processing software providers who offer trials. You can see how their software works for free. This allows you to test it and see if it fits your needs.
Brainstorm service packages. Try to come up with subscription packages. What services will you include? See if you can create packages with monthly or seasonal services.
Consider your current services. Subscriptions should add revenue to your business. Think about how to schedule subscription services so you don’t interrupt your operations.