Many small businesses rely on recurring revenue to be sustainable. This has prompted some entrepreneurs to explore subscription-based models, which can provide dependable monthly or yearly income. However, offering subscriptions brings challenges, including the need to track renewals, cancellations, upgrades, and payments.

Subscription management software can make this process a reality for businesses. It’s an increasingly important part of doing business: the global market for subscription management software was valued at $6.46 billion in 2023 and is projected to reach $17.19 billion by 2030. These solutions organise and automate the tasks that keep revenue flowing while eliminating many of the challenges of manual billing. They handle sign-ups, recurring payment collection, communicating with customers, and more. A well-crafted system also provides owners with deeper insights about subscription metrics, customer trends, and pricing.

Below, we’ll explain how subscription management software works for small businesses, what features to look for, and how Stripe can help businesses manage subscriptions.

What’s in this article?

• What is subscription management software?
  
• How can subscription management software help small businesses?
  
• What are the main features of subscription management software?
  
• How does Stripe help small businesses manage subscriptions?
  
• What are common challenges with subscription management?
  

What is subscription management software?

Subscription management software automates recurring billing. Instead of manually sending invoices each month or pursuing overdue payments, owners can use this software to help with repetitive tasks. The software monitors each subscriber’s status, processes changes to plans, applies taxes or discounts, and ensures every transaction is accurate. If a payment fails, the software sends reminders or retries the transaction until the problem is resolved. Credit cards, digital wallets, and other payment methods integrate with the management platform.

This type of software reduces manual work and has built-in detailed reporting features so businesses can see their subscriber numbers, recurring revenue figures, and churn rates easily.

How can subscription management software help small businesses?

Many small businesses find that recurring billing provides consistent revenue in uncertain markets. However, starting a subscription service is just the first phase. As sign-ups begin, owners need an organised approach to track plans, pricing, and payment schedules. Though managing this yourself can work for small operations, complexity increases as you grow.

A subscription management platform handles recurring charges in the background so the owner can focus their energy elsewhere. The software processes payments, notifies customers about renewals, and flags issues such as expired cards. Fewer late payments and fewer billing issues keep revenue steady. It’s also easier to identify trends early. If a large number of subscribers downgrade after three months, that could signal that your products might need a refresh or that your marketing message isn’t working.

What are the main features of subscription management software?

An effective subscription platform administers the practical and strategic sides of recurring billing. Though each platform is unique, look for these valuable features:

• Automated billing: When a new customer signs up, recurring charges should take place at preset intervals without intervention. This usually includes sending reminders when payment methods expire or fail.

• Multiple pricing tiers: Many businesses have basic, mid-tier, and premium plans. It should be simple enough to set up these tiers, and customers should be able to switch between them without too much effort.

• Customer database: A subscription platform often acts as a centralized directory of subscribers’ information, including their contact details, transaction history, and account status. This helps with issuing refunds, applying promo codes, or resolving billing questions.

• Analytics and reporting: Owners need to understand how their subscriptions perform over time. Analysing metrics such as the churn rate, monthly recurring revenue (MRR), and customer lifetime value (CLV) empowers you to make stronger decisions about marketing and pricing.

• Payment gateway integration: The software should be able to connect with one or more payment gateways to process transactions. Storing payment methods securely should also be an important part of its integration capabilities.

• Tax and compliance tools: Calculating sales tax or value-added tax (VAT) is often inconvenient and time-consuming. Quality subscription platforms automate these calculations or integrate with tax solutions to reduce manual work and errors.

How does Stripe help small businesses manage subscriptions?

Stripe makes it easy for small businesses to manage subscriptions. Here’s how it works:

• Simple subscription setup: You can quickly create and manage subscription plans for different types of pricing models, whether it’s a flat monthly fee, usage-based billing, or tiered options.

• Automated billing and payments: Stripe handles the recurring billing process, including sending invoices and charging customers automatically. If a payment fails, Stripe automatically retries the transaction and notifies the customer without drawing your staff away from other work.

• Customisable plans: Do you plan to offer free trials, discounts, or special deals? With Stripe, it’s easy to create promotions or customise subscriptions for different customer segments, which helps attract and retain subscribers.

• Support for different payment options: Stripe supports many payment methods, including credit cards, digital wallets such as Apple Pay and Google Pay, bank transfers, and locally preferred methods around the world. Businesses can expand their reach while giving their customers flexibility in how they pay.

• Real-time insights: Stripe provides precise data about subscription performance, including churn rates, CLV, and MRR to drive your decision-making.

• Simple tax compliance: Stripe calculates sales tax, VAT, or goods and services tax (GST) automatically based on your customers’ locations, so you stay compliant without extra effort.

• Easy integrations: Stripe can integrate with the other systems you’re using, such as your customer relationship management (CRM) solution, accounting software, or e-commerce platform.

• Custom solutions: If your business has unique needs, such as integrating billing with your app or setting up a layered subscription flow, Stripe’s application programming interfaces (APIs) make it easy to build a solution that fits.

• Self-service for customers: Stripe has a ready-to-go customer portal where subscribers can manage their accounts – including updating payment methods, changing plans, or cancelling service – without needing to contact you. It’s great for customer satisfaction and cuts down on your support workload.

• Room to grow: Whether you have 10 subscribers or 10,000, Stripe manages growth effortlessly. You won’t have to worry about whether your billing infrastructure will break down as you scale.

What are common challenges with subscription management?

Managing subscriptions can transform your revenue, but this process poses challenges for businesses:

• Handling failed payments without losing customers: Managing failed payments, known as involuntary churn, requires a thoughtful strategy. To combat churn, implement smart dunning management, such as sending timely reminders, updating expired cards automatically, and making it easy for customers to resolve issues.

• Scaling without chaos: When you start small, managing subscriptions is often much more manageable. But as your customer base grows, keeping track of who’s on what plan, what discounts apply, and when renewals happen can quickly become overwhelming. Automating tasks can help you avoid a cumbersome process that’s prone to human error.

• Offering flexible plans: Customers expect options: monthly vs. annual billing, usage-based pricing, or pausing their subscription instead of cancelling. But setting up these variations can be a substantial lift. You need systems that can handle these variations without breaking your billing logic.

• Staying tax-compliant across regions: Depending on where your customers are located, tax rules can vary widely – and sometimes change without warning. Mismanaging your taxes opens you up to legal and compliance risks, and the stakes get higher as you enter new markets.

• Providing a great customer experience: Billing is an integral part of subscription management, but it’s not the whole picture. The most successful subscription-based businesses make it easy for customers to adjust their subscriptions. Customers should be able to upgrade, downgrade, or cancel their subscriptions with a click – without calling your support team. Empowering customers to manage their own accounts often means investing in tech and processes that work well together and are simple to follow.

• Fighting churn: Some customers leave because your product is no longer the right fit for them, but others leave over avoidable issues, such as unclear billing or perceived lack of value. Identifying why customers churn – and fixing the problem – takes effort.

• Integrating your tools: Most businesses already use tools for CRM, accounting, and marketing, and your subscription software needs to integrate with them. If it doesn’t, you’re stuck with manual work or inconsistent data.

• Adapting to changing customer needs: Your customers might want subscription features you didn’t plan for or currently support. The challenge is keeping your system adaptable enough to meet their needs without moving too quickly or without a calculated approach.

• Predicting revenue accurately: Recurring revenue is predictable income when done correctly, but you need to factor in churn, trial conversions, and seasonal fluctuations. Getting a clear picture of your future cash flow requires careful monitoring and accurate forecasting tools.