If you’ve been tasked with launching a subscription-based business at your organization, or are thinking about starting your own XXX-as-a-service or XXX-of-the-month-club, before diving in, take a step back.
To ensure a solid foundation, I encourage companies to devote a few weeks (usually at least 2 and no more than 12 weeks) to fleshing out the business case before proceeding. After all, the objective of testing is to assess the viability of the model, make necessary adjustments, and get the green light to move forward at a broader level. Without understanding the business case, how will you, and your organization, know whether you’re on the right track.
Template: Your Business Case for the Forever Transaction
When you go to your board or leadership team to make a case for investing, you need to answer the following questions. I usually put these questions into a PowerPoint presentation, like I did back when I was a consultant at Booz Allen Hamilton, and then work with the client to figure out how we’re going to fill in the pages. You can do this on your own and include the following key questions:
What’s the Business Rationale?
· What’s the financial opportunity?
· How does it fit with our strategic vision?
· How can it help our marketing—building relationships, trial, insights?
What’s Our Forever Promise?
Who are we targeting, and what are our goals? What’s in it for them, and for us?
What is our vision? If we refocus our business on forever, what would it look like in three years?
· Products and services?
· Competitive advantage?
· Financial?
· Positioning for the future?
What Do We Need to Execute on the Vision?
Why wouldn’t we dive into executing on the full vision immediately? What don’t we understand yet? For example:
· What’s the right offer?
· How do we execute?
· What additional resources, skills, and technology might we need?
· What’s the upside/downside to revenue, gross margin, CLV, etc.?
· What would it cost us?
· Who will want it?
What Are the Risks of This Strategy?
· Cannibalization
· Backlash from customers and partners
· Competitive response
· Team support
What Early Steps, Research, and Tests Are Needed?
· What questions can we answer without a minimum viable product (MVP), through research? What is the MVP, and what questions will and won’t it be able to answer? Features? Pricing? Scope? Target?
· What are the success criteria that would indicate we’re onto something?
· Under what circumstances will we shut down the team? Under what circumstances will we expedite?
· What are the second, third, and fourth tests? We know they may not be right, but we should start thinking about it!
What Are the Criteria for Board Support?
Ask board members the following questions:
· What support are you willing to give us now?
· What results do you need to justify continued support?
· What metrics and milestones will be used to assess success?
· Are these proof points going to be enough to get your full support moving forward?
Assembling this business case through answering these questions will help in many ways. You may decide the business case isn’t powerful enough to justify moving forward. That’s useful. If your business doesn’t have sufficient resources and needs to prioritize short-term cash flow, that’s OK. It’s important to get clarity and not waste time doing more research, testing, and implementation than you need to move forward.
Performing this business case exercise also documents the best, most focused thinking about many topics that routinely pop up at leadership meetings. There are many “goals of the moment.” Boards ask companies to go direct-to-consumer, generate more services revenue, implement a subscription or membership model, or just be more “like Netflix,” whatever that means.
These requests can distract the whole organization.
Having a detailed business case can lay some ideas to rest or clarify the expected results and the real investment costs. By synthesizing the analysis and accumulating information on what’s required, your organization can move forward more quickly.
It’s likely that your board and leadership will love your business case mapped out as above, step-by-step. By defining initial steps and milestones, you are setting the stage for sufficient support before initiating testing and research. This is especially important if you’re accountable for the success of the incubation period. Just because leaders sound enthusiastic or give you a verbal green light doesn’t guarantee your success. Verify that you’ve secured what you’ll need.
Don’t take on leadership of your team’s initial experiment in the Membership Economy until you can answer all of these questions. I’m serious! I wouldn’t take on a consulting project without answers to these questions, and my career isn’t on the line like yours may be!
· Is this a top priority for leadership?
· Am I confident that if I need resources or help, leadership will come through?
· Do I understand why and how this initiative aligns with our company’s strategic vision?
· Has everyone agreed on the success criteria, and recognized that the first experiment isn’t going to achieve the vision?
· Does leadership understand the principles of the Membership Economy and accept that we might lose money before we start accruing predictable revenue?
Mapping out your plan before you launch is critical. Be clear about needs, next steps, and timing before diving into the research and testing phases. And make sure it’s something you’re ready to do.
