Set Up a Subscription-Based Business in UK

There is a boom in the number of companies that offer their services through recurring fees, both in the UK and elsewhere in Europe. But what do these types of companies consist of? In this article, I explain how to set up a subscription-based business in the UK.

What is a Subscription-Based Business? How Do They Work?

A subscription business model is the one in which customers pay a fee per interval (for weeks, months or years) to access the services that a company offers. This type of enterprise is common in sectors such as the audiovisual (with platforms such as Netflix or Disney+), the press (where digital newspapers demand the payment of certain fees to access exclusive articles) or mobile telephony.

Because it carries certain advantages, it is an alternative that is gaining popularity in the UK. Firstly, it allows a corporation to receive constant and predictable flows of revenue. Secondly, recurring payments allow to implement a simpler financial planning. Finally, by interacting with customers on a daily basis, the company obtains data about their preferences and consumption patterns.

Nonetheless, the clients will expect to receive new quality content on a recurring basis. In addition, it is a sector in which there is a lot of competition. Therefore, while establishing a subscription business can be a lucrative option, it is necessary to understand the challenges of managing one of these types of enterprises, especially when it comes to marketing or consumer retention.

Steps to Set Up a Subscription-Based Business in the UK

1. Understanding the Current Legislation

There are certain rules in the UK that protect the rights of customers and corporations. The Consumer Rights Act 2015 states that subscription businesses must clarify the terms and conditions of hiring their services. In addition, it also decrees that a company must grant the consumer the right to cancel their registration and protects them against defective goods and services.

On the other hand, Consumer Contracts Regulations 2013 dictates that the client must be provided with information before signing the contract and corporations must offer a 14-day cancelation period.

Finally, the sale of some products will require obtaining certain licenses or permits.

2. Conducting a Market Analysis

Conducting a market analysis is essential for one of these types of companies. They will serve to recognise possible market niches that anybody covers. Moreover, they are useful to understand who the competitors are and what they offer or to map the profile of potential customers.

To conduct market research, you can post surveys through social media or investigate purchase tendencies through Google Trends.

3. Choosing a Business Structure and Registering the Company

The owners of the company should evaluate which business structure will be the most suitable for the economic activity they will perform. They shall consider factors such as taxes, expansion forecasts or the search for external financing. The most common options are private or public companies, as they offer limited liability for enterprises debts and a better company image. However, it is also possible to form a subscription-based business as a sole trader or partnership.

Limited companies and limited liability partnerships will have to register with Companies House and all types of business must sign up with His Majesty’s Revenue and Customs (HMRC) to declare their taxes.

4. Product Development

The product should meet the needs and expectations of consumers. It is also key to set up a reliable and efficient production chain that is scalable in the case the demand would increase.

5. Development of a Website and a Marketing Campaign

The vast majority of subscriptions are marketed through the internet. Thus, it is crucial to have a website that allows you to manage subscriptions. Additionally, it must be compatible with mobile devices, easy to use and optimized for selling products.

On the other hand, it is also essential to create marketing campaigns. They will serve to generate expectation and attract the first customers. You can use strategies such as referral marketing, email marketing or offer exclusive discounts and promotions.

In ukstartcompany, you will find information about how to establish, register and operate companies with different legal structures and business activities in the UK.