How to Start a Subscription Business, Step by Step

We'd put more than $200,000 into my first business, a results-guaranteed marketing agency. And we were still burning through cash faster than an American consumer on Black Friday.

The agency was busy. We worked on some fantastic product launches. But every dollar we earned was a one-time payment. We'd win a few projects and max out our capacity. Then the projects would wrap up, and I'd sit there wondering how I was going to pay everybody.

Feast or famine. Every month.

So I sold the business to one of my best clients. It wasn't a great financial result, but I kept my dignity, and I learned the most important lesson of my career.

Next time, I'd build something with recurring revenue.

When my brother and I started our next venture, the first product was an e-learning academy for architecture and engineering students. Recurring subscription revenue from day one.

What made the difference? Two things: recurring subscription revenue, and a strong moat.

This guide walks you through how to build both, step by step.

Why start a subscription business?

Three reasons, and the third is the one most owners miss.

1. Predictability. You know roughly what's coming in next month. You can hire, plan and sleep.

2. Cash flow. Annual plans bring cash in before you deliver. At 30 June 2026, Kogan was holding A$11.3 million of membership fees its customers had paid in advance.

3. Value. This is the big one. Businesses built on one-off sales usually sell for a modest multiple of profit, if they sell at all. Subscription businesses are often valued on their recurring revenue.

In the book I showed the difference with two numbers. The typical small business I compared sold for about 0.67 times its revenue. When Salesforce bought Slack, it paid about 26 times Slack's projected revenue. Same planet. Very different outcome.

You don't have to be Slack to benefit. Think about a real estate agency. When a buyer looks at the books, the first thing they check is the rent roll, the recurring property management fees. Sales commissions are nice. The rent roll is what they value.

How to start a subscription business in 10 steps

Step 1: Find a need customers have over and over

I have a favorite peppermint tea. Every month Amazon sends me a new supply, and I save 10% for subscribing. Tea gets used up. I want more. Perfect for a subscription.

Now think about a doctor who cures an ear infection. The patient doesn't need them again. That's a one-off need, and a subscription would be fighting human nature.

Ask yourself:

• What do my customers buy, use up or need serviced regularly?
• What do they worry about that I could take off their plate for a monthly fee?
• What would they happily pay for every month if it saved them time, money or stress?

If you're starting from scratch, start with a hungry market. In my first book I called it finding a starving crowd: a group of people who already want something badly and aren't being served well. Read the starving crowd principle, or score your ideas with the free Starving Crowd Niche Finder in our tools section.

Step 2: Choose your subscription model

In the book I describe eight subscription models. Most successful subscription businesses use one, or combine two.

Read the 8 subscription business models for detail on each, or answer eight questions in the Subscription Model Selector below.

Step 3: Check the numbers per subscriber

This is the step people skip, and it's where many subscriptions quietly fail.

Work out what one subscriber is worth to you each month after every cost.

Now ask the uncomfortable question. What happens if your heaviest users join first? Pret's UK coffee club once offered up to five barista drinks a day for £30 a month. The people who joined were the people who drank five coffees a day. In 2024 Pret changed it to half-price drinks. Model your price against your top 10% of users, not the average.

Use the Subscription Price Calculator below to run your own version.

Step 4: Set your price and your tiers

Most subscription businesses do best with three tiers: a good, better and best plan. The middle one is usually the one most people choose, and the top one makes it look reasonable.

Three decisions matter most:

1. Your value metric: what you charge for. Per member, per visit, per user, per order, per credit. It should grow as the customer gets more value.
2. Your tiers: what goes in each, and the price gaps between them.
3. Monthly vs annual: offer both, with a discount for annual.

The full method is in how to price a subscription.

Step 5: Decide on a free trial, freemium or neither

• Free trial: full access for a limited time. Best when your market is smaller, the product isn't naturally shareable or a cut-down free version would be useless. (Imagine a Netflix free tier with no movies.)
• Freemium: a free plan forever, with paid upgrades. Best when your market is huge and the product spreads through use.
• Neither: a paid first month, a money-back guarantee or a low-priced intro offer. Often right for services.

Whatever you choose, from 1 July 2027 Australian businesses will need to send subscribers prescribed notices, and a reminder before a free or discounted trial ends is expected to be one of them. The timing will be set by regulations, so build the reminder into your plan now and check the final regulations.

Step 6: Launch a small first version

Don't try to run before you can walk.

The Food Boss Academy, which I wrote about in the book, started with monthly video modules, weekly live training sessions and group coaching, and was built without spending thousands of dollars. Who Gives A Crap raised about A$50,000 for its first production run with a crowdfunding stunt before the product existed.

Start with a proof of concept and an introductory offer for your first 10 to 50 customers. Delight them. Ask them what they love and what's missing. Then build from there.

Not sure you're ready? Ask your first users how they'd feel if they could no longer use your service. If fewer than 40% say "very disappointed," keep refining before you spend on marketing.

Step 7: Set up billing, terms and compliance

You need:

• Recurring billing: a payment platform that handles subscriptions, failed-payment retries and reminder emails.
• Clear terms: price, billing frequency, renewal, how to cancel and any minimum term, shown before the customer pays.
• A cancellation process that's easy to find and easy to complete.
• Australian basics: an ABN, and GST registration once your GST turnover reaches A$75,000 (see the ATO's GST registration guide). How GST applies to digital and physical subscriptions is covered in GST on subscriptions.

Step 8: Win your first customers on a shoestring

You don't need a big budget. In Chapter Eight of the book I share my four go-to techniques:

1. Community marketing: a group where customers help each other and talk about you.
2. Webinars: I once ran a product launch webinar for Dr Libby Weaver that attracted almost 8,000 attendees. At my previous software company, webinars were one of our top acquisition channels.
3. Referral programs: reward customers for bringing friends, ideally with a free month or extra capacity rather than cash.
4. Embedded integration: connect to the tools your customers already use.

More in grow subscribers on a shoestring budget.

Step 9: Onboard and keep your customers

Signing up a subscriber isn't the finish line. It's the start.

Get every new customer to their first win as fast as possible, stay close for the first 90 days and watch for the warning signs that someone's about to leave. Across Recurly's network in July 2026, median churn ran from 3.22% for SaaS to 4.99% for education, and failed payments caused about a third of it. Read the customer retention strategies.

Step 10: Measure, then dig your moat

Track five numbers every month: monthly recurring revenue, churn, customer acquisition cost, lifetime value and net revenue retention. The subscription metrics hub explains each.

Then protect what you've built. Remember my dog biscuit example from the book? If you sell dog biscuits by subscription, I can find a supplier, put up a template website overnight and compete with you tomorrow. Subscription revenue isn't a moat on its own. Score your business on the five factors in the MOATS framework.

How much does it cost to start a subscription business?

Honestly? It depends far more on what you deliver than on the subscription part.

The subscription layer itself is cheap. A template website, a payment platform that handles recurring billing, an email tool and a spreadsheet will get most service businesses started for a few hundred dollars and some evenings. In the book's final chapter I tell bootstrappers not to spend thousands on a website: use Wix, Webflow or WordPress with a free template, or Shopify if you're selling products. Your customers won't care that the site is templated if the subscription gives them what they want.

What costs money is the thing inside the subscription:

• Physical products need stock, packaging and shipping before the first box goes out.
• Software needs development, hosting and, for AI products, usage costs that grow with every customer.
• Services mostly need your time, which is why they're the cheapest to start and the hardest to scale.

The biggest hidden cost is cash flow. You often pay to win a customer upfront and earn it back over several months. Growing fast can feel like going broke slowly until the early cohorts pay back. The low-cost route is covered in starting a subscription business with no money.

What tools do you need?

Keep it simple to begin with:

1. A website or landing page with your plans, prices and terms.
2. A payment platform with recurring billing, retries for failed payments and automatic receipts.
3. Email for onboarding, reminders and renewal notices.
4. Accounting software that records subscription income properly and handles GST.
5. A simple customer list (a CRM or even a spreadsheet) showing who's active, paused or canceled.

Add customer success, analytics and referral software later, when you have enough customers to need them.

What kind of subscription can my business offer?

For more, see 101 subscription business ideas.

Seven mistakes to avoid

1. "Unlimited" without a limit. Panera dropped "Unlimited" from its Sip Club in August 2026 and capped it at 30 drinks a month. Say "a coffee a day," not "unlimited."
2. Pricing for the average customer. Your heaviest users join first.
3. Skipping the numbers. Know your margin per subscriber after GST and fees.
4. Making it hard to leave. Amazon paid $2.5 billion in 2025 to settle claims that canceling Prime was deliberately difficult. It's also becoming illegal.
5. Ignoring failed payments. They can be a third of your churn.
6. Launching big before you've proven fit. Superhuman's founder held his launch until he could measure fit.
7. Forgetting the moat. A subscription anyone can copy will be competed down to thin margins.

When a subscription is the wrong choice

I'll be honest. The subscription model isn't right for every business.

If customers genuinely need you once (a wedding photographer, a one-off renovation), forcing a subscription will annoy them. Look instead for a related recurring need: an album subscription, a maintenance plan, an annual check.

You also don't have to start with a subscription. Ruslan Kogan built kogan.com on one-off sales, starting in his parents' garage, and added the paid Kogan First membership later. If cash is tight, one-off sales can fund the subscription you add next.

And some subscriptions carry risks that are easy to underestimate. Volvo suspended its Care by Volvo car subscription in 2024; carrying the depreciation, insurance and early-return risk of a car inside a monthly fee is hard to make pay. If your subscription bundles costs you don't control, model the worst case first.

What to do next

1. Write down the repeat need your subscription will serve, in one sentence.
2. Choose your model from the eight.
3. Run the numbers for one subscriber after GST, fees and delivery costs, and your break-even member count.
4. Draft three tiers and a monthly and annual price.
5. Pre-sell to ten people before you build anything big.
6. Set up billing and terms that will meet the 2027 Australian rules.
7. Plan your first 90 days of onboarding for every new customer.

If you'd like a personalized version of these steps, the free AI Subscription Playbook Generator builds one for your business from the book.

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Robert Coorey, MBA

Robert is the author of The Subscription Playbook and Feed a Starving Crowd and a Director at BPAG Accountants in Sydney. More about Robert.