Well, 2022’s been a year.
Even as the COVID-19 pandemic dies down and international borders reopen, other tremendous challenges to doing business continue to pop up.
But your subscription business has survived—for now. And you’re determined to keep it that way for as long as possible, by shifting your 2022 post-mortem and 2023 planning efforts into high gear.
As you formulate your business strategy for the new year, consider these three industry trends worth watching and preparing for.
The subscription industry has exploded over the last 20 years, with businesses launching subscription offerings left, right, and center.
Software businesses have moved from a perpetual license model to selling their product on a subscription basis. (Think Microsoft, Adobe, and more.) Meanwhile, service businesses are finding means of subscription-izing their business models. Just take VideoHusky, for example, which provides video editing services for a flat monthly fee.
And in the software-as-a-service (SaaS) space, SaaS market growth is predicted to grow by $99.99 billion(!) from 2020 to 2025, according to market research firm Technavio.
With everyone trying to get in on a piece of the action, expect the subscription industry to get even more competitive.
You’ll have to work harder to win—and retain—customers as rival subscription-based businesses try to snatch market share.
Not only that: you’ll also have to fight to attract talented staff to join your ranks.
“Finding good SaaS talent is a well-known challenge, especially for critical roles such as product managers, software developers, and data scientists,” writes management consulting firm McKinsey.
“There is simply not enough supply to keep up with accelerating demand, which is driven by competition from software companies and nontech companies going through digital transformations.”
(P.S. More on such digital transformations later!)
How will you future-proof your subscription business with these challenges in mind?
2. The continued strengthening of data privacy
Now, let’s turn our attention to another potential source of digital gold: personal data. Coming into force next year are new data privacy laws that affect businesses operating in certain U.S. states.
For example, amendments to the California Privacy Rights Act (CPRA) that take effect on January 1, 2023, will grant individuals the power to limit the extent to which a business can make use of “sensitive” personal information it has collected from them.
The CPRA considers personal information to be “sensitive” if it reveals the individual’s account login details, precise geolocation, or social security number, among other types of identifying information.
Businesses need to comply with the CPRA if they do business in California and meet at least one of the following requirements:
- having a gross annual revenue of at least $25 million,
- engaging in the buying, receiving, or selling of the personal information of at least 50,000 California residents, or
- deriving at least 50% of their annual revenue from selling the personal information of California residents.
Apart from these beefed-up Californian data privacy laws, other new data privacy laws in states such as Virginia, Connecticut, and Colorado are also scheduled to take effect during 2023. Consider consulting a qualified data privacy lawyer if your business needs tailored legal advice on complying with such laws.
3. Digital transformation will be a given
Bringing the same old tired (read: inefficient) ways of working into the new year will only lead to starting 2023 on the wrong foot. 84% of organizations surveyed by intelligent enterprise community Intelligent Automation Network (IAN) disclosed that they are currently undergoing a digital transformation.
In other words, if you haven’t taken similar steps to digitally transform your processes by now, you may already be lagging behind. Well, better late than never.
Digital transformation is an iterative exercise, where you’ll gradually upgrade your processes in all areas of the business—and continue to reevaluate those upgrades as technology evolves. But if you’re wondering where to begin, try overhauling your finance processes for a start. This appears to be the most popular area for digital transformation, with 74% of organizations doing so, according to the same IAN report.
In contrast, the 2018–2019 edition of The State of Digital Transformation report by consulting firm Prophet found IT, customer service/support, and operations to be the top areas of focus for digital transformation just a few years ago. Finance was in seventh place.
Conducting research into finance automation, you’ll see jargon such as robotic process automation, machine learning, and natural language processing being thrown around. These terms may sound daunting, especially if you’re thinking you have to build your own souped-up billing system from scratch. But don’t sweat!
The easier approach is to invest in an off-the-shelf solution that has all the automated billing features you need, ready to go from day one.
For example, a comprehensive subscription billing software like Stax Bill can help you automatically:
- create and send accurate customer invoices when renewal rolls around,
- recognize revenue according to pre-configured revenue recognition schedules,
- diligently follow up on failed recurring payments with automated dunning management,
- reconcile your accounts for month-end closes, and more.
Plug your chosen billing system into your financial tech stack, then watch as it handles all these tedious finance processes, on your behalf and on autopilot.
Welcome to the digitally transformed future—of which you’re now a part!
2022 saw the world emerging from the COVID-19 pandemic, but things don’t seem completely rosy for subscription businesses in 2023.
Competition for customers and talent seems set to heat up as more businesses get into the subscription space. Existing businesses may also have to expend more resources to comply with enhanced data privacy laws.
And we haven’t even gotten into the looming recession—who knows how long that may last?
Digital transformation of operational processes can help subscription businesses redirect limited resources toward weathering upcoming challenges.
All in all, there are business opportunities to be seized if you can spot them and have laid the groundwork to capitalize on them. So, as you wrap up the loose ends for 2022, take the time to formulate your action plan—or your list of New Year’s resolutions, if you will—for your business in 2023.
(It doesn’t hurt to write to Santa, either.)