150420 two better than one

Most businesses are based on a single type of income model. Garages, electricians and restaurants all rely on selling their services for a one off cost. If you need your car fixed, you pay the garage a one off fee for doing it. Fancy a meal out? You'll need to pay a lump sum to do so. These businesses rely on large one off purchases to keep going.

Other businesses, such as internet providers and T.V. services (think Sky Sports or Netflix) are subscription based. They rely on a large number of customers paying a little each month.

Each business model has its own benefits. A normal business generally requires a lot of work for each new customer. For example, if you're a mechanic, you fix a car and charge the customer £200 for this. That's a lot of income in one go but what happens tomorrow? What happens if no cars break down, how will the business survive?

A subscription model generally requires a little bit of work each month to keep a customer on board and it requires a lot of customers before you start showing a profit. For example, if you wanted to start a gym, you'd probably charge around £30 a month for membership. With a gym, there will be a huge investment of cash required to start the business and with £30 a month coming in for each member, it will take a long time for you to start making a profit. The benefit is that once the business is profitable, it is relatively secure because even if 10% of your members all cancelled their memberships at once, it's likely that the business can continue.

With a subscription based service, there is also the benefit of scaleability. Once up-and-running, usually it's very easy to add lots of new customers and therefore increase your income, without putting a lot more work in. Using the gym example, it would require a little bit of paperwork to sign up another 100 members but after that, the work's pretty much done but the profit keeps rolling in.

There is a third way - a hybrid solution. Why not try and build to a business based on both models? This will give you the benefit of big projects and therefore big income whilst providing the security of a subscription based service as a safety blanket.

I build my web site business using both models. We have one section that offers pay monthly web sites. We have 100s of web sites running for customers, each paying £15+ per month. This part of the business pays the mortgage and it my safety net.

The second part of the business offers custom build web sites that cost anywhere from £350 to £1,800 as a one off fee. This part of the business pays for 'treats' such as our family holidays.

We now benefit from the security of a guaranteed monthly income (subscription services) and a bonus income to pay for extras from the one off web sites that we build.

Can this idea be applied to all businesses? Yes, why not?