In an increasingly competitive landscape, businesses are realizing that one-time transactions aren’t enough. Instead, recurring relationships are driving long-term growth. That’s why the subscription model—a once-niche approach—is now a mainstream strategy across industries. From software and snacks to fitness and fashion, companies of all sizes are adopting subscriptions to boost revenue consistency, increase customer retention, and build stronger brand engagement.

A Growing Industry With Massive Potential

The numbers don’t lie: subscriptions are booming. According to a 2023 report by UBS, the global subscription economy is expected to reach $1.5 trillion by 2025, up from just $650 billion in 2020. Statista also found that subscription video-on-demand users alone exceeded 1.2 billion worldwide in 2024, showing just how embedded recurring models have become in everyday life.

Tien Tzuo, CEO of Zuora and a leading advocate for subscription commerce, notes, “Every company is becoming a subscription company. It’s not just software anymore. It’s everything from coffee to cars.” His company helps businesses transition into subscription-based models, and he’s witnessed firsthand the strategic power of predictable, renewable income.

Why Subscriptions Work: The Business Case

So why are subscriptions so attractive to small business owners and startups? For starters, they provide predictable cash flow, which is vital for budgeting, scaling, and investment. Monthly recurring revenue (MRR) offers a level of financial stability that’s hard to achieve with one-off purchases.

Additionally, subscriptions foster customer loyalty. Instead of chasing new buyers, businesses focus on keeping their existing customers engaged. According to ProfitWell, increasing customer retention by just 5% can boost profits by up to 95%.

Sam Tuke, founder of open-source CRM company Lightmeter, shared in a recent interview: “We switched to a freemium subscription model and saw churn rates drop by 30%. It allowed us to deliver value continuously rather than just upfront.”

Who’s Winning With This Strategy?

Many household names—and countless small businesses—have pivoted to subscription-based strategies. Take Dollar Shave Club, for example. It revolutionized the grooming industry by offering razors and personal care items through monthly boxes. Their model proved so successful that Unilever acquired the company in a $1 billion deal.

On the digital front, platforms like Notion and Canva offer free access to basic tools with optional paid subscriptions. This “freemium” approach allows them to hook users and gradually convert them to paying customers.

Fitness businesses also embraced the model during the pandemic. Peloton, despite facing recent financial hurdles, built a massive user base with a hybrid hardware and subscription content strategy. Smaller gyms and yoga studios followed suit, offering on-demand classes through subscription platforms like Uscreen and Patreon.

The Risks and Challenges

Of course, not every subscription story is a success. Businesses must watch out for subscription fatigue—the point where consumers start canceling due to too many recurring charges. A 2023 study by PYMNTS and sticky.io found that 45% of consumers canceled at least one subscription in the previous year, citing reasons such as lack of value or forgotten sign-ups.

Pricing, too, can be tricky. Set it too low, and margins suffer. Set it too high, and churn increases. Moreover, delivering consistent value is non-negotiable. In a subscription model, customers expect ongoing improvement, not just a one-time delivery.

Chris George, co-founder of the Subscription Trade Association (SUBTA), put it bluntly: “Subscriptions are not a shortcut. They require more customer care, more content, and more attention than traditional retail.”

How to Get It Right: Tips for Small Businesses

For entrepreneurs considering the shift to subscriptions, the strategy requires thoughtful execution. Here are some key considerations:

1. Start with your core value – What ongoing problem do you solve? This helps define what people will actually subscribe to.

2. Test before scaling – Pilot with a small group. Measure engagement and churn before rolling out broadly.

3. Invest in customer success – Regular updates, check-ins, or added bonuses can reduce churn and build loyalty.

4. Offer flexibility – Make it easy for customers to pause, upgrade, or downgrade their plans. The less friction, the better.

5. Track metrics – Beyond revenue, keep tabs on monthly churn, lifetime value (LTV), and average revenue per user (ARPU). These numbers will shape your long-term sustainability.

Subscription Trends to Watch

As the market matures, the subscription space is evolving. In 2025, several trends are taking center stage:

• Personalization: AI-powered tools are helping businesses tailor content and offers to individual users. Think Spotify’s curated playlists or Netflix’s recommendations—these models are trickling into e-commerce and services, too.

• Hybrid models: More businesses are blending subscriptions with a-la-carte options. For example, a bakery might offer a monthly pastry box alongside single-purchase desserts.

• Sustainability-focused subscriptions: With growing consumer interest in eco-friendly choices, companies like Who Gives A Crap and Blueland are using subscriptions to reduce waste and promote sustainable habits.

Final Thoughts

The subscription model isn’t just a trend—it’s a strategic transformation. For small business owners, it offers a path to more stable revenue, deeper customer relationships, and scalable growth. But it’s not a “set-and-forget” tactic. Success requires delivering value month after month, adapting to customer needs, and staying focused on long-term loyalty over short-term gains.

As consumer behavior continues to evolve and digital adoption accelerates, businesses that master subscription strategy will be well-positioned for the future. Whether you’re selling skincare, digital tools, dog toys, or financial services, recurring revenue can become your competitive edge—if you’re willing to invest in doing it right.