The Fundamentals to Building Great Businesses [On-demand vs Subscription Model]

Every business at the end of the day is in a race against time to become sustainable and self-sufficient.

Having a good business foundation is not just important, it is fundamentally essential to building businesses that can succeed and provide jobs, good jobs for people and application for the society.

 

When I started Butler In Suits, it was my third business venture since the age of 14, and now at 24, I am still learning and applying newly gained knowledge, coupled with past experiences, and the ability to think and thinker with business frameworks to make it innovative and sustainable.

 

I came from an F&B background, where hawkers and food shops are earning on low margins, and bearing most amount of risk, the risk from all 3 dimensions (Supply, Operation, Consumer) such as bad food, bad taste, high lease, equipment failure, perishables, food poisoning, and many more.

I see food shops as a processing plant and the ingredient suppliers as chip manufacturer. The game is disproportionate, and the manufacturer always wins with the most amount of margin. “He who create value wins!”

 

Business Models Deep Dive.

1. The On-Demand Business Model

The on-demand business model is similar to what a food stall is like, earning the processing fees per transaction (low margin), and bearing the most amount of cost, risk, and PR nightmares as a processor or middleman.

The Business Model has a few fundamental flaws to it. Just like in a restaurant, you will never hire a part-time chef to be the chef to run your restaurant.

  1. The lack of quality control and consistency
  2. The lack of passionate freelancers
  3. The lack of trust, believe, and security.
  4. The lack foundation to be self-sustainable.

The freelancers of gig based economy are unprotected, without the safety net of full-time employees such as Job Security, Health and Medical Insurances, CPF, and the most important and far too often forgotten, a Career Path.

If you are a bellboy at a hotel, climbing the corporate ladder may take 15 years before reaching a management position, in return, there is Career Progression, Security, Welfare, CPF.

With the gig economy today, the “freelanced” bellboy gets paid 2x the salary, but the time spend = loss of career opportunity. 15 years later, he may be drawing the same amount of salary as he did 15 years ago after the novelty of disproportionate incentivisation becomes a costly legacy. The lack of far sight will bite the freelancer and the economy hard.

Only time will tell if the gig economy business model is sustainable, however, we are already experiencing unsustainable and low-quality effects of such an business model. The on-demand economy is running on the hypothesis that people will pay the full cost in the future, and freelancers are willing to continue their “gigs” in the future without incentives.

 

2. The Subscription Model

The subscription model is an up and rising business model and has recently seen a boom in its adopters, traditional businesses such as telecommunications have embraced it for years, promising blue chip returns. There is underlying magic in the subscription model for its ability to forecast and predict. And the investment trend will definitely move towards the subscription model.

The Subscription Model has its challenges as well, it is usually associated with high start-up cost, due to the placement of infrastructure or supplies before generation of revenue. There are subscription businesses that have perfected the business model, such as giftbox subscriptions, coffee subscriptions.

 

The catch of a subscription model

  1. Higher Cost of Startup
  2. Inventory before Revenue
  3. Slower Growth (Subscription “per subscription” vs On-demand “per order”)
  4. Higher overheads
  5. The default desire to become monopoly

A subscription business can produce higher quality of work and service, and this is done by providing an in-house team of employees, such as the startup Butler In Suits – We are the finest housekeepers and home managers in Singapore.

The catch is, it usually requires a high startup cost for preparation, inventory, staffing, and training. which is difficult especially if you are a startup.

And many founders look at top-down, planning strategies and applications for many users. What they often forget is the classic “Rome wasn’t built in a day”. 

As a subscription model startup, you can be lean with time to acquire customers slowly and keep them happy!, and your Monthly Recurring Revenue will increase over time.

Patience is the key element to win in the subscription model. 

A subscription business is more traditional as most staffing are full-time employees, a subscription company often takes care of their welfare.

 

End of the day, if the business makes money. As a founder, would you hire a freelancer or a quality full-time employee?

 

Conclusion.

We have to see more innovation in the on-demand business model to understand what really can make it sustainable. As for subscription business model, it is tough but proven to be stable and shares similarity with traditional infrastructure businesses. Food for thoughts.

 

About Poon

Poon is the founder and CEO of Butler In Suits – the world’s first daily housekeeping subscription for residential apartments, and an advocate of happiness through business culture.

 

 

 

 

 

 

 

 

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