How Writers Can Create Recurring Income

The benefit of a 9–5 job is a steady paycheck but as a writer, your income can vary month to month and this makes it difficult to budget for expenses. How can you maintain a steady income while doing what you love? This is how leveraging a subscription model can help.

Having supported data analytics at companies with subscription models, I want to share my insights and how you can leverage this information to generate recurring income.

Introduction

A subscription model is when a business “charges customers a recurring fee — typically monthly or yearly — to access a product or service”. Netflix is a great example of a subscription model where you pay monthly to access video content. As a writer, Substack is a popular platform with a subscription model you can leverage to generate recurring income.

The key to a subscription model is to get more new paying subscribers than the number that stops paying ( churn ). The longer your subscribers keep paying, the more recurring income you’ll make.

How Subscriptions Generate Recurring Income

Let’s use Substack as an example to calculate how much recurring income you can generate over time when readers pay for your newsletter.

Substack monthly subscriptions start at $5 ( cell B3 ). We’ll ignore the annual subscription option to keep things simple.

Let’s assume paying subscribers will stay paying for 12 months ( cell B4 ) and you can get 10 new paying subscribers per month ( cells B7 to B30 ) over a 2 year period with a current subscriber base of 2,400 email subscribers ( cell B1 ).

To make it easy we’ll start with January 2021 where you’ll make $50 ( cell C31 ). The next month you’ll make $50 from the paying subscribers you got in January ( cell D7 ) and another $50 from new paying subscribers in February ( cell D8 ) for a total of $100 ( cell D31 ). If you continue with 10 new paying subscribers per month by December 2021 you’ll hit a plateau of $600 a month ( cell N31 ) assuming you can keep adding 10 new subscribers every month to cover the 10 that churn after 12 months ( cell B4 ).

What if you could get 50 new paying subscribers a month in the example above? In January 2021 you could make $250 and by December you could be making $3,000 a month. By going from 10 to 50 new subscribers a month you can boost your earnings from $600 to $3,000 by December. Can you now see the earning potential of a subscription model?

Another benefit with a subscription model is your writing time will remain the same but you’ll earn more as you gain new paying subscribers. You can work less but still make the same amount of money as before.

Factors That Affect Subscription Earnings

I’ve shown you how subscription earnings accumulate over time. Now let’s discuss factors that affect how much recurring income you can generate.

Conversion To Paying Subscriber

In the first example above, we assumed you could convert 10% of the 2,400 email subscribers ( cell B1 ) to paying subscribers over 2 years. If you could increase conversion from 10% to 12% ( cell B2 ) keeping all assumptions the same, you could earn $720 a month from December onwards instead of $600 — an increase of $120. Not bad right?

There are many strategies to increase paying subscribers. These are just a few that apply to Substack.

• Offer a limited-time discount to create urgency.
• Steer subscribers to pay for an annual subscription rather than monthly. A person paying monthly has 12 times to cancel in one year but a person that paid annually only has one chance to cancel. A portion of annual subscribers will renew for a second year but monthly subscribers paying consecutively for 12 months already had 12 chances to cancel and are less likely to pay longer.

• Offer a free trial. Readers may be hesitant to pay for content without first seeing what they’ll get. Once they see the value, they’re more likely to pay.

Price

What if you charged more for your newsletter and increased the price from $5 to $7 ( cell B3 )? By December 2021 you’ll make $840 a month compared to the $720 if you brought in 2 more new subscribers a month in the previous scenario.

I’ve worked on price increases as a data analyst and it’s better to set the price you want to charge at the beginning instead of increasing over time. Typically this causes fewer people to convert to paying and more paying subscribers to churn. It may not be a big impact if you only increase by $1 but keep in mind churn can fluctuate wildly if you do decide to change prices.

Churn

We assumed paying subscribers would stay for 12 months but what if they only paid for 10 ( cell B4 )? In this scenario, you’ll plateau your earnings at $500 a month by October ( month 10 ) compared to hitting the plateau in December ( month 12 ) at $600 if subscribers stay for 12 months.

The more your charge the shorter people will stay as a paying subscriber. Keeping paying subscribers is easier than getting new ones. If you don’t want to constantly work on getting new subscribers to cover the ones that churn be sure to make an effort to retain your paying subscribers.

Takeaways

As a writer, your income can vary from month to month. If you want to generate a steady income over time, consider a platform that offers a subscription model such as Substack. An added benefit is you can leverage the same content for 1 or 1,000 paying subscribers.

To recap, the keys to success for a subscription model are:

• Getting more new paying subscribers than the number that stops paying.
• The longer your subscribers keep paying, the more recurring income you’ll make.

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