What sort of billing cycle is the best. I understand monthly would be good for steady residual income, but yearly or semiannually would provide for a lump sum that could be reinvested.

What are the pros and cons of each billing cycle model? I haven't seen this topic discussed much here, perhaps its time. Thanks.

Offer all of them and let your clients decide.

I agree. A lot of people want to pay yearly because they can afford it and they like not dealing with the hassle of a monthly bill. On the other hand, a lot of people will, understandably, not sign up with a host that only offers yearly billing, as that is a good sign of a fly-by-night host.

I agree with both the above posts. One thing I might add is that you could provide the option to switch between monthly and annually billing methods at their request. I know that it seems like something that should be obvious but letting people know in simple terms that they have options like this can go a long way. Are you planning to offer a discount to those who sign up for more than a month at a time?

We offer both monthly and annual (with a 10% discount) and find that customers are split 50/50 when choosing how to pay.

I don't think you need to do "either/or", unless your prices are so low that it isn't cost-effective to have monthly pricing.

Yeah, you can't go wrong by just offering BOTH. The more your business (hopefully) grows, the more diverse your customers' preference will show. Just be prepared to offer some sort of medium for annual customers who would prefer to cancel early.

Obviously, a monthly billing cycle allows for a more steady flow, while a yearly billing cycle is more of a lump sum coming all at once.

Think about it in terms of going to the supermarcet. Some people like to stop by their favourite grengrocers and buy 1 or 2 apples before they get home, other just buy the whole lot for the coming week.

If you are looking into making large investments up front than yearly billing and a good timing can help you avaoid to take a loan, while the monthly payments would ensure you pay the rates off on time ;-)

To get a customer paying up front for a year you will need either their trust which you might already have or offer something in return f.e like 10% off.

I think most customers prefer monthly payments because you know the running bills and there are no surprises.

Well, I like to see a mix of both. It is never good to have just one or the other. For yearly well if you were ever to sell it would hurt the value based on what I've seen just because of the lack of income coming in constantly. You don't know if people will renew after a year or not. But all monthly is not good from your stand point and you need obviously money upfront to invest so having more is always good.

I would suggest monthly and quarterly billing cycles. The amount is smaller and easier to come up with for clients. A yearly payment can trigger the search for a cheaper host when seeing an invoice for $120 in the inbox. "I am paying that much for web hosting ...?" is the possible reaction. Yearly payments also often require to give a discount. But you run monthly billing anyway and so you can save that money for the discount and rather have a small credit card processing fee.

Look at all different kind of membership websites or services with recurring fees. The cell phone carriers have it figured out best. Long contracts and decent monthly premiums. I would follow that model.

Christoph

Some clients will prefer monthly, other's yearly. If you offer both, you will never lose a potential client because you don't have the billing cycle they prefer. It would also be good to have a mix, so that you have some income every month, but also lump sums to invest at the beginning.

The cell phone carriers have it figured out best. Long contracts and decent monthly premiums. I would follow that model.

Christoph

And this is why providers such as Boost and Cricket are quickly gaining market share. No contracts.

Consumers don't want contracts and would never tolerate one in the hosting industry.

I chose to offer only shared hosting with a monthly term for my upcoming company. The reason for this is because I don't feel I have the right to charge my customers for more than 1 month at a time until I have proven myself to them and the industry.

Similiar for my product choices. What gives me the right to sell reseller hosting when I haven't even proven my ability to sell?

This is something you might consider yourself depending on how long you've been around.

And this is why providers such as Boost and Cricket are quickly gaining market share. No contracts.

Consumers don't want contracts and would never tolerate one in the hosting industry.

Agreed! :) I use Virgin Mobile. I can upgrade/downgrade any time, instantly, add/remove extras any time, pay any way I want, upgrade phones any time I want (for a little extra, of course), etc. I will never sign up with any company that requires a contract.

Customers want choices. You can see this in many marketing campaigns, the most prominent of which right now in the US is the Alltel commercials advertising rate changes at any time.

From your perspective, annual is usually better because you get more money up front to invest. We always encourage annual signups by offering a good discount when they sign up.

I have personally decided on quarterly or yearly, but there is a discount with yearly.

All billing cycle options have positive and negative aspects to them. Speaking from a hosts point of view, I personally prefer having clients pay for 6 or 12 months upfront, that way I am not having to track them down for a payment every 30 days, which is a pain..... On the other side of the coin, having steady, monthly income in nice as well..... A good middle ground I have found are paypal subscriptions. This allows customers who are unable to afford, or prefer not to prepay to still pay in a method that is dependable, and arrives on time each month :)
-steve

All billing cycle options have positive and negative aspects to them. Speaking from a hosts point of view, I personally prefer having clients pay for 6 or 12 months upfront, that way I am not having to track them down for a payment every 30 days, which is a pain..... On the other side of the coin, having steady, monthly income in nice as well..... A good middle ground I have found are paypal subscriptions. This allows customers who are unable to afford, or prefer not to prepay to still pay in a method that is dependable, and arrives on time each month :)
-steve

Also, a good billing system, merchant account, and recurring payments can produce the same result. PayPal subscriptions are nice though.

We offer all billing cycles but most of our clients pay monthly, which is fine as you said its a good steady source of income.

I only offer yearly, now. I also have yet to sign a client.

Q...