I am pondering whether or not to start implementing 1 year contracts on all hosting plans we sell. I am looking for feedback from other hosting providers on if this is something I should do and the pros and cons of doing it.

Thanks in advance...

No don't do it. That way customers wanting to prepay will come to us webhosts that offer it. :)

Seriously though, almost half of our customers prefer to prepay. But we offer a discount for prepaying. That's a lot of customers' preferences that you just can't ignore.

But we don't offer 1 year contracts, it's still month to month, just prepaid.

We had some clients who asked if they could pre-pay yearly, so we setup an option to pre-pay yearly on one of our plans, kind of as a special, and it was very sucessful.

Now we give prospective clients the option to pre-pay yearly on all our reseller plans.

The obvious advantage is it improves cash flow problems, and the only disadvantage that I can think of is it makes managing finances a little messy, with some clients paying monthly and others paying yearly.

I'm actually surprised how many resellers want to step up with an annual payment.

Gary

So, perhaps I should offer an option to pre-pay for a year and maybe give 10% off the rates if a potential client uses this option? Would this be something that would work?

we used prepay yearly for special offers.

offering a discount for this to the public is ok too

but we never offer that to resellers

they get a resold account for $4.95/m and thats giving it away

and now with a yealy discount they want 20% off that price

no thanks we're not that desperate....

by the way when the resellers client leaves him, that reseller most likely will beg for a refund, and threaten to leave if you dont give it back...

yealy discounts ok for pub hosting, not resellers..

If you offer prepay just watch yourself. You now have collected income for more than the current month. If you pay your bills monthly and you collect annual payment, you need to keep track of that money so as to know that it has to be spread over 12 months. If 80% of your business prepays for a year, and then a deep depression is hit, or something happens with your company internally and signups stop for some reason, you need to have that money still. Otherwise you will get caught in a sticky situation because you already spent money which was needed to cover service for the customer yet you have no new signups to pay for your current customers, but your current customers were promised service far into the future... and its yuck.

In other words - lump payments are good if you have a handle on your money and know what it is and where its going.

Lump payments are bad if you dont keep track or offer too much of a discount.

How weird that I just had someone ask about paying for a year today. We are just starting the company, reselling, and we haven't even opened the doors on the site yet. I told the liason that maybe in 6 months we'll be offering it, but not right now. I also told her that if I were going to host with a brand new company I wouldn't want yearly right away. Kinda made me feel weird that they asked for that.

I guess once we do decide to pre-pay for a time frame, 6 months or a year, we'll have to weigh the pro's and con's.

Thanks for the thread, gave me something to think about. :)

Sara

Keep in mind that a lot of customers like to pay on a monthly basis because it allows them to move hosts when they feel they need to. Don't force them with ONLY yearly plans. You might lose business.

I would stick with monthly it is easier for billing and a lot less problems if someone wants a refund. In web hosting a monthly hosting client is considered an asset while a yearly client is debit. The monthly client owes you money every month, while you owe the yearly client 12 months of service.

If you do offer a yearly plan I would make it a special offer or if a client requests it that way.