Over the past year I was extremely suprised at the amount of monthly to yearly sign ups I had almost half seemed to pay for a year insead of choosing monthly billing.

Is this common does anyone else see this to ?

I am currently starting a new larger hosting company and wondering If I should plan for the same amount of signups for yearly.

Before I started my own hosting company, when I found a host that I liked, I paid monthly for the first two months, then for six months or a year, depending on the amount of discount I would have gotten.

Reasons I would pay for a year in advance:
1: get the payment out of the way, take care of it, don't have to worry about that expense for another year
2: if the host offers a discount for prepayments, take advantage of it - once I know that the host provides good service

That's my own personal reasons. Other peoples' mileage may vary.

I resisted offering annual accounts as I feel they are a mistake on the part of the customer, particularly a new customer. The most serious abuse and scamming we witness is associated with annual accounts. I still do not offer them on my more expensive plans. I just think it protects the consumer. In my opinion, no consumer should ever sign up for an annual plan which if the company goes out of business tomorrow will seriously harm him. It's much like gambling in Vegas. Don't put more on the table than you can afford to lose.

I also follow another practice related to my annual accounts. I set aside the funds into a separate account within my books, labelled "prepaid funds" so that they do not appear on my books in my regular bank account. Each month I move the appropriate "earned" portion. This may seem complicated, but, frankly, for those less experienced in managing cash flow, I would suggest a separate bank account. The worst circumstance imaginable is to get down the road and find you had spent all the funds needed for servers and staff.

Originally posted by Incognito
I resisted offering annual accounts as I feel they are a mistake on the part of the customer, particularly a new customer. The most serious abuse and scamming we witness is associated with annual accounts. I still do not offer them on my more expensive plans. I just think it protects the consumer. In my opinion, no consumer should ever sign up for an annual plan which if the company goes out of business tomorrow will seriously harm him. It's much like gambling in Vegas. Don't put more on the table than you can afford to lose.

I also follow another practice related to my annual accounts. I set aside the funds into a separate account within my books, labelled "prepaid funds" so that they do not appear on my books in my regular bank account. Each month I move the appropriate "earned" portion. This may seem complicated, but, frankly, for those less experienced in managing cash flow, I would suggest a separate bank account. The worst circumstance imaginable is to get down the road and find you had spent all the funds needed for servers and staff.


Good point, that is what we did we currently have a surplus, in which I am restructuring and investing in the things I should have at first.

I did seem to notice that most of the yearly signups were with referalls

We've seen about 15% rate for yearly sign ups. I prefer payments via a month to month basis, but my clients were asking for yearly sign up :(

I got burned by my next to last hosting provider so I have sworn off paying for the whole year in advance.

On the other hand, I would like to collect the full year from my customers because it lowers my cost of collecting the money.

The lesson is that I have to make sure that I don't burn my customers. Also, a no questions asked refund of the unused portion might be a good idea to protect my customers.

Just thinking aloud. :)

I refuse to offer yearly payments.

If I every sell my company, those yearly customers become LIABILITIES; whereas monthly customers are ASSETS due to the cashflow.

Just something to consider.

If you charge $10/month for hosting and are paying 50 cents in transaction fees when it is all said and done between payment processors, payment gateways etc. then you are throwing out 5% and probably at least 20% of your profit on accounts that would prepay for a year, by not allowing them to do so.

-Brendan

My pricing already accounts for that situation. Overall margins are not affected.

Pre-paid hosting accunts are frowned upon by potential buyers. My concern is that I have as much monthly cash flow as possible.

What about the customers who sign up, pay for a year and then charge back the whole amount after they've run up huge bandwidth bills their first two months.

Isn't it easier to protect yourself from chargebacks if you can show a history of customers paying monthly?

It's easy for someone to say you screwed them from the beginning and they tried to work it out 90 days after sign up and chargeback the full amount...but it's harder for someone to say you screwed them from the beginning on monthly payments because the bank will ask them why they continued to pay every month without cancelling if they felt they were getting ripped off.

I'm debating on yearly signups myself???

Originally posted by 7out
What about the customers who sign up, pay for a year and then charge back the whole amount after they've run up huge bandwidth bills their first two months.

Isn't it easier to protect yourself from chargebacks if you can show a history of customers paying monthly?

It's easy for someone to say you screwed them from the beginning and they tried to work it out 90 days after sign up and chargeback the full amount...but it's harder for someone to say you screwed them from the beginning on monthly payments because the bank will ask them why they continued to pay every month without cancelling if they felt they were getting ripped off.

I'm debating on yearly signups myself???


Bandwith restrictions.

We used to do them, and some still pay 3,6, or 12 months at a time, but shifted to monthly only a little over a year ago. A few people have inquired about yearly payments, but it's not enough of an issue that we'd really look at doing it again.

Never really had a problem with any of them (in fact some of them are from our earliest days as a webhost, and are still with us), but it simplified the whole billing system which in turn means one less issue to deal with as a business.

Greg Moore

Originally posted by MarcD



Bandwith restrictions.

They can still charge back the whole amount after 89 days of service and you're out three months hosting charges, time, set up fees and chargeback fees.

They can still charge back the whole amount after 89 days of service and you're out three months hosting charges, time, set up fees and chargeback fees.

I don't see that problem if you offer a no-questions-asked refund of the unused part of the hosting fee and if you specify the procedure to follow to ask for that refund, for example a dated help desk ticket no later than the 20th day of the month.

That should be documentation enough to establish the date of the earliest refund request. If the account started on January 1 and the refund request is made on May 18 then you would refund May through December and the account would be shut down on May 31. You are not only offering a refund but you are also giving your customer a free month.

If you publish this on your web site you should not have a major problem convincing the credit card company that you are being fair in your dealings.

We find more ppl pay yearly to monthly. Thats great, as long as the number of signups stays steady. Otherwise your find one month almost everyone paid yearly, then the next 2-3 months no one at all sign ups. So in the long run having ppl pay monthly is far better and you get a much more realistic figure as to how well your doing.

Originally posted by captainccs


I don't see that problem if you offer a no-questions-asked refund of the unused part of the hosting fee and if you specify the procedure to follow to ask for that refund, for example a dated help desk ticket no later than the 20th day of the month.

That should be documentation enough to establish the date of the earliest refund request. If the account started on January 1 and the refund request is made on May 18 then you would refund May through December and the account would be shut down on May 31. You are not only offering a refund but you are also giving your customer a free month.

If you publish this on your web site you should not have a major problem convincing the credit card company that you are being fair in your dealings.

That is assuming that the host wants to handle refunds that way. And also assuming that the scamster wants to follow your procedures for asking for refunds. I'm not talking about legitimately unhappy customers, I'm talking about yearly payments opening you up for a greater loss if someone does pull the wool over your banks eyes with a fraudelent chargeback.

What about the scamsters who don't even ask for a refund, they just charge back. Even if you win the dispute, you lose time and money proving your case. I even had one scamster get me for like $20 because Card Service International mailed me a letter saying a charge back had been requested and by the time I got the letter I had about 2 days left in which to resolve the issue. Needless to say, my time ran out before I could get it resolved.

And, I was told that if I didn't have a signature on file that I had to get a signed statement from the customer saying that they agree to the charges. This sounds to me like if you are using CSI for your processing and you don't have my signature on file that I can sign up for a yearly plan for a dedicated box and use 59 or 89 days (I can't remember if they have 60day or 90day cutoff) of your service and then just request a chargeback. You will then be responsible for asking me to sign a statement saying that I authorized the charges and if I'm trying to scam you, I'm obviously not going to sign that.