Now and then a client will ask if they can pay for their care plan for the full year, some even wondering if there is a discount for paying a year in advance.
While I do like the immediate cash-injection—I’ve learned that it’s not worth the drawbacks that come with year-long prepaid services.
Monthly Billing Benefits
There are several reasons I think monthly billing is your best option for care plans…
1. Keeps the invoice small.
My most popular care plan is $100/mo. For most small businesses, this isn’t a very large bill. It doesn’t “sting” to spend this kind of money — which makes it easier to do every month without thinking about it.
But billing the same amount yearly means they’ll get hit with a $1,200 bill that they, honestly, probably forgot about.
Clients are more likely to question the necessity of a $1,200 invoice over twelve $100 ones. Sure, the total is the same, but how it’s delivered is quite different.
2. The client never feels “locked in”.
One benefit of my care plan (that I also use as a selling point) is the fact that the contract is month-to-month and they are free to leave at any time.
Often when a client is signing up for a care plan, you haven’t had a relationship with them long. Signing up for a year-long commitment with someone you don’t know well can be concerning, and giving them the peace of mind that they are only committed for a month helps ease their mind and make it an easier decision to at least try.
3. It ensures we communicate frequently.
When it’s a full calendar year between billing cycles, it’s too easy to let months go by without communication. Not every customer will need your attention every week, but going long periods without touching base is a good way to decrease your perceived value.
By billing monthly, I know that at a minimum I will communicate with them every 30 days. Along with my invoice, I often ask how things are going, offer suggestions or support, and try to have a little back and forth.
By communicating regularly, it keeps me top of mind.
4. It allows me to raise my rates easier.
As a bit of a piggyback to the last point, if I want to raise my prices by 10%, their bill would go from $100 to $110 — which doesn’t seem like much, especially if you compare it to a $120 increase annual billing would bring.
5. Stabilizes my cash flow.
From a practical standpoint, it’s much easier for me to budget my expenses (which are mostly monthly) when I’m getting paid monthly. Annual payments are a nice, up-front lump sum, but that money is gone by the time month #2 rolls around… And I won’t get paid from that client again for a while.
Monthly billing stables my income and makes it easier to understand my financial situation at a glance.
6. Protect myself from bad-fit clients.
The next client I fire won’t be my first, or my last. As my agency has matured, I’ve learned that some clients just aren’t worth the hassle they bring.
Monthly billing allows me to cut ties with a client easily and quickly. If I sign a client up for an annual plan and find out in the second month that they’re bat-shit — it’s going to be a long 10 months or a painful refund.
7. Reduced chances of being taken advantage of.
As part of my monthly care plan, I offer an allotment of services each month for my client. With monthly billing this is simple to track.
It can be uncomfortable (for a people pleaser like me) to tell a client “that's out of scope” — especially when it's something on the cusp. Monthly billing makes it easy to give a client an option for paying for an additional request or pushing it off to the next month's billing cycle. This is non-confrontational, and often times, they'll just wait until the next month.
But you don't have the same flexibility with annual billing — try telling a client you can do that next year!
Your mileage may vary
Though there are plenty in the same camp with me in this policy (like the queen of care plans, Kristina Romero), it’s only one side of the coin — and your mileage may vary.
For me, the biggest upside to annual billing is the immediate cash… but besides that, monthly billing wins out on every other comparison.
If your business is stable enough that you can play the long game, then monthly billing just makes things easier for all parties involved.
This post was inspired by a conversation happening inside The Admin Bar Community.