As a freelance web designer, I'm always thinking of ways to smooth out the natural ups and downs of project based income. One of the ideas I've been toying with for a while is offering to build websites for a monthly cost, rather than an up front cost to the client. My research about this produced some interesting and positive feedback that has me re-thinking my business plan for 2010.

Self Financing

In essence, by stretching out the payment for a service I'm already providing up front, I would be self financing my customers at 0 percent interest. I chose not to have interest because I think people are leery of bankers and the whole credit based banking system right now, in light of the recession and many financial institutions collapsing.

Here's how it would work: For a project that would cost $6000 to create, a customer would pay me $250 per month for 24 months, and I would perform the work up front. This means that the only deposit I would receive on the work would be the first two $250 payments, not much in light of the value of the work, so I'd be taking a risk. Would it be worth it?

Pick-Fu To The Rescue

If you have a burning question and $5 or $10 to spare, Pick Fu is the answer. I posted a simple question:

"As a business owner, which payment option would you prefer when purchasing a new web site for your business?"

  • Option A) Pay $250 monthly (24 month term)
  • Option B) Pay $6000 once

And within a number of hours I received an amazing amount of feedback.

Most Customers Want to Pay Monthly

While this one A/B test is not conclusive, I think the overwhelming majority to one side reflects a greater truth: Most customers would rather pay monthly for web design. In fact, out of 100 people polled, 82 of them chose to pay monthly. When you think about it, it does kind of make sense. If you compare this to other purchases customers make for their business - cars, office space, telephone service, internet service and shipping accounts, you begin to see a pattern in the way businesses operate. There is a definite pull toward managing income and expenses on a monthly basis, and stretching out fixed costs over time.

Reasons for Monthly Payments

Some of the comments on my Pick-Fu question relay why customers may want to pay monthly instead of all at once.

  • It keeps working capital in the business for unexpected expenses
  • It ensures the attention of the web designer over a longer period of time
  • Bank accounts pay interest on balance, so outlaying the payments over time would accrue more interest

In contrast, the only reasons that people would choose to pay all at once would be to avoid the potential hassle of a monthly bill, and to "get it out of the way". I think these comments reflect a small minority of potential customers.

If you're a freelancer, you've probably already imagined yourself receiving a fixed monthly payment from somewhere, but haven't figured out yet where it could come from. By splitting contracts up over a term, you're basically ensuring yourself a steady income during the slow months, and enabling more month-to-month communication between you and your clients, which is always helpful for gaining future projects.

Finishing Up

Do you have any experience splitting projects up into monthly payments? If so, comment and share them below. Also, if you're interested in checking out the details of my Pick-Fu question, feel free to check it out.