Your annual prepay discount is a loan at a rate you’d never sign for

Ten per cent off for paying twelve months upfront feels like a rounding error on the price list. Priced as what it actually is, it looks different.

By Steve 5 min read
Abstract bridge artwork for Your annual prepay discount is a loan at a rate you’d never sign for

Most annual prepayment discounts are set the way most discounts are set: someone looked at what the market seemed to be doing, picked a round number, and it stuck. Ten per cent off for paying twelve months upfront. Two months free. It reads as a modest concession in exchange for cash and commitment. It is not a concession. It is borrowing, and the arithmetic of what it costs is straightforward enough to do on the back of an envelope: which is precisely why so few businesses have done it. Price…

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