Extending Pricing plans and long term commitments for business web hosting packages.

As you are fully aware by now, a majority of web hosting companies will lower the price of your monthly hosting charges the longer you extend or subscribe to their web hosting services. Normally most web hosts such as Lunarpages and Ipowerweb charge $7.95 if you prepay for one year of web hosting, but that price drops once extend it by another year and it will drop again if you extend for 3 years. The reason is because web hosting companies prefer customers who stay with them and they want the money upfront so they can purchase additional servers and equipment. Just a couple of users going with this plan can help pay for the cost of the server. Thus, the marginal revenue of the server will increase as more users are added to the server because the initial cost of the server has already been paid off by the initial users who subscribed to the services and prepay on a bi-annual or annual basis.

But is making an extended payment option always the right choice? If you choose a annual or bi-annual subscription you can save between 20-40% per month, but if the company goes bankrupt after 4 months (the grace period when you can dispute a charge with a credit card company) then you are out of luck for the prepayment of services you have already paid. Worst yet, if the company provides bad service you will be stuck with them for years before you can get out since most companies have severe penalties for leaving the services early.

The best option is to prepay annually though if the company is reputable and has been in business for a long time. If they have been in the business for a long time and they provide good service initially then more than likely they will stay in business for years to come. Better yet, they will get more customers without advertising because their customer service is above par in the industry. The best predictor is to look for reviews of business web hosting companies before going with that web host. The worst thing to look for in a web host is value = best bang for the buck, because most likely they cannot afford to hire the proper staffs and their server reliability will be below par in the industry.

In time they will go out business because once their merchant account is out of service they can’t bill customers and they will not have much revenue left to sustain their business.
You can also look at the BBB report of the company to ensure that their level of customer service isn’t degrading. If customer service is degrading then it is a sign they that they are running out of funds and they are either not able to support the growth of the company or they are running out of funds and are being forced to let people go. This is a first sign that the company is heading to a downward spiral and will eventually go out of business. 

article source: http://www.upperhost.com/prepay-bestwebhosting.htm