> For example, a big company happily using the $250 a month plan could, quite possibly, be happy to upgrade to a $5,000 a month contract if you offered them the right incentive. (Twenty times as much, you ask? No, transitioning from "pocket lint" to pennies. Stop thinking like a human. Think like a corporation. Corporations are like humans whose smallest increment of currency is the largest paycheck you've ever received.)
> This is important: Enterprise pricing is discontinuous with normal pricing. If the $250 a month plan entitles you to 500 foozles and an Enterprise needs 5,000 foozles, that costs thousands or tens thousands of dollars per month. If an Enterprise only needs 500 foozles, that costs thousands or tens of thousands of dollars per month. If an Enterprise only needs 50 foozles, that costs thousands or tens of thousands of dollars per month. This is partially justified by the amount of pain you're signing up for by doing an Enterprise sales process, but is mostly just pure, naked price discrimination. Enterprises are not price conscious. Don't attempt to sell them based on your price. ( For prices customarily contemplated by software companies.)
A relative of mine has a business which sells to very large companies. One of them pays so much later than even the normally egregious large companies that they get a "special" price, which takes into account the cost of not getting paid for say 120 days. (This company is large enough that it's one of the 30 companies in the Dow Jones Industrial Average [0]).
Related, how many days you have to wait to get paid after you've spent money supplying the thing is called the cash conversion cycle. For a business selling to enterprises, maybe it's 90 days from doing work or building a widget and shipping it until they get paid. Dell back in the day would charge your credit card as soon as you bought a computer, and then only pay its supplier some time later, so that they had a negative number of days, I think around -5; in effect, their suppliers were loaning them money.
We (enterprise buyers) would never agree to that. In all contracts I work on, there is a lengthy back and forth between lawyers working out the terms. Something like a premium fee if we are late on a net 30 payment would be a deal-killer. We know it takes a long time to process payments. I don't intentionally delay, nor am I encourage to delay - it is just that the wheels of SAP turn really slow.
This is one of the things where mathematics gives way to linguistic manipulations.
If you add a "late fee", it's a no go. But if you get an "early payment credit that will appear on your next invoice", it is ok.
Don't know if this is still the case, but for a long time, merchants couldn't add a "credit card fee" (even though they pay it at 2-3%). However, they could give a "cash discount".
One of my companies sold to hospitals. They are the WORST with payables. Unbelievably bad. It was terrible. We eventually were coached by a very friendly client who had pity on us.
We ended up raising prices something like 30% and offering discount terms like 15 day 30% discount.
They never once paid on time for the discount, although we would sometimes get paid in 30 days at the higher rate. (Typical pay rates at the time were Net-180 to Net-270).
So, price it up, and show it as a discount. A good customer inside an enterprise should be sympathetic; if you're good, you can turn it into you and your customer against the customer's payables department. You can say "tell me the real story on payables", and "I have to get paid faster than that or I need more cash than we talked about" to many of them.
I know in my industry (pharma) we offer "prompt pay" discounts to our customers. 2% 30 net 60 for example (payment due in 60 days, get 2% off is paid in 30).
Of course a huge corporate has a lot more leverage with regards to terms than a small contractor.
You send an invoice at 100% and put at the bottom 'if paid before xx/xx/xxxx, amount is really $x.xx'.
Obviously this depends on local regulations. For example, in Belgium the rule is that the basis for VAT does not include the 'prompt payment discount'. E.g.: invoice is 100, 2% 10 net 30. How much is the VAT @ 21%? It's 0.21 * 98, so your invoice can say 'total payable before xx/xx/xxxx: 98 + 0.21 * 98, after that: 100 + 0.21 * 98.
I had a long, drawn-out argument with a supplier once whose very accounting manager didn't understand this concept. They would have me pay VAT on the 100, because otherwise, according to them, they'd be giving me 'a discount on the VAT' (that sentence doesn't make any sense whatsoever). So I called the tax office, PLUS an accountant, to confirm the right way for them to bill me, and they still didn't believe me (or rather - didn't understand me). So just to shut me up, they said 'we'll give you another 2% discount' facepalm
Tangential to the discussion above, I guess, just venting ;)
Good question! With a lot of our discounts we do a chargeback. That is, they pay 100%, then we send them the 2%. Not sure if the prompt pay discount works that way though.
We've added in a late payment fee that gets added on every month a payment is late. As soon as that first notice goes out saying "You now owe us $X,XXX MORE!" people seem to magically send checks. You have to have that in the MSA/Contract of course.
