How many customers take a prepay or annual offer (15–20% for buy-10-get-2, 30–40% with bonuses), how big the discount should be, and payment structures (half now/half in 30 days, payday-aligned splits, layaway, third-party financing at +35% sales) that pull cash forward.

Prepay discounts, annual plans, split payments, layaway and financing

TL;DR

Offer at least a 10% discount for paying in full today. Money now is worth at least that much more than money in a year.
Buy 10 months, get 2 free (about 16–17% off): expect 15–20% of buyers to prepay.
Moderate discount plus a bonus (skip the line, concierge, longer guarantee): expect 30–40% to prepay.
An annual plan with a discount lowers churn. Buyers decide once instead of 12 times, and they’re more committed.
If they won’t prepay, offer half now, half in 30 days, even for 6–12-month programmes. Line payments up with their paydays. Use layaway for big-ticket onboarding.
Third-party financing: a contact at a large financing provider quoted +35% sales overall. Financing won’t save a bad product.

Details

Why prepay. A customer who has paid for the year can’t churn. You also get the cash now and can spend it acquiring the next customer.¹ Hormozi’s minimum prepay discount is 10%, because that’s roughly what the money would earn in the stock market over a year.²

Take rates (Alex Hormozi’s rules of thumb). A buy-10-get-2 deal gets about 15–20% of buyers to prepay.² Make prepaying faster, less risky or easier with bonuses: prepayers skip the line, get a dedicated concierge instead of the group, or get a guarantee (or double its length). With a moderate discount plus one or more of those, he expects 30–40% to prepay.³

Annual plans for memberships. On Skool (the community platform he co-owns), annual buyers churn less. Partly they can’t cancel, but they’re also more committed and better qualified because they paid more up front. The common structure is 16–17% off, i.e. buy 10 months and get 2. His advice is to add one today and expect a “meaningful chunk” of members to take it.⁴⁵

Payment structure ladder. He prefers to sell durations rather than open-ended monthly plans. Then:⁶

Pitch prepay with the guarantee, priority and concierge bonuses.
If they decline: half now, half in a month, even for a 3–6-month programme. Delivery timing doesn’t have to match the payment schedule.
If they decline again: three payments.
Ask a salaried buyer when they get paid, or a business owner when most of their deposits land, and schedule the charges for those dates.

Layaway. The customer starts paying now and gets the thing when it’s fully paid. At Allen (his white-label agency software, with a $25k onboarding), two partners asked to pay $2k a month. When he said onboarding would be scheduled a year out, they switched to half now and half next month. Layaway gives the buyer a reason to pay fast, makes collections easy, builds anticipation, and means you risk nothing on delivery.⁷⁸

Financing. Hormozi relays a contact at a large point-of-sale financing provider (the transcript says “a firm”, most likely Affirm) who quoted about a 35% lift in total sales. People who couldn’t have bought now can, and you still get the cash up front. But if the restaurant’s food is bad, financing just helps more people find that out faster.⁹

Disagreements / caveats

The take rates are Hormozi’s heuristics for services and memberships, not measured benchmarks. App-store subscription data suggests the best plan structure depends on category (see Weekly vs monthly vs yearly plans — and which plan gets the trial).
Discounted annual plans bring down average revenue per user. Check whether the retention gain covers the discount.

Prepay discounts, annual plans, split payments, layaway and financing

Prepay discounts, annual plans, split payments, layaway and financing

TL;DR

Details

Disagreements / caveats

See also

Footnotes