How We Calculate Savings

How We Calculate Savings

The general idea is we split the savings with you! Easy, right? In most cases, it’s as simple as saying “you were paying more before, you’re paying less now, let’s split the difference.” As with all things, the more you dig into it, the more complicated it can get. So, here’s a more thorough breakdown of how it works.

It’s only natural to look at the amount you’ve been paying a provider in the past and consider anything less than that to be savings, but the more accurate representation of savings is reducing the amount you are scheduled to be paying going forward. Almost all providers increase their service charges and fees annually due to “cost of business” increases, and discounts expire with no guarantee that they can be replaced with a discount of the same value. So saving money may look like paying less than you ever have in the past, but it might also look like preventing those future increases, diminishing the effects of those increases, or just anything that prevents you from paying the full amount you would be paying if you did nothing.

This is why our very first step in each negotiation is to estimate what your bill will be over the next year, so that we have a starting point for our negotiations that is as accurate as possible. We look at what you’re paying now for each line item, and we look for any expiration dates or scheduled increases that will affect that price over the next 12 bills. Often times this information is listed on the bill itself, but we also ask for the expiration date of every item over the phone with the service provider reps, since not every increase has a warning in print. Either way, once we have a full picture of the next year, we start negotiating a lower bill.

Once we’ve wrapped up our negotiations, we compare what your bill was scheduled to be over the next year with what your bill will be over the next year now that we’ve negotiated. The difference is the amount that we’ve saved you on that bill.

A new discount with no scheduled increase

A straightforward example of a negotiation where there were no scheduled increases and we simply applied a $20 discount for the next 12 months would look like this:

You can see that the bill was set to be $100 over the next year, and we’ve lowered it to $80 by negotiating a $20 a month discount. This would be a $240 savings over the whole year.

A new discount with a scheduled increase

In the next scenario, there’s a scheduled increase over the next year that we’re unable to prevent, but we’re still able to apply that $20 discount:

Even though the bill goes up in month nine, our discount is still in place keeping it $20 lower than it would be otherwise. This scenario happens most often with annual increases or when pre-existing discounts are set to expire, and we don’t replace those discounts or prevent them from increasing. This would still be a $240 savings over the whole year.

A new discount that prevents a scheduled increase

The final scenario is when we are able to replace a discount that is set to expire within the next year with a discount of the same or greater value:

Here we see that the bill is $20 lower for the first eight months, but when the bill was scheduled to go up by $10 on month nine, we were able to prevent that increase and keep the bill the same. This means a $30 a month reduction on the last 4 months. This would be a total savings of $280 over the next year ($20 for 8 months and $30 for 4 months). Technically, we should claim credit for those savings. However, we’ve found that honestly it’s just too weird and complicated to explain well and it feels bad even though you are actually saving money. So, in that case, we’ll only call that $240 in savings.

In all three scenarios the very next bill would have been $100 and we negotiated it to be $80 by applying a $20 discount. However, you can see how knowing what the bill will do over the next 12 months affects both the total savings we’ve negotiated and the price you can expect to see on your bill. This is why we generally calculate savings as the difference between what your bill is scheduled to be over the next year without any intervention, and what we negotiate your bill to be over the next year.

Year 2 and Beyond

One aspect of calculating savings that can be especially tricky is what happens after your first year’s negotiation. We use the same principle from above, what are you paying vs. what would you have been paying. As a result, some weird things can happen. However, we try to lean on the side of generosity to you.

A note first: this all only applies to residential bills, since for those we cap savings at 12 months. So, if we save you money for 24 months, we’ll still only charge for the first year. For business bills, we end up doing a lot more long term work, so savings calculations don’t work the same way.

Here’s a basic situation:  you might see no change at all in your bill and yet we’re claiming savings for another year. Why is that? Let’s imagine you signed up with a bill for $100 a month. We negotiated that $20 discount that brought your bill to $80 for a year. Now, a year later, it expired and your bill is going to go back to $100. We negotiate again, another $20 discount, you’re back to $80. Except now, when you get the good news from us that you’re saving $20/mo, it’s all happening theoretically, because we prevented that price increase. The alternate method would be to wait until your discount actually expires and you get a higher bill. That’d make the whole thing easier to explain, but you’d pay more as a result.

Because of scheduled price increases, it might be even more annoying (and eventually will be.) You were paying $100 a month. We negotiated a $20 a month discount for a year and now you pay $80. Now, year 2 comes along and your provider has raised prices for all their services by $10. So, as soon as your special discount expires, your bill is going up to $110. We get in and negotiate in time and we get that exact same discount—$20 a month. Except now your bill is $90! Your bill to bill difference is that the bill is actually going up! But the reality is that if we hadn’t intervened, your bill would have gone up a lot more. Honestly, this situation is frustrating for everybody involved. We don’t look as cool, you don’t feel as good. The only people who are happy are the provider’s accountants. Unfortunately, price increases are just a part of life as long as there is inflation and also greedy executives.

One thing that we do to lean on the side of generosity is that we start each year with a fresh eye. Let’s look at that example again. You sign up, $100/mo, we negotiate the $20/mo discount, $80/mo. You know the drill. Except in this case, we actually did something slightly better than that. The discount is tiered. So, in year 2, you’re not going to get the full price increase. Your bill is only going to go to $90/mo if we don’t renegotiate. When we negotiate again in year 2 this time, we get it back down to $80/mo. In the theoretical imaginary world where we didn’t get involved, you would be paying $100 or $110 a month without our involvement. But we consider all residential savings complete after 12 months. So, in year 2,  we use the $90/mo number as our starting point even though we’re the ones responsible for it. That way, we only end up claiming $10/mo in savings.

 

 

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