Recurring business models for your agency business

This article is part of a series discussing Launching recurring products.

Genius Division will have been running ten years in August this year and over that time, we’ve learned a lot about designing and developing apps, websites, and brands. We’ve learned a lot about business too.

In our first few years, we worked project to project. As soon as one was done, it was billed and then we moved on to the next. A lot of businesses operate this way as there is simply no other way to do so. We found however, that not having even a small recurring income, left us exposed financially. What if one of us had to take time off due to illness? It would put a lot of pressure on the others to keep things going whilst also financially looking after everyone.

Our initial recurring income

The only real recurring income that Genius Division had was from hosting websites for our clients. We offered a basic, minimal service that kept our client’s websites online and not much else. In those days, it was up to the client to keep things up to date such as content as well as making sure that WordPress was kept up to date.

It was a fairly easy process to keep things up to date, they just had to log in and click update periodically. As we know though, when you’re running a business, you have countless other things to do than to remember to login and update a website. 

Our invoices were quite small and billed annually. They were priced similarly to what you’d pay if you were to find your own hosting and host the site yourself. 

The problem we found with this was that there were certain expectations that didn’t align between us and the client. Who should be updating the site? If the client was to host their own website and it got hacked, whose responsibility was this to fix it? We developed the site, but without proper maintenance from the user, it would be susceptible to faults and issues. 

With this in mind, we decided that we had to do something that took this ambiguity from us and our clients and give them something that would solve these problems. 

Research

We started looking at what other agencies were doing and also what other businesses not in our field were doing. A lot of agencies still used the same model as ours where they billed a client annually for hosting and didn’t do much else other than keep the site online. 

We looked to our existing clients too and asked them what they’d like to see. A lot of them wanted a hands-off approach, they were quite happy to have us look after everything and just get it off their plate but they also wanted us to give them advice on how to improve their site.

With this in mind, we started to look at a product for our clients that would include:

• hosting that keeps websites fast, reliable and online
• client support so clients can get in touch with questions and queries
• technical support so we can continuously improve their website
• marketing support to improve their website with search engine optimisation

Rich has written about how we developed a hosting platform that would use the latest cloud technology to keep our clients’ sites running fast and importantly reliable. 

Craig goes into detail about the product that we developed and what it includes.

Recurring revenue

Once we were happy with our offering, we came up with three products for our clients that offered as a minimum, hosting, support and backup as well as a monthly report that detailed how their site was doing and what could be done to improve it. Higher packages included search engine optimisation and marketing services. 

Offering a more enhanced service meant that we had to increase our fees for these clients but with the extra value they were receiving, were happy to move over to these new products.

We decided that the best way for clients to pay for these products would be monthly as this means there’s not a lump sum to pay annually. 

Spreading the cost monthly was a benefit both to us and our clients as it allowed us to plan work in easily as well as giving us time to be more proactive with ideas and suggestions on how our clients could improve their sites. It also meant better cashflow for them.

Logistics

Offering monthly payments initially worked for us but we had problems, we’d send clients a small invoice, they’d forget to pay it or they’d think they’d just paid it when if fact it was last month’s. This lead to a lot of admin work for us chasing payments and importing transactions into our accounting system. 

Direct Debit looked a good option to us after some research and we found one that integrated seamlessly with our account package, FreeAgent. This meant that once a client had instructed us to look after their site, they were setup on our system and payments would be collected automatically without us or the client having to do anything. 

Conclusion

Since implementing these products four years ago, we’ve seen our recurring income increase and they now account for a third of our income at Genius Division. This allows us to constantly invest in our products to make them better for our clients.