
Ask HN: Fastest way to get recurring revenue with hosting? - NicoJuicy
I like startups and creating webapplications. But my main income (after working hours) is still selling websites &#x2F; hosting or invoicing packages (=&gt; customization of the invoice layout, configuring webapps, ...), which is like 85% of my income). The rest is mostly from hosting (webapps &#x2F; websites)<p>I&#x27;m wondering, what do you sell to people (webapps, websites, cms), which contains hosting and is fairly easy to create a recurring revenue with?<p>And do you upsell? (eg. selling a website + email marketing application + affliate gmail for biz)
======
NicoJuicy
I'll give you example of how i upsell a website

When it is a new company (is going to launch in 1 month for example), i
propose them to set a launch page (basic one, created in max. 15 minutes) for
100 €, to collect emailaddresses.

The launch page includes a text email to all of your visitors when they
subscribe and say that this proposal doesn't include HTML (for images),
because that is custom work and more difficult.

When the moment arrives, i ask them for the text they want me to send to their
visitors.

In 70% of the cases, they ask to include a picture of the team.. I explain
them that this was not part of the deal, but that i can change the message to
a HTML email for 80€ (if provided the assets first).

So, selling a website earned me another 180 €, a happy customer (the launch
page is added publicity)

How do you upsell?

~~~
onion2k
You're probably making less money than you think you are because you're
ignoring most of the time costs in acquisition and client relationship
maintenance. For example, the time taken for a 100 euro launch page is not
'max. 15 minutes' \- it's 15 minutes development time + whatever time it takes
you to persuade the client that it's necessary, time to write the necessary
copy, time to source artwork, time to agree it with the client, time to put it
online, time to update the client on it's performance, time to export the list
of gathered email addresses, and so on.

In total I could imagine that 100 euros covers up to about 10 hours work if
the client wants to change a few things along the way. I don't imagine your
time is only worth 10 euros an hour.

This is a fundamental problem with scaling a consulting business - it might
feel like you've earned a lot of money for a tiny amount of work, but the
reality is that all the time you spent getting and managing that work means
it's not very valuable.

~~~
NicoJuicy
Well, the launch page part is actually quite easy to sell. I propose it if the
client is a new business.

It takes about 10 minutes to persuade (in experience), i choose the layout and
ask for a picture and a small title + subtext. There isn't a lot to change on
the launch page (the layout is almost solely the picture in full)

The changes by the client are usually for the website, but that's a different
package. There i create max. 3 first page designs, then i create the whole
website. (included according our talk). Then for reasonable changes, i check
wether it's part of the package or is it stuff that we didn't talk about that
requires >20 minutes of work (eg. new features)... I'm quite clear on that
upfront.

The launch page is just an extra income that takes max 40 minutes (talk +
create + publish + text email to subscribers).

Then again, i'm also waiting to raise prices untill i get (more) busy with
projects to create.

------
luckyisgood
Web agency founder with a decade of experience in selling websites here. I
wrote a book on the subject of recurring revenue for web agencies and web
professionals, all based on our experience.

Here's what worked for us:

\- after selling a website, we sold the mandatory support and maintenance
contract. We considered this service the foundation, or level one of our
recurring revenue stream. This is fairly easy to sell and renew. The recurring
revenue we got from this was enough to keep us afloat.

\- after selling support and maintenance, we upsold the client to "levele
two": services which grow our client's online business. The types of services
we offered in this plan: everything that needs to be done to reach client's
business goals, and that we could deliver well. This was harder to sell
(because the type of client needs to be just right for this kind of service),
but the amount of money coming in every month is substantial. This is what
makes the agency grow in long term.

Here's what didn't work for us:

\- web hosting. We've been offering this for more than a decade and in the
end, all things considered, it is just not worth it. A combination of support
+ maintenance + growth-oriented services is a much better bang for the buck.
We sold most of our servers and hosting accounts to a specialized hosting
company and focused on what we did best.

For the exact details about building, pricing and selling support and
maintenance services, check out my book:
[https://www.simpfinity.com/books/recurring-revenue-web-
agenc...](https://www.simpfinity.com/books/recurring-revenue-web-agencies/)
(the part about growth-oriented services is coming soon, matter of weeks)

I love talking about the subject of recurring revenue, it's a passion of mine.
I'll gladly answer any questions you might have.

Edited: typo.

~~~
NicoJuicy
I think selling hosting to a customer is wrong, but selling services based on
hosting could do well (email app,invoicing app, website, dropbox alternative,
booking services (restaurant, hotel) ...). There's no money in the hosting
without a webapplication part (my 2 cents)

Currently, a lot of my clients don't need the monthly support option. That
doesn't seem to sell very well, because they mostly have no problems.

What can be sold is the support for 3 months (during the start)... But that is
where the most problems are, so i'm wondering if it's financially interesting
to do that :) . I also mention that i'm a busy guy, but with a monthly support
fee. They can call dibs on me anytime.

~~~
luckyisgood
The way I see this "clients do or do not need support" is this (and this
metaphor faired well with clients, to help them understand why support and
maintenance is absolutely crucial): I personally don't need medical insurance
either because I'm healthy most of the time. But what happens when I get sick?
I need fast remedy and I want to live my life assured that there's a team of
experts on standby, ready to take me in.

In my experience, it made no sense to argue with the client about maintenance
when the website was "sick". All the client wanted was for us to fix it. I
knew that, so I made sure I sold them a maintenance package in advance, when
they "didn't need" it. A website is just like a bridge: if you build it,
you're responsible for it, but it's not for free. Everything I put in the
world, I am responsible for, but the client needs to pay for it.

Here's how we sold support: \- 30 days guarantee period (after launch) \- we
were selling only annual contracts. A lot happens every month. Frameworks and
libraries need updating, 404 links happen, browsers update, CMS systems get
new security updates... There's a ton of things to keep an eye on as a
developer, and you could create an annual plan which your client pays for
monthly (give her a discount when she signs a contract).

------
kijin
As others have mentioned, hosting is not a profitable business in itself.
There are plenty of web/vps/dedicated hosting services who have been in the
business for years and who can easily outcompete you on price, features,
stability, and pretty much every other metric that you can come up with.

Except one thing.

DreamHost staff are generalists. They're probably good at fixing hacked
WordPress blogs, but they will never be able to compete with you when it comes
to in-depth troubleshooting of the exact application that you built for your
client. At best, all they can do is direct your client back to you. At worst,
they'll misdiagnose the problem and damage your client's website.

You, on the other hand, are a specialist. You know the website inside and out.
You can take one look at an error message and figure out exactly which line of
which file is causing the issue. You know when the software stack will need to
be upgraded, and you know which parts are the most likely to cause trouble
after an upgrade. You know when the client is expecting traffic spikes, and
you know that when that happens, DreamHost is likely to suspend your client's
website.

Your hosting package, should you choose to offer one, must take advantage of
these differences. It should be part of a long-term support contract, not a
standalone product, and it should be massively overpriced, like, at least an
order of magnitude more expensive than the off-the-shelf equivalent. In
exchange, the client gets a server stack that is perfectly tailored to their
app (nginx, node.js, redis, you name it), a guarantee that they will never
receive a canned answer in response to an urgent support request, and a
guarantee that their website will not be suspended in the middle of the
biggest marketing campaign of the year.

And of course you should be ready to fulfill such expectations. Don't use
cheap servers to host your clients, get some Linodes or Droplets instead.
There will be no in-house email hosting, it should be outsourced to Google
Apps or some other company that specializes in email. Don't mess with cPanel,
your clients can call you if they need to make any changes. Everything should
be premium-grade, because there's no money to be made in the low-end market.
Make your customer feel like your offer is actually worth the combined cost of
hosting and support that you're charging them for.

------
bdunn
Like many others have said in this thread, it's hard to make any meaningful
dent in your profit from being a middle-man between your clients and who's
hosting their sites.

I'm a fan of bundling — which sounds a bit like what luckyisgood was getting
at.

Every consultant wants diversified and/or recurring revenue. This is why just
about all of us inevitably create (or try to create) products of our own.
Eventually, many consultants get wind of the idea of retainers, which can have
the predictability of SaaS but without needing to build and market software
first.

The issue arises with how most consultants put together retainers. It's
usually something like "I'll sell you in advance 20 hours a month of my time
for $2000."

Here's the problem:

Any first grader can figure out that you're effective hourly rate is $100,
which is probably less than your real rate — but hey, it's a retainer and
it'll relieve your need to always be selling, so that's OK for most.

Since you'll be making $100 an hour on this retainer, your income potential
becomes constrained (you're now on the hook for 20 hours a month @ $100/hr)
and the client knows what your hourly rate is. "Brennan, I need more this
month. I'll pay you $2500 for 25 hours" or "Can I just pay you $100 an hour
when I need you?"

And this is where the retainers of a lot of the consultants I've talked with
go south, and the relationships sour.

A better approach (which is something patio11 and I talked about during an
event we hosted last year) is to instead sell bundles — which could include
your time, and hosting — and make these bundles really tricky to divide.

I could sell a client on:

\- Hosting

\- Backup management

\- Framework / security updates

\- A/B test experiments and management

\- Up to 20 hours of upgrades and modifications

Now it's not so easy to divide the invoices I'm sending my clients monthly by
X.

And I could charge... $5000 a month for that. Or whatever would make it so
that my client gets both the peace of mind they're looking for (smart guy
managing hosting, backups, security issues, etc), a product that's becoming
more valuable (running a/b tests, analyzing their funnels, etc), AND a pool of
time for me to do whatever random updates they need.

~~~
NicoJuicy
Things (in my experience) that are hard to sell to smb's:

\- Security updates + framework

\- A/B testing

\- 20 hours of upgrades and modifications upfront (charging per hour works or
naming it differently and including it in your price)

\- Monthly support

What i can sell more easily:

\- Backups (else, they have to do it themselves)

\- Hosting

\- Webapps (email marketing, invoicing, ...)

\- Google Apps for business

~~~
bdunn
I've done, and know quite a few people, who are currently selling framework
updates ([https://railslts.com](https://railslts.com)), a/b testing as a
service ([https://draft.nu/revise/](https://draft.nu/revise/)), and not to
mention selling blocks of time upfront — e.g. the retainer model a lot of
agencies employ.

(Re)selling hosting, webapps, etc. situates you as a middleman; The margins
are much better if you not not only sell them on an Optimizely account, but
run it for them also.

~~~
glimcat
Optimizely takes minutes to sign up for - and they're always looking to make
that easier, and to make more people aware of the value they provide. In
contrast, the expertise to conduct tests that alter revenue outlook takes
somewhat longer to develop.

Sure, people could go out and spend the time to learn just about anything. In
practice, they won't, because that's competing with all the other anythings
they could be doing.

 _Sell the thing that actually has significant barrier to entry._

You take care of the easy thing too, because making the client spend
meaningful attention on something that would take you five minutes is just
silly, and you're there so they don't have to worry about that stuff. But sell
the hard thing.

------
moron4hire
I'm a "consultant", but I've only had the same, one client for the last 3
years, for whom I work 40 hours a week. I have a comparatively low rate
($75/hr), which the consistency of work has made difficult to argue over. I'm
also getting bored with the project. Basically, it's in every way what it was
like having a real job, except I don't put pants on most days (I work 100%
remote, my client is a 3 hour drive away).

I don't specialize in anything particular. I do both web and desktop apps for
my client. They are a small suite of systems for collecting certain types of
physics data, mapping it, and performing a basic analysis of subsets of that
data. Other than setting up the servers (system administration is a weak spot
for me), I've built everything of consequence in the project: from designing
the database schema, to implementing and even improving the client's
proprietary algorithms, to building a smooth, intuitive (as intuitive as this
can get) UX around Google Maps. But it's mostly done now and I'm bored with
the project.

Any tips on how to get out of such a rut?

~~~
luckyisgood
It depends on what you want to do next and from which sources you want to
build your recurring revenue. Building recurring revenue before quitting the
client or venturing in a product business is the key.

Let's say that your one current client is like having a day job. It's wise to
keep them if they're your only source of income, until you find more exciting
and equally / more profitable sources of income.

A couple of ideas:

\- try to get a couple of new clients, but only a few, so that you can manage
them. Put them on a retainer and service them yourself for starters. Repeat
until you have enough money from that on retainer. Aim for fewer clients at
higher retainers.

\- hire a person (as an outsourcer, or paid by the hour, or similar) to help
you service the existing client first and the new clients later. Keep training
that person so that there's less and less manual work for you, and keep
overseeing everything she/he does (be the quality control person). This brings
you closer to a real business (other people do the work, you sell and
negotiate deals)

\- let's say that you now have one colleague that does the work, and a couple
of clients who pay just enough consulting to make you feel relatively safe.
Let's say that you've organized this in a way that leaves you 50-75% free time
to work on The Thing You Really Want To Do. Now, do you want to build a
professional service business, or a product business?

In any case, if your work is the only source of income and you can't raise any
capital (not even from friends, fools, and family), building recurring revenue
streams first is how you get out of any rut, because getting out of the rut
requires freeing up your valuable time first.

Does this make sense? Would any of this work in your case?

~~~
moron4hire
Actually, what you've written is basically what I've been trying to do for the
last year.

I'm definitely more interested in a product business, rather than a
professional services business.

I've been trying to find small contracts and other sub contractors to push
stuff on to. It's difficult to find clients who only need a small amount of
work for the sort of things I do. Most of the potential clients I end up
talking to either need something simple-yet-out-of-my-competence like throwing
together a Wordpress theme, or they want to hire me full time for their early
stage startup (at a huge pay cut) on a project that doesn't interest me. I
might be bored, but I don't hate it so much that I'm willing to make life
measurably worse in just about all aspects over it.

The few (two) potential clients who sounded ready to work evaporated after I
mentioned putting together a contract. That's skeevy. Probably a good thing
they disappeared.

And it's been _extremely_ difficult finding developers who A) know what they
are doing, and B) don't want full time work. I'm either finding great guys who
want me to hire them full time (which I would love to do, if I had the money)
or I'm finding chuckleheads who will take any scraps I can give them, but I
have to redo all of their work in 2 to 3 months. My current client says I
shouldn't hold everyone to my own standards. I don't know how to do that and
my knee jerk reaction is that it's a terrible idea. I don't know how to make
software with bad developers. I can't just sit by and watch Tweedle Dum and
Tweedle Dee fail to complete tasks week after week that I know I could have
gotten done myself if I wasn't spending so much time managing them.

I've been running side projects, but I'm blocked on turning "thing I'm excited
about" into "thing that makes money". My most complete project so far is an
ePub-generating, browser-based text editor. My friends use it regularly and
love it, but it's been very difficult getting other users to it, so after
about 5 months I think it's time to move on. I'm torn between just hunkering
down and refining the tool even further + adding a pay wall, or leaving it the
way it is and pursuing a new project with more potential.

I tried finding a PR/advertising partner. Everyone has their own projects and
nobody wants to sign up for someone else's. I only looked for about two or
three months, though. Perhaps I gave up early.

I think the big problem is that I am very isolated from people. I live in a
suburb of DC. I moved here two years ago to be with my wife, a move made
extremely easy by the fact that I was already freelancing and working from
home. The only people I know down here are her friends. So I'm trying to get
out to tech meetups, do some networking.

There is one task coming down the pipe for my current client that I'm somewhat
interested in doing. I'm not sure I'm going to get to do it, though. He's been
trying to hire someone with more experience in that particular area, plus
there is a long list of other things that have to be done first.

In the past, I've been apt to just quit at this point and then figure out
where things would go from there. I've usually been able to find a new job
right away, as my skills are usually in demand, but it's always the same sort
of consultoware that burns me deep. I'm trying not to follow the same pattern
again. I wouldn't call it a mistake the times I've done it before, as it
afforded me chances to see things from different perspectives and even got me
into freelancing. When it was just me, not having any money to go on exotic
vacations was fine. My wife has spoiled me in the last couple of years.

So I don't know. I feel like I've been spinning my wheels. I think I'll wait
out my client to see if I get the chance to work the project I want, sock the
cash away, and if I don't, double my rate on him, drop my hours back, and
screw around with VR programming.

~~~
luckyisgood
How about you offer your client that it would be YOU who would help find
another person for that other project for your current client, so you form a
team of two? If your client is not a developer or a technical person, it's
100x harder for them to find a suitable person for the job (and I hear you:
you wouldn't want to work with Tweedle Dum and Tweedle Dee either nor should
you lower your standards). Whatever needs to be done on that task, chances are
you would be an ideal dev lead / project manager / senior dev for that task on
that project. You could present yourself as a partner on that project who
would do some of the work, but that way you'd be slowly moving away from
coding and more in the direction of managing / strategic consulting. That way
you can demand more money because you're adding more value, and you'd be
responsible for the other person. Recognizing good dev talent is hard, that's
the hidden value that many developers forget that they bring to the table.

And yes, networking helps. I have my own small "mastermind" group and the best
thing I get out of it is inspiration, bursting my own bubble I have locked
myself into, and decreasing fear of the future. I just wrote about it
yesterday on my personal blog, so that part of your comment rang very near and
very true to me.

In the end, you already know what to do :) I see from your comment that your
direction is clear. Good luck with everything!

~~~
moron4hire
Thanks. I have such a group of people, friends I have an email circle with. I
try to read back through our emails over the years every once in a while.
Things are definitely better today than back then. It just doesn't always feel
like it.

------
txutxu
If operations/systems is a second class citizen in your company, then you just
live with that fact, minimize the headaches and maximize your other incomes.

When you offer "hosting"... do you offer intelligent systems? advanced low
level networking? CDN? anycast DNS? disaster recovery plan? peak resistance?
awesome monitoring system with 24/7/365 support of the solution? 0day level
security solutions? nanosecond performance? 99.999% SLA? penetration testing
as proactive maintenance? multidevice testing of every change or patch?
development, staging, validation and production environments? storage
engineers? database tuning? project road-map with weekly (or daily) reports
and meetings of a team of engineers analyzing infrastructure usage, logs, new
threats, proposals and evolutions? an awesome web interface for ALL customer
facing controls? a problem free experience?

Or are we talking about cheapo domain+cert+shared resources "online presence"?
If yes, than maybe just stick to one provider and seek for a "reseller plan",
to minimize costs, and as said in other comments, start offering a
"maintenance package" as part of the products/solutions to get some recurring
revenue.

When you get a great team of operations and support engineers with outstanding
knowledge and passion for "systems", they stay motivated, and they are not
mismanaged, you will be able to monetize them (and their "toys") with
"hosting", "cloud", "online presence", "services" or whatever name, in team
with the rest of the solutions you sell.

Infrastructure is a complex and expensive topic. If you do it properly, you
can move money. You just need more customers wanting your system
solutions/team, than the cost of it.

Otherwise, there is many competence and "third party" services, and the
average position is to re-sell that, and focus on the ego of "i'm a
designer/coder, systems is a second class stuff I cannot convince you to payme
more for that".

~~~
gaadd33
Are there any hosting providers that are "moving money"? Most of them seem to
have pretty minimal profit margins and low valuations by the financial
community. I believe Voxel sold to Internap for only $30M.

~~~
txutxu
A few (about 3) years ago, the company where I was (in Europe) did make money
doing hosting over housed space.

We did hosting (dedicated and virtualized servers), managed services, and re-
housing, this is, rent again the racks/power/IPs which we did rent on
different providers.

If I'm true, I think it did work very well because the company did get very
big projects, because the company management did have great agreements and
contacts with high environments (local government, local banks, football
teams, newspapers, etc).

That is, I as a technical person, do not see myself starting from zero the
same AND getting the local customers we did use to get. And much less global
customers.

I can assure the systems part of the project budgets, did make great money.
Even more profitable on maintenance status. The worse on the company was
sometimes, the development team's estimation and execution balance.

~~~
gaadd33
Right but there's making "great money" which for anything that has fixed
overhead is probably like 2-3x cost vs "great money" for software which
implies you have 80%+ margins.

------
antocv
There is no money in hosting.

Call it cloud, thats where the money is.

------
callmeed
10 years in niche websites here. We sell a website system (hosting + cms) to
professional photographers. A lot of them. We do traditional hosting where
each customer is an individual apache host with it's own database, FTP
account, etc. But you could just as easily do something in a multi-tenant,
"cloud"y fashion.

The margins are decent IMO. You can get a decent sized VPS or dedicated server
and easily have your costs under $2 per user per month. Then you charge the
customer $9-29 per month.

They key will be automating the setup process. If you're doing traditional
hosting, you may also need some sort of control panel (they all suck, btw).

We also sell other SaaS tools for photographers–allowing them to sell and
share photographs. We upsell them to our website clients.

It's hard to define _fairly easy to create recurring revenue_. We were
profitable from day 1 but it took more than a few years to clear $1M in annual
revenue. And now there are a lot of well-funded competitors (wix, squarespace,
etc.). So, my advice would be to find a niche, figure out what they need, and
focus on them.

I have a few ideas (below). This is random, but I would advise you to avoid
restaurants. I've tried it. Many others have too. They owners are too busy,
have little money, and most just don't care that much.

Some other ideas I've had:

* A static website hosting service based on Jekyll. But a web-interface somewhere allows you to create new jekyll posts/pages.

* Wordpress hosting for landing pages. I like Unbounce but it's expensive. Create a WordPress theme with 12 different page styles and let me make an unlimited number of landing and lead-gen pages for it.

* Elementary school websites. As a parent of 4, I've yet to see a good one. I'm sure there are existing players, but if you can carve out a niche, there are COUNTLESS other things you could build for them. Start with some private catholic/christian schools near you. They have much less red tape in their buying process. If you have some sales chops, aim at the district level so you can bag a few schools at once.

------
j45
I see a lot of great discussion but not much centered around hosting itself. I
do agree with Brennan and have been pricing how he described for some time, it
works. Value based pricing always works with the right kind of clients.

Along the way I was able to run a website that delivered the retail customer
website of a billion dollar company using my code.

How something as silly as hosting helped make it happen..

I have hosted customer apps and sites in a datacenter since about 98.
Networking, security was something that there was little choice to avoid
picking up in addition to software development.

Forget about today, even 15 years ago (man it's weird typing that), hosting
was quickly becoming outdated. Yet, there was still an earnest need that was
going unfulfilled.

The need I see repeatedly is for complex/custom hosting of Web apps and
websites instead of the basic ones.

Example today? Even something as simple as Wordpress is a pain to reliably
host when there is traffic for the average person. Someone deciding to master
WP has lead to a fantastic startup with WPEngine which sits on the premium end
compared to it's peers.

This isn't for everyone: assuming you have the ability to develop your skills
as needed, and with the right support, you can tackle your slice of the
complex/custom/app hosting market.

Even small businesses with custom workflow or website apps often end up
needing their own vps or dedicated server to maintain. If you're this
passionate about hosting, I'm trusting that you have or are pursuing dedicated
hosting skills.

Putting together a managed server hosting package that may or may not provide
application level support can be quite stable income assuming the line is
clearly drawn between code induced issues vs infrastructure induced issues.

How much is on the other side?

On the low end I have changed a few hundred a month, all the way up to a few
thousand a month, so a customer can have a sys and app admin rolled into one.

The right kind of customers definitely have a peace of mind budget, where they
want the discipline and consistent availability of someone who cares about
them more than a contractor. The bottom rung of customers don't scale very
easily, either.

------
imdsm
I think we have quite a few people waiting for the answer, and a few people
not wanting to give up the answer.

~~~
NicoJuicy
I think the exact same thing, that's why i added one of my easiest/best
technique to earn more with the same thing.

I really hope some people share their knowledge/experience. The more people
that share, the more people you can use it to gain a better profit :)

