On this episode of THRIVE—sponsored by Workamajig—Kelly and Brent Weaver, founder of UGURUS and Maverick for Cloudways, talk about how digital agency owners can achieve peace of mind through the diversification of strategic partnerships and recurring revenue.
EP 84:Ensuring Stability for Digital Agencies
Kelly: So welcome back to this week's episode of Thrive, your agency resource. Today, the conversation is all about ensuring peace of mind for digital agency owners. And I am thrilled to talk about this more in depth with Brent Weaver. You may know him as the Founder and CEO of UGURUS, which is essentially a business training and education company, specifically for digital agencies. He also hosts The Digital Agency Show podcast, which you may be familiar with. And he's one of the brand ambassadors or Mavericks for Cloudways, which is a managed cloud hosting company. We're going to get into all of that today. Brent, thank you so much for being here. I really appreciate it.
Brent: Thanks for having me, Kelly.
Kelly: So, the thing is, COVID, we're 9 months into it. What I'm seeing from my end is that there are a lot of agency leaders who have literally just started saying yes to everything, their clients are needing all sorts of things that are sort of in or out of their wheelhouse. They're saying yes to them, because they're worried about where revenue is going to come from. And while we understand it, it's also kind of presenting some issues, both short term, and then going to present some issues long term. So can you talk a little bit about that?
Brent: Yeah, for sure. And, I definitely don't fault anyone for saying yes, to as many things as possible. And I think that one of the things that we've told our clients, is to first and foremost protect your core business. And for a lot of people, that means ensuring that you've got revenue, cash flow coming in and making sure that bills are getting paid, that you're getting paid and the core business is healthy. So I think, if anything, saying yes to everything in the short term is a solution to a problem, which is either fear of not having enough revenue coming in, or actually not having enough revenue and kind of grasping at anything. But I think Kelly, as you said, it is creating a problem or will eventually create a problem when we start to feel a little bit of burnout, a little bit of the lack of peace of mind, for agency owners out there.
Kelly: Yeah, for sure. So agency owners, when they are saying yes to some of these things, they're really just looking for project based work, they're looking for anything that's going to come in, but the Holy Grail is sort of this like passive recurring revenue, right? Like that's all any of us want. But there are some critical issues to trying to do things that are outside of your wheelhouse in house and trying to use your existing resources for just quite honestly, the things that they are not really skilled up. And I know that you have sort of a horror story that we can all relate to. I certainly could, when you told it to me at first.
Brent: Yeah. So we had been running, hosting as part of our agency's business. And we had said yes to that, partly because we wanted that passive recurring revenue. We looked at it as an opportunity to make some income from hosting, that kind of automated credit card charge type revenue. But also because clients I think, came to us and asked us to host their websites. We were there web guys or we were their web gals, right? And I think a lot of people take that. And they kind of just say, oh, yeah, I guess I should do hosting, because I designed their website. And there is actually a case for that. But it was quite a while ago.
We had about 50 sites on a server. Got a client call. Hey, our website's down. Oh, yeah, I'll take a look at it. I mean, that website is down. And another, phone rang again. I'm on the phone with this client, right? Then another client is like beeping in my cellphone, started to ring. And all of a sudden we're just swamped with all these phone calls about websites and emails that are down. Well, turn out, one of our servers’ hard drives crashed. We have like a single server in a colocation environment. No RAID hard drives. No backups. No failovers. Nothing. And this thing was a beast. I mean, it had been online, probably going on, like the better part of a decade and had just run, and we'd never questioned it. And yeah, we made some money on it. But it wasn't like massive money. I mean, we were pretty much charging commodity level rates, which means that we were kind of barely breaking even on this server, and then all of a sudden goes down.
So 48 hours of pretty much hell of trying to get this thing back up, looking at all of our old archive site files, trying to rebuild sites that we didn't have updated sites for and we eventually got the server back up and running. I'd say 85% sites were like maybe 3 weeks old kind of thing and the content wasn't like as new as it should have been. But it was pretty much back up. And I went home and my head at the pillow and it probably wasn't three hours later, I got a phone call. My phone started blowing up again. And I'm like what is going on?
Turns out RAM failure. And this second server got up and running, which basically just reset the clock. I mean, everybody came back to the office and had to get this thing up and running. And so that kind of like put a bad taste in my mouth about hosting. And I think a lot of agencies have experienced something similar. At the time, we had like one, I'd call him like, he was the systems admin in our agency’s team, but he was really a .NET developer. And he was kind of like the de facto’s hosting guy. Because he just knew the most in the office, but we really didn't have like a team in place. And we really didn't know what we were doing when it came to hosting. But I think we had the right intent, which was passive revenue, recurring revenue, maybe a little bit of diversified revenue.
Kelly: The right desire, let's say.
Brent: Yes, okay. We had the right desire, but our game plan wasn't really great. And the problem was something like hosting when it's not crashing or going down, it is out of sight, out of mind. And it's something that you kind of stopped thinking about and our clients don't think about it. They don't think about it when it is working. They just think about it when it’s not working. And so, on a long enough timeline, if you don't have the right infrastructure in place, and you're taking that money, you can cause all sorts of problems.
Kelly: Yeah, absolutely. And, I think every single one of us who have owned a digital agency for any period of time, we not only have that almost exact story, but we all have done the thing where you've got the one lead developer or someone who just knows enough to be dangerous about web architecture and running the actual servers. And that's what we do to get by. It's an early mistake. It's a common mistake. I don't think that there's a single agency owner out there who hasn't done that, or has some kind of story that's similar to that. So definitely understand it. When crisis hits like that though, it's really in the diversity and the depth of your strategic partnerships, because we really shouldn't be doing these things in house. We should really be back to what you said before, stick to our core business services, what we're great at. But those partnerships, if they are strong, they become really critical moments like these moments where COVID, if 50% of your clients leave, but you also have that recurring revenue, and a strong partner to manage that. That can actually be really a saving grace because people's websites, as you have said before, aren't going down just because of COVID. They're still up. If anything, they're even more critical now, because people are spending more time online. So can you talk a little bit about the importance of the diversification from your experience?
Brent: Yeah, so at the time, initially were like, screw this. We are never touching hosting again. This was a painful lesson. And we're never going to do this again. So our initial reaction was actually to get rid of hosting as being part of our business. So we started to actually push clients away from our company, and said, hey, you're responsible for hosting your website, which I think is also something that I see out there in the marketplace, which I think has a good desire, as you said. To say, I'm just not dealing with this. We're gonna find other ways to make recurring revenue. But because we were still the companies that we’re building the websites, and my clients had my cellphones, we would put them on like GoDaddy hosting and be like, oh, you got to call GoDaddy for issues, but because we were the company that was building their website. And anyway, they have my cellphone, right? They don't have CEO of GoDaddy, his cellphone.
So what we found was we actually pushed that money away. And we still had the same problem, except now we had, let's say, I mean, we were assigning about 50 clients a year at this time. So we had 50 to 100 clients over a couple of years that we're all on random hosts, and then they were all still calling us for all their problems. And so this created like almost a death by 1000 cuts, right? We no longer had the revenue. We weren't diversified in that way anymore. But we still had the problem. Now, our stuff wasn't going, if one host went down, or one client site went down. I mean, the only benefit was that, we didn't have 50 clients go down at the same time.
But we decided to kind of change our tune. So at the time, about 3% of our revenue was from recurring. I would say I didn't have the stability. I didn't feel like I had peace of mind. We really didn't have that diversification. So we said, look, let's put some effort into building up our recurring revenue and the very base layer of that became the infrastructure. If our clients call anyways, let's at least make that a profitable part of our business.
And at the time we were charging our clients, 20 bucks a month or something like that for hosting on our shared servers, but they had my cell phone. So what's the value in that? Like, I can pay GoDaddy, 8, 9 bucks a month. But I also don't have their cellphone. I'm calling somebody who has no idea who I am, all that kind of stuff. So we looked at it as kind of three different components in the recurring revenue side. We wanted to get our infrastructure straightened out. We didn't have enough revenue to hire a full sysadmin team. We couldn't have enough of the right people on our team to be able to do that.
So we had to find a cloud based partner to do that. But our clients still had us as that middle agency layer. So we just decided, hey, we can probably charge $100 to $200 a month to be that kind of not human layer, but kind of a translator layer, where our clients didn't have to talk to sysadmin.
Kelly: The intermediary.
Brent: Intermediary. So we decided we could charge 100, 200 bucks a month. We called it web care. We bundled hosting into that. We had a really strong cloud hosting provider. We stopped doing any kind of sysadmin level hosting work internally. We relied 100% on our partner. So if a server went down, it was all of their responsibility. And we kind of played crisis manager. We kind of would monitor them. We kind of figure out what was going on. And we would keep our client up to date whenever issues like that happened. And then the other layer on top of that though that became really interesting for our business’ stability was the ongoing maintenance and management of our client sites. Once we had a reliable infrastructure layer, that next layer became a really profitable part of our business where we were doing website updates, plugin updates, those types of things that aren't really that exciting, but it kind of keeps the trains running on time.
Kelly: They're necessary. Right?
Brent: Yeah, right. Somebody messaged me the other day about a client of their site got hacked because it had an outdated plug in, like it's not that sexy, but it happens. When it happens, everybody feels that, knows about it. But I think what ended up driving the most recurring revenue for us was kind of that growth driven design layer, where we went to our clients and started really working with them on strategic initiatives, helping them run campaigns and launches, building additional websites for them, micro sites, that kind of stuff, where one client would turn into 10, 20, 30, $50,000 a year in additional kind of growth revenue. And none of that would have been possible, at least for us without really nailing those first two layers. Right?
Kelly: Absolutely. And your partner now is Cloudways. I know that you recently joined them as a Maverick, which is essentially like a brand ambassador, but you've been a client of theirs for some time. Can you speak a little bit from your firsthand experience with them?
Brent: I mean, I've been in the agency space now for 20 years, and I've been kind of enamored with the companies in our market that really make an extra effort to work with agencies directly versus the kind of direct to client type of business where agencies are just kind of like a different type of customer. And so what I saw, Cloudways is really making that move to support agencies as a unique type of client, because every agency might not be supporting one website. So if they have issues, they might have 30 clients, 40 clients, 50 clients, and they really need to be dealt with a little bit differently. And they probably don't need to have those like standard support channels.
And so when I saw their moves, going more towards that part of the market, it was really exciting. So we decided to move all our stuff over to them. And it's been cool, because it's made us a lot more profitable. I think we cut our costs by about 70%. And I didn't want to do that unless stuff performed better. So I had my team, basically benchmark all of our sites beforehand. And we actually experienced about a 2x lift on speed across all of our sites. So it felt really good. Once we saw that, I was like, okay, we saved a bunch of money and stuffs a lot faster. And they're making huge plays towards helping agencies. And so, kind of approached them and said, hey, I'd love to help you guys get more people in our market to be aware of this, because we think this could help them with that stability, with that peace of mind. Everything we've kind of talked about in this episode.
Kelly: Yeah. And then as an added benefit, they didn't actually mention that lift in speed is actually helping your clients from an SEO perspective, right? Like Google loves nothing more than a really super fast site. So that's great. That's a completely added benefit. I can't believe the 70% increase in profitability, did you? Do you think that that's something that can be expected across the board or did you have a situation where you were just kind of admittedly overpaying with the previous provider?
Brent: I mean, probably overpaying and probably some of us. I still have some scars from that month’s lost of my productivity and of my life. I mean, never gonna get it back. I wake up every morning, and I put on that hosting crash t-shirt and I think, oh, gosh. But I think that there's probably some truth to that, of wanting to make sure that we have a partner, that we're paying for in case, a lot of people say, you don't pay for when things are good, you pay for when they're bad. And so I think we had that kind of experience. And we wanted to make sure we had somebody that was going to make sure this was never gonna be a problem for us again.
And so we probably did overpay a little bit. But that being said, I think that the WordPress managed hosting market has changed and evolved. And I think as an agency, I mean, most agency owners have, maybe they have like 20% of their clients or like high performance websites that need to be on their own server. They need to have like lots of infrastructure behind them. And so we want to make sure we have a hosting partner that can help with that. But then there's that 80% of sites that like we don't necessarily need to have. It’s like a local restaurant or whatever that's getting 100 visits a week, which obviously, we should be working to help them grow that but maybe they're on getting huge traffic.
And so that's, I think, where there's an opportunity to create a lot of profit, assuming that you have a solid hosting partner. And so that's kind of where we looked at it. The high performance sites probably about, even in terms of profitability, because we had to create our own infrastructure there. But it's those sites that we could leverage a little bit more buffer on, those where we saw a big lift.
Kelly: Yeah, cool. Now, Cloudways has an actual formal agency partner program that they have in the works. I know there's like a waiting list for it right now. Do you know about that program? And can you tell me a little bit about what the specific benefits would be for agencies? Like, if I still had my agency, why would I sign up for that?
Brent: Yeah, so one of the reasons I joined as a Maverick was basically to go all in with their agency partner program. So it's still in kind of early pilots. They have a handful of agencies, a few dozen agencies that are in the program right now. And they're in the process of accepting additional agencies into that program. So if you do go and sign up, depending on when you listen to this episode, you might have to join a short waitlist.
But for the three big things, one is priority support. So as I mentioned earlier, agencies need a different kind of support than your retail hosting support. So they have a few different channels, including Slack channels for some of their higher performance partners. So literally, you've got Cloudways on demand for your agency. If you have an issue, you've got them essentially on live chat all the time through their Slack channels. They also have kind of a growth program where they're going to help with co-marketing and also some discounts. So if you're actually joining the program, you can kind of as I mentioned, increase our profitability, partly because we're able to get better pricing on some of their cloud hosting and support.
And then the last part is relationships. So you get a dedicated partnership manager, which is kind of your main account manager, if you will, where you can contact them, talk about what's going on with your clients, if you got some big clients you're about to sign, maybe you've got some additional clients that are getting featured or need some kind of higher traffic, or you just see your agency growing, and you want to be able to work with somebody on their sites, you've got that a dedicated partnership manager.
And then you've got people like me on their Mavericks program. We're running some additional training for those agencies that are in that partner program, some additional coaching and support to help them not only with the hosting and the tech stuff, but also to really help them grow their business, which is one of the things that I'm most excited about.
Kelly: Yeah, that's amazing. And it feels very, very support centric, like everything that you just mentioned; it's not just about Cloudways just wanting to sign more clients. It really feels like they thought it through, and that they're really providing all of the things that historically have been pain points for digital agencies when they thought about maybe getting into bed with a partner like this to outsource their hosting.
Brent: That's one of the things. When I joined, that project had already been, let's say 80, 90% completed, but I was blown away, one of the other Mavericks has been working with our team in this like intensive user experience research study. So they've been talking to dozens of agencies within their network and doing interviews, proposing what those plans might look like, iterating them, testing them, doing more interviews, lots of feedback. They're like going really, really slow with the program right now. And I've been really impressed because a lot of people are like, oh, we should make money and agencies. And they just like launched a discount code, launched like a dedicated email address. But there's no real background process on that. And so I've been really impressed by seeing what they've done to create this program. And I think there's a lot more in store with what they're offering.
Kelly: Yeah, it seems like it. So if there are any digital agency owners or leaders out there, and you're interested in checking out that partner program, you can just head over to cloudways.com/thrive. And that'll take you right over to that agency partner’s page. I think they're also doing a discount if you're just interested in trying out the hosting, like as a trial run for maybe one or two sites, maybe for your own site, maybe for a new client. And so if you just enter thrive as a promo code at checkout, you'll be able to get an exclusive discount. Obviously, I'm going to put all of that in the show notes if you didn't catch it. But, Brent, thank you so much. I mean, I think this is incredibly valuable, not only in general and support of agencies and growth and stability, but also as we're all sort of navigating this new normal. And so having these really strong partnerships that can add to our growth, add to our recurring revenue, like nothing is more important than that right now. So I just want to thank you for all that you're doing as well.
Brent: Yeah, thanks for having me on the show.