Happy 4th of July everyone! As you may recall, Erik spoke on a previous episode about how we analyzed all of our clients and grouped them by how much revenue they produce on a monthly basis. In episode 170 of Journey to $100 Million, listen in as Erik explains why we got rid of our hosting only clients here at Array Digital. After grouping our clients, we found that we have a rather large bottom-tier group of clients. These clients pay us less than $100 per month, and all have one service in common: hosting only.
What is hosting only? In the past, when we were building websites over the years, we would get paid by project. After we finished building the website, we could either give the code to the client and they could host on a server of their choosing, or we could host it for them – thus birthing our hosting only service. We started to host for these clients as it brought in extra revenue for us. We were charging about $10 a month at first for hosting, which is the going rate. We were not trying to make a killing, but instead trying to get some recurring revenue going.
Over time as we morphed into more of a digital marketing agency, we got away from providing hosting only as a service. We stopped offering it to new clients, and the only people that had this service were old clients that were legacy. We have been trying to convert these remaining legacy hosting only clients to other services we actually sell, like unlimited content changes. But, a lot of them have resisted to upgrade. These clients were just not interested, or our sell was not a compelling enough reason to change. We have been trying to do this for about two years now.
After we did this analysis to figure out who was in this hosting only category, we concluded that we really did not want to support these clients anymore. The total monthly recurring revenue from all these hosting only clients combined was only $1,000. The proportion was way off, and even if we jacked up the price, it still would not be enough to justify. So, we decided to get rid of hosting only.
This has happened before where we have discontinued services, and it’s always somewhat of a painful process. You have to really think through what services you want to keep long term. Then the services that just don’t fit anymore, unfortunately you have to rip off the band-aid and tell your clients you are going to discontinue it and they either need to upgrade to one of your current services, or migrate to another provider.
That is our plan with our hosting only clients. We have reached out to them, and our sales manager is trying to contact them one more time to let them know we are truly getting rid of this, and then see if they want to upgrade. If not, we will coordinate with them so that they can take their files and go to a hosting company that is going to be way cheaper than us, and a better fit!