7 Recurring Revenue Streams to Build into Your Digital Marketing Agency
Many digital marketing agency owners struggle with the rollercoaster ride of feast and famine cycles.
You get a new client on, work hard to get the project done, and while you’re busy doing the work your sales suffer. When the project comes to an end and you hit the “famine” part of the cycle and desperately hunt for your next project.
This is stressful, and even more so if you have a team of employees who are relying on you for their pay check.
The answer to breaking this feast and famine cycle is to build a strong base of recurring revenue into your business. Recurring revenue provides a secure base for your business, which not only helps you sleep better at night, but enables you to grow your team more securely, as you can project your recurring revenue and plan hiring staff and other business expenses.
If you’re running a digital marketing agency, here are seven types of recurring revenue that you can aim to build into your business.
1. Website Hosting
Hosting websites for clients is a simple way to build recurring revenue. But don’t compete in a race to the bottom in terms of price. Don’t aim to compete with the super cheap self-hosted platforms such as Bluehost or Dreamhost. Instead, remember that clients pay for the value you add.
Your client doesn’t understand the technicalities around hosting, and they shouldn’t have to. That’s where you provide value.
Clients also often overlook the importance of reliable backups. They’ve invested in you building their website – don’t let them be naïve when it comes to backups. Providers like Bluehost actually have it written in their T&Cs that they do not guarantee their backups! And if your account is larger than a predefined limit (e.g. 2 GB) then their backups won’t work.
If you let your client host on one of these self-hosted platforms, and then their site gets hacked, or broken and none of the backups work, they will not be impressed. And arguing that the web hosting was done by a third party won’t help you mend the relationship.
So, make sure that you choose a good hosting environment and have a reliable backup system. Then pick an amount to charge your client for hosting – but don’t get tied into the amount you’re paying to the server provider. Instead think about the value your client is getting, the time it will take to do any troubleshooting as needed, and the risk you are taking if for some reason a site gets deleted or damaged and you need to spend unbillable time fixing it.
2. Website Maintenance Plans
If you are building websites in WordPress, the most important practise for keeping the websites secure is to keep WordPress and plugins updated.
Releases come out regularly, which include feature updates, bug fixes and security fixes. If you let a site get out of date you’re leaving your client’s site potentially vulnerable to hackers.
Therefore, you should require that each WordPress site that is hosted with your company must have a monthly maintenance subscription. For this fee, you will take care of all WordPress and plugin updates.
The easiest way to take care of this is to use ManageWP to run updates for all the sites you maintain from one simple interface. Or use the premium WPMU Automate plugin to run updates as they become available. (But sometimes WPMU Automate runs into problems with an update, so have ManageWP installed too).
By selling your clients on a “Hosting and Maintenance” plan you’re adding much more value than the super cheap self-hosted platforms and can charge a recurring fee
3. Payment Plans for Websites
When building a website, it’s common to require a deposit, a progress payment and then a final payment when the site is live. But an alternative approach is, instead of charging on an up-front basis you could split the payments over monthly instalments for 12 or 24 months.
The advantage for the client is that they don’t have to find the funds upfront for the website build. The advantage for your business is that you can often charge a higher amount for the full website, which the client wouldn’t have been able to afford if they had to pay it at the start.
If you go down this path though, make sure you have a rock-solid contract. If the client decides to get another website built by an alternative provider before the contract term is up, you need to make sure you won’t be left out of pocket.
4. Search Engine Optimisation
As a digital marketing company, search engine optimisation is an ideal way to increase your recurring income. SEO is a continuous process, and if someone is knocking on your door looking for SEO services, you have an opportunity to turn them into an ongoing customer.
SEO results can take a few months to see, so make sure you explain this clearly to your client. That way expectations are in the right place, and as long as you start to get results, you’ll have got yourself a client who’s not going anywhere.
5. Google Ads (AdWords)
Google has pretty much taken over the online world, and nearly every business wants to be found on Google to generate leads.
If you have someone signing on to try Google Ads, and you are able to generate leads for them, they’ve got no reason to leave you. The more business they get, they more they want to invest and the more money you take.
Some agencies charge a fixed fee for managing Google Ads, others charge a percentage or performance basis. If prefer the percentage model, because if your campaigns work so well that the client wants to spend more money, you should be rewarded for the results by earning more from that client too.
6. Domain name renewals
Domain name renewals are a simple way to make some extra recurring income. Mark-ups of almost 100% are common – so if you buy a domain for $21.50 it’s common to retail it to your client for $39.95 per year.
However, while the mark-up sounds impressive, the actual profit is very small. With the example figures above it is just $18.45 per year. And for that you need to pay for the domain, send an invoice to your client, and chase up late payments if needed.
So, to make this work profitable, automation is critical. Full automation (where the client logs in to your system and pays to keep the domain going) is a lot to setup and only useful if you’re dealing with thousands of domains. A much more simple way to setup automation is to use Xero or Quickbooks repeating invoices. When you buy a domain for a client, setup the repeating invoice in your accounting system and set the invoice to be automatically sent each year. That way, you never have to touch the administration again (until the client wants to cancel the domain).
Measuring your recurring income
Recurring income is a smart and sensible way to give a solid financial foundation to your growing your business. To keep your finger on the pulse you need to be able to project your recurring income easily on a regular basis. This will help you immensely with your planning, and measurement of business growth.
It is a good habit to look at your recurring income forecasts on a 12-month basis, so you know what to expect. This helps you plan ahead and work out what you need in order to grow.
Forecasting used to be painful and complicated. But if you’re using Xero for your accounting, forecasting your recurring revenue is now instant, thanks to software called DonkeyBean. DonkeyBean connects to your Xero account and within 2 minutes gives you a 12 month forecast of your revenue from your repeating invoices.
Building recurring income into your digital marketing agency is a great practice that will fix the feast and famine rollercoaster so you have the time to focus on growing your business and discovering new business opportunities.