State of the Biz: 2018 (Annual)

Welcome to the 3rd annual State of the Biz report for FatLab Web Support. I’m a little surprised I got this done 3 years in a row! In case you are interested you can find the previous year’s reports here:

I guess this continues to be more of an exercise for me, a way to take the annual numbers and create a report that shows the big picture. It’s not like we have shareholders or investors. However, as the company grows I want to share that with clients, assuring them we are stable and will be here to serve them for a long time to come. I also want to share this with others who simply might be interested in how we run a web support company and more importantly how we make money and keep ourselves employed.

I don’t need to tell any of you who run small businesses that it’s a constant emotional roller coaster. The highs are high and the lows are very low. Winning a new client, no matter how small, is huge victory while losing a client is something that ruins many nights of sleep. This report is like a calming drug that shows no matter what irrational thoughts were going through my head on any given day, we did good!

This was a record year on just about every metric However it’s not all roses as I know some of these numbers are going to be hard to replicate in 2019. There were also a few anomalies that I will explain further into the report. Let’s get to the facts.

The Numbers

Organizations served: ~55
Revenue growth from previous year (2017): 16.26%
Average earned per client: Up 26.54% from 2017
Websites hosted: 82 (up from 71 in 2017)

How We Generated Revenue

I have been tracking revenue in four different categories for the last few years. The following graph shows how we generated revenue in regards to these categories in 2018. The big take away here is that where our revenue comes from and the percentage share that each area represents didn’t change much since 2017.

2018 revenue by division

Note: In the above chart, agency hosting and support agreements are only represented as “agency partnerships” and not also included in “web hosting” or “support plans”. Most support plans include web hosting, the web hosting category is representative of only those clients that host but do not have a “support plan” and are not part of an agency partnership.

Key Metrics

Agency partnership revenue is up 46.83%
Website maintenance and support plan revenue is up 7.89%
Web hosting revenue is up 6.72%
On-call support is down 6.92%

In past years I have taken a look at how much of our revenue is generated from nonprofit clients vs. commercial clients. At the end of the day it really doesn’t matter. However from a marketing perspective it’s nice to know because potential nonprofit clients will typically ask if you have such experience or related clients.

This year I added agency partnerships to this graph because in our small world we often refer a client as belonging to one of these three groups and it’s nice to see how that breaks down. Honestly it was a bit of a surprise to me that they split so cleanly at about 30% each.

 

commercial, agency and nonprofit revenue chart

Note: In the above chart, only nonprofits and commercial businesses that we work directly for are included in their respective categories. We work for a good number of nonprofit and commercial organizations through agency partnerships, though in this model these are included under “agency partnerships”.

What Was So Good About 2018

This was a growth year, for the third year in a row we saw growth with our support plans and a decline in straight on-call (hourly) support. This, at least for now, is a good thing as it means we lost some smaller clients, converted some to larger plans and were able to sell some of our more profitable support plans.

We did lose a few clients in 2018 as we are down to about 55 active clients from about 60 at the end of 2017. However the impressive figure is that revenue per client is up about 26%. Again, I think it shows we lost some of the smaller clients and replaced them with larger ones. In our business this is very much a positive!

We Saw a Few Anomalies in 2018
There were a few wildcards this year that we probably wont be able to replicate in 2019. For one we actually did build a website for a client (I know I say we don’t do that), this was a large job – tens of thousands of dollars that fell under hourly billing – and the only reason that on-call web support was not down even further this year. It was a special exception for an organization that I have been working with for over 15 years, and which has special circumstances which I provide a high-level of legacy knowledge on.

We also saw a huge increase revenue generated from agency partnerships (up about 46% from 2017) and this was due to a couple unusually large projects.

The 2019 Outlook

I have to be honest here. I am not super optimistic about growth in 2019. I personally feel that as the U.S. economy becomes more unpredictable, budgets will be cut. We do have an advantage here in that we offer support versus trying to sell our clients something new. However we do very much rely on our agency partnerships (about 1/3 of our business) and they do in fact sell new products, which they use our services for. I also have to admit that the premium level of service we provide is not cheap. When hosting can be found for a few dollars per month, and our managed hosting starts at $225/month it’s easy to worry that bargain hunting could hurt us.

Our 2019 Plan
I think 2019 is going to be the year we really focus on the clients we have. After several years of incredible growth I think it is time that we take stock, focus on current clients, current services, and ensuring that everyone is as happy as they can be. Sure, we’ll continue to seek growth through new clients and partnerships, but this renewed focus on client service is going to be a key goal for 2019.

More Highlights from 2019

  • We hit my revenue goal for 2018
  • Niki Sebastino and I wrote an eBook to help organizations plan and hire (correctly) for their website builds
  • We prepped a new service for 2019: Website consulting. This is not a service that is going to make us wealthy. It’s honestly an effort to help organizations plan for and make the right hire when building/designing a new website. A well built website aids in the ease of future support so it’s a win win for both our clients and us.
  • I had the opportunity to meet Andrew Schulkind, of Andigo Media for the first time. Andy and I have worked together for many years but have never actually met in person. That all changed on the shores of Costa Rica when our families were able to get together for a sunset dinner.
  • Niki Sebastino and I also met for the first time in person despite working daily with each other for many years. She and I met in Washington, DC and spent the better part of week meeting with clients there and in Baltimore, MD. We also shared a few meals, had some good beer and actually didn’t hate each other’s non-virtual company.
  • Ryan Wadsworth, jumped at an opportunity to work with one of our agency partners and one of their biggest clients to develop a custom geo-based calculator and complete a major website overhaul. This was about a two month dedicated effort we were able to provide.
  • By the end of 2018 all hosted and support plan clients would have been moved from PHP 5.6 to 7.x
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