About 4 years ago, I left a startup job to run a web development agency with a long-time friend. He and I were very entrepreneurial and always looking for ways to leverage our skills in order to make some money, without having to work for “the man.”
We put together a company, found some customers, and started building websites. Our business operated on word of mouth and we soon had numerous partnerships and shared contracts with design and marketing firms.
One thing that we never could figure out was how to form long-term relationships with our customers that also resulted in recurring revenue. It would have been great to find a way to smooth out the dips in contract work by having a monthly check heading our way.
Increasing your margins from each customer
For most of our websites, we were using 3rd party plugins as much as possible to save ourselves time on the initial development, as well as lowering the footprint of code we had to be responsible for.
Successful plugin developers manage their plugins and have communities of people helping each other to solve problems—which made our jobs much easier. At the same time, since we knew what to use, how to configure it, and how to customize it, we were able to charge a proper fee for that work, increasing our margins on each site.
Develop recurring revenue by providing email services
You could easily apply this idea to your agency business. For example, SendGrid has API libraries (AKA SDKs) in 7 different languages that sent a significant volume of emails for 10s of thousands of customers in 2017. Any development shop can quickly and easily build on top of the SendGrid API, using proven and well-tested code, without having to know all the nuances and details of the API. This saves time and gets projects delivered more quickly.
Hindsight being what it is, I wish we would have thought about reselling 3rd party tools (like SendGrid) to our customers.
We were already setting up their email plugin, which overrode the default functionality, and helped to make sure the emails were actually delivered.
We could have easily been resellers of the services we were already using ourselves! Frankly, we missed this opportunity to continue our relationships with our customers outside of the random support or training call (to be fair, we also missed the opportunity to have a recurring website maintenance fee too).
Email fits the work you’re already doing
Why add email to your agency product offering? Because your customers are already building email lists and communicating with their customers—whether you know it or not.
Often, those same customers are struggling to figure out how to make email work more effectively for them, or they have some poor soul calling deny lists trying to the get company’s email turned back on so the CEO can email the team about how their email isn’t working!
This happens all. the. time.
How to start
SendGrid has two features that work together, called subusers and sender authentication, that allow you to insulate your company’s email streams from each other. SendGrid often suggests that customers send their marketing email through one subuser and their transactional email on another. This helps to make sure that when someone gets a marketing email they don’t want, transactional emails (like forgot password or receipts) still get sent and received.
These features also work swimmingly for insulating customer email accounts from each other. You can set up sender authentication and subuser pair for your customer, then create an API Key, and send email from whatever tools or sites you have implemented for your customer.
Subusers also provide a couple of other really interesting features for agencies. The first is that you can restrict the total number of emails that are sent per day, week, year, or overall. Secondly, as the owner of the subuser, you can either run a report manually, or through the API to determine how many emails that subuser sent and how many contacts they stored in the last month.
Start collecting $$
Once you have the usage info, whether you make it a flat fee with credit restrictions or by querying the API, you can invoice the customer every single month. This gives you that recurring touchpoint and reminds your customers about the amazing service you are continuing to provide them.
SendGrid’s plans are set up to get cheaper per email as you scale. This works so well for agencies, because the more customers you send email for, the better the margins are on your monthly bill.
For example, let’s work off of a hypothetical company that:
- Sends out about 1,000 emails a month for marketing and for purchase receipts
- Has a SendGrid’s Essentials 40K plan which is $10 a month, because this plan gives you subusers that allow you to insulate your email types from each other (at least now you will, right?).
You are spending $.01 per email (not bad, right?)…but you’re letting 39,000 emails that you paid for go into the trash can.
For the sake of easy math, let’s say you have 10 recent website customers. Each customer averages about 1,000 emails a month from the site you built them. So, you create subusers and sender authentication for each customer and you set up the sites to use these subusers. For this service, you charge them $5/month.
Now, you’re netting $40/month in profit (making $50/month from customers and spending $10 with SendGrid). You are using 11,000 emails of your 40,000 (leaving 29k emails for future growth). Your customers are now paying you to market to them, update them, and to send your invoices to them!
If you max out your account at the same customer sending rates, you would be making $145 more per month before paying SendGrid anything extra.
If you’re an agency, you’re likely looking at ways to maximize your efforts and provide the highest value for your customers so they become long-term and invested with you. Using SendGrid is a great way to help achieve this with your email program. Learn more about how SendGrid works with agencies.