How To Build The Ultimate (Hosting) Business in 5 Steps
April 7, 2016 | Jesse Nickles
Table of Contents
This guest post was originally titled “How To Build The Ultimate Hosting Environment” at the invitation of MaxCDN. Soon after beginning the post, however, I realized that discussing any sort of “ultimate” web hosting infrastructure really required some background discussion on business values. Below is the more extensive piece I came up with.
During the U.S. occupation of Japan after World War II, much deliberation took place between American and Japanese officials on how to rebuild the Japanese economy to a point of prosperity. General Douglas MacArthur, frustrated at his inability to make so much as a phone call in Japan due to post-war destruction, requested an American professor of statistics to assist with the early planning of the 1951 Japanese Census.
The professor, W. Edwards Deming, had previously assisted with organizing the U.S. Census and had experience in quality control and various sampling techniques. Inspired by Bell Laboratories’ Walter A. Shewhart, Deming went on to train hundreds of engineers, managers, and scholars in statistical process control (SPC) and quality control concepts. One of his trainees was Akio Morita, the co-founder of Sony.
In summary, Deming’s message to Japanese business executives was this: Improving quality reduces expenses while increasing productivity and market share. By implementing Deming’s concepts, Japanese companies and manufacturers went on to achieve never-before-seen levels of economic growth. Less than a decade after the war ended, Japan became the world’s second largest economy due to international demand for Japanese products.
This quality-first approach, along with Glen Allsopp’s Marketing Inc. project, greatly inspired me to find a unique niche in the web hosting space that could be the best service of its type. It’s with this mindset that I launched LittleBizzy, a managed WordPress hosting business focused entirely on speed, stability, and security.
In this post, I’ll tell you how I built the hosting biz of my dreams — a service that I had tried to find for years until giving up and launching it myself — without any affiliate program, and by acquiring most of our new customers by way of referrals and resellers.
Step 1: Focus on Quality First – Always
Despite his rise to a cult-like status among Japanese corporations, many of Deming’s business values — such as eliminating quotas, cherishing relationships, and focusing on the “long game” rather than short-term profits — never really caught on strongly in the Western world.
In any regard, his common sense observations of human nature, paired with statistical mathematics, has proven to hold a unique place in the history of business, and is surely something that I’ve come to appreciate as a web hosting provider. The quality assurance philosophy of W. Edwards Deming was summarized by his Japanese cohorts as follows:
In other words, according to the above ratio, companies that focus on quality tend to improve their quality over time while simultaneously decreasing their costs (by reducing waste and increasing customer loyalty). On the other hand, companies that focus on costs tend to perpetuate waste and regularly lose customers, all while lowering overall quality standards.
Step 2: Confirm a Market Exists
Call this business validation, or whatever else you want. The web hosting industry is very saturated with constant price wars, so I needed to find a niche in which I was truly the top “expert,” while maintaining a pricing structure that didn’t just target deal seekers, if I wanted to make a profit.
As I had years of WordPress experience as an SEO consultant, and as I came across surprisingly few companies focused specifically on “fast” WordPress hosting, I decided to offer a hosting service that was squarely focused on improving WordPress speed. For six months, I found jobs on oDesk (now Upwork) where clients were looking to improve the performance of their WordPress sites.
Initially, I made money not only from “fixing” the recommendations on Google PageSpeed, Pingdom, or GTMetrix (people love that stuff!), but also from affiliate sales by referring my clients to services like DigitalOcean, MaxCDN, and CodeGuard. I tried hard to connect with already-successful business owners who were not “too cheap” to pay for quality, and who were open-minded and receptive to advice.
Step 3: Perform an Ethical Bait and Switch
During my six-month freelancing experiment, I made sure to get each client’s email address and contact information. As time went on, many of them contacted me directly for additional work and new, fast server setups on DigitalOcean.
At this point, I had a naturally-growing base of clients who already trusted me and were pre-qualified candidates for my theoretical web hosting company. Standing out was clearly going to be easier than I thought since 99% of web hosting companies are focused on being “the cheapest” rather than adding value to the experience.
My goal for LittleBizzy was to not only offer better performance and higher quality web hosting than the majority of the market, but also to simplify the technical and billing aspects of web hosting in ways that provided real value to small business owners.
In an industry chock-full of “snake oil salesmen” and an overwhelming amount of options, I knew from years of past marketing experience that, rather than having tons of options and features available, limiting LittleBizzy to hand-picked, high quality add-ons – while educating my clients on why they should buy them – would make for some very easy upsell and cross-sell opportunities. Plus, my clients already trusted my recommendations after seeing their improved loading speed!
Not only did this position me as a B2B service solving real, immediate problems for business owners, but it was a recurring billing business model too, meaning potentially YEARS of monthly revenue per relationship.
I also wanted to make sure my pricing was marked up minimally to prevent my clients from feeling the need to shop around. I knew that my “quality” would be top notch and “wow” most of them, but that wouldn’t mean very much if the pricing didn’t make sense in this very competitive industry.
Step 4: Choose the Best Components
As Sony famously learned during the 1970s-1980s, “dispensing with unnecessary features” and developing product components as distinct, high quality elements that stand on their own increases quality while making it much easier to customize a product.
When it comes to website performance, I try to use a “pyramid” analogy when explaining features to my clients:
At the base of this pyramid is DNS, without which the entire internet would not exist. This is followed by servers and datacenters, and third party services like MaxCDN. I’ll explain the main components of this pyramid below.
Domain Name Service
Servers and Datacenters
Your datacenter should be located in a major internet “hub city” of the world (a.k.a. Internet Exchange Point) tied directly into Internet backbones to achieve top speeds.
Enter: DigitalOcean, one of the fastest growing VPS providers in the world that strategically locates their datacenters in key cities across the globe while maintaining 99.9% network uptime. They also offer KVM virtualization, SSD storage drives, and IPv6 configurations (plus, no confusing acronyms or hefty bandwidth costs… cough, Amazon).
After careful research, I came up with a reliable LEMP stack configuration (Ubuntu + Nginx + MySQL + PHP-FPM) that worked perfectly for WordPress websites without straying into more experimental applications like HHVM and MongoDB, etc. for unnecessary headaches.
By placing each client on their own VPS instance with “newer” versions of LEMP, it helped increase security as well as speed, while ensuring that one customer’s website did not affect any other. Also, this allowed me to accept clients from anywhere in the world, since they could choose their own datacenter.
Since I was focused purely on WordPress-based websites running on Nginx servers, the only real discussion here came down to WordPress theme and plugin recommendations. Or as it were, non-recommendations in many cases.
This largely consisted of listening to customer questions and developing a rather extensive FAQ and New User Guide section in order to make sure our hosting clients understood that LittleBizzy was NOT an old-fashioned cPanel/Apache type of company, that we did NOT enable PHP mail on our servers, that we only allowed ONE database per VPS server, and that we disabled XML-RPC functions, among some other things.
Third Party Services
These days, having a solid server configuration at decent pricing is still sometimes enough to set you apart from the competition. However, recall that my goal for LittleBizzy was to be a total solution for SMBs looking to offload technical AND billing worries when it comes to the performance and management of their WordPress website.
After all, if my clients had to open up various accounts and pay various bills each month, I probably wasn’t saving them very much time or hassle.
That’s why MaxCDN, CodeGuard, SendGrid, CometCache, UptimeRobot, and WP StageCoach became the true selling points of LittleBizzy’s managed WordPress hosting, allowing our customers’ web hosting experience to take place almost entirely from within their WordPress admin panel. (For anyone worried that CDNs are becoming less relevant now that HTTP/2 has arrived, allow me to assuage your worries.)
One of the most common security (and performance) risks that WordPress sites have is bloating their server space (and abusing their CPU/RAM) with janky backup plugins. CodeGuard, on the other hand, intelligently backs up your site to remote servers every night via Git version control. This makes for a much lighter origin server, no stressed VPS resources, and no possible way for hackers to snoop around a bunch of backup ZIP files.
Add in CometCache (formerly Quick Cache / ZenCache) — quite possibly the best and most underrated caching plugin for WordPress on the market for years now — along with SendGrid for uber reliable transactional email delivery, and UptimeRobot for exceptionally flexible uptime monitoring alerts (with extremely reasonable pricing), and the rest, as they say, is history.
(Our latest addition that’s quickly becoming a customer favorite is WP StageCoach, which allows our clients to rapidly set up remote staging sites without cluttering their live server.)
Author’s Note: At the time of this writing, we were using MaxCDN, but are now experimenting with CloudFlare’s CDN for a few different reasons.
Ultimately, the thing I love most about all of the companies mentioned in this article is that NONE of them are based in the Silicon Valley bubble (besides CloudFlare). Every single one of our partners is a company focused on a single niche that has dedicated themselves to becoming the best provider within that niche.
I’ve even spoken with several of the CEOs/executives of these companies already, and, in many cases, they have implemented a new feature or change based directly on a conversation I’ve had with them. Can you imagine that happening with some alternative corporate options in the web hosting world?
Step 5: Put Cherries on Top
As if the above wasn’t enough for our clients to stick around (it is!), it’s always nice to round things out with a few extra special things.
At LittleBizzy, we offer 100% free setup and migration for ALL websites, and we never, ever ban any WordPress plugins like many other WordPress hosts are doing these days. Combine that with HTTP/2 support from CloudFlare and IPv6 support from DigitalOcean, and, well, that’s a wrap!
Treat Your Hosting Business Like A Sony Home Stereo
Just as the U.S. government sought to break apart the pre-war Japanese family monopolies into smaller, more flexible business structures, the future will surely give way to tens of thousands of boutique web hosting options, rather than just a few dozen well-known web hosting companies.
One of my customers, Vanessa Harris, recently wrote up a glowing review of LittleBizzy after she left a major hosting provider. And, shortly thereafter, she decided to go try out WPHostingSpot’s new PHP7 + MariaDB offerings.
Did I mind? Of course not. Smaller, customized niche services are the future, and when you don’t need millions of customers to flourish, more personal relationships and better customer service is possible. LittleBizzy will always have plenty of customers to prosper — as long as we focus on quality.
In conclusion, just like a 1980’s Sony home stereo system, I was able to come up with arguably the BEST POSSIBLE managed WordPress hosting environment currently available by partnering with the best “components” currently available. From DigitalOcean, to CloudFlare, to MaxCDN and beyond, the building blocks of LittleBizzy are each the leaders of their industry and provide our hosting clients with an amazing level of stability and performance.
The best part of all is that these partners are working day and night to monitor and improve their services, meaning MUCH less work for us, yet we reap every benefit of their hard work in the improved reputation of our company among customers! And, if at anytime in the future one of these components becomes less than ideal, we can choose to simply swap it out with an alternative “component” service. This can happen with likely no financial loss whatsoever, and without significant interruption to any of our clients.
Of course, if all this sounds like too much, you could always become a LittleBizzy reseller.