Building A SaaS Business: How Reilly Chase Took HostiFi to over a Million in Annual Revenue!

all right tom here from lawrence systems and i am joined by riley chase of hostify and when did we do that first video i think it was july 2019 was the first time i was on tom's channel it's a millionaire now okay we maybe not quite a millionaire there's that misconception of you're making a million dollars in recurring revenue that's true yeah so we're going to talk a little about the sas journey how he's just an overnight success and you can do it too you can be a unicorn and just you just have to scratch some itch and find a need and we can oversell entrepreneurship or something right well you actually are very realistic like i am about this as a topic i i never say it in a way of gatekeeping i sometimes think entrepreneurship can be oversold but but i only say oversold not that it shouldn't be sold not that shouldn't do it uh i don't think it's like that we should as entrepreneurs who've been successful roll that ladder success up and not help people but i always want to talk about it's real you have to be very realistic uh it was not an overnight success you've put in you could you even count the hours you didn't work a 40-hour week to build this uh you to build the hostified company right it says yeah it's yeah it's definitely been a lot of hours it's it's a it's an idea an alignment and uh having this whole i don't know it's so hard to describe you know isn't it because you're in shock when you hit the hit that mark right yeah well the thing is i never really imagined that it could ever be that big actually when i started it i was actually thinking this was just like a yeah i'm gonna this can be a test run to try starting a sas business and maybe if i get 10 customers i remember actually thinking this if i get 10 customers it'll pay for itself and that'll be a success for this project and i can move on to something more interesting or more complicated but uh as i got deeper and deeper into it it got more complicated more interesting and i found more customers than i ever thought so yeah so a few years ago to give you a little background uh well go we can go further back when did you start hosting exactly may 2018 is when i launched it and i started like trying to put it together in like february march 2018. yeah and uh one of the things that made me interested in the whole project well not just the fact that i use unifi but because he publicly blogged step by step and by the way host five wasn't the only thing you started you actually tried uh an msp you tried what else did you have going you had a couple other things i trimmed or what they all were yeah for so for like four years before starting hostify i had an msp business called lachlan networks after i started hostify i thought well this is cool um it's growing really slowly but it's it seems like uh like it's working out but i i thought well i'll try making a couple other things just like this i think it got to like a thousand a month and i was like well maybe if i could just like do 10 more things to get to a thousand a month each then maybe that'll work so i i started like a vpn service called ghostify that's the other one and i started a um another service uh called captify which was like the wireless portals integration for unify um but i've since shut all those down i also started msp community and i don't have time for that so i shut that down as well i i think it's important to highlight that there it you're even though you are with someone who's diligent willing to put the work in not every idea flies that's just something i like to be as realistic as possible i sometimes see the oversold of hey look he's making a million you can do it too buy my book and i'll tell you how like that's the playbook right yeah step by step and there's not really a uh the career paths are going to be very different the commonalities is what you want to look for is like yes yes we all worked hard we all put a lot of things in there we also failed at a lot of things uh i don't own suburban computers anymore i don't have my electronics repair company anymore i don't i don't have and i i don't there's several things thomas failed at as well so i usually like to be very honest about it but back to the hostify so if you're not familiar with the whole unified platform for those who maybe just came here talking about starting a sas business or you know follow whatever links led you here the one thing about it is uh you got to find something where there's a hole in the market yeah that sounds really obvious now unifi has the controller software that they give away for free you can just download it and me i'm bad at sass because i said why wouldn't i just host it myself so i host it myself and why wouldn't other people host it yourself uh that's where i'm not thinking like riley who says this seems like a little bit to set up to host i'm like you know my mentality yeah sure it is here's my youtube tutorial on how to build your unified hosting and riley says no i think people want to pay for this as a service and so this free controller from unifi that manages the unified platform riley built the platform that manages that that actually takes and takes care of all the hosting for you takes care of all these little intricacies of what it's like to set it up and that actually brought you all the way into you do some qa testing i laugh because i think as big as unifi is i mean here's a company that's got a market cap of somewhere north of 10 billion dollars right and people ask uh i get tagged in twitter and riley and there's a couple other people like i think chris from crosstalk's been tagged twos a couple times uh they'll ask us should i upgrade to the new version yeah and we're like why is the question it's always the question but it's the doing things at scale uh riley's really kind of niched into that become kind of like the voice of unify that unified doesn't have if you're not fair also with the other side of unifi is their support's not great they give away a product they don't give away support they don't even have a paid option for support it's weird that didn't you know if i have a market doing this for a little while so for when i started osi we were actually directly competing with ubiquity they had uh after i launched hospital they had actually just launched their own hosting product and their own support products so they had a unifi elite and uh cloud hosting that went along with that as well and so yeah we were actually competing head to head but we kind of beat them at it because they stopped offering it and now they don't do elite support you can't buy it anymore and they don't do cloud hosting um they still have customers um that we've been migrating over to hosted by they haven't done updates on their controllers in years so they actually have controllers out there that are vulnerable with security vulnerabilities running two-year-old 5.11.50 i think it was or something that's crazy and uh yeah so we've pretty much taken all their customers though they no longer offer it and um yeah it's just really weird it's really weird to have a company have that gap like that and so one cool thing though is near and dear to my heart is you're extremely public about all this at the blog post you've really done a great job of doing regular updates to step all along the way of how you got to where you are to be very transparent about it that's transparency is huge because i like to get share with the audience so to speak how we got where we are no hiding it you know no back end i didn't tell you by the way uh my cousin's the guy who owns unify and that's how i started right rob's not your cousin so no no i don't even think matter of fact at some point i don't think they liked your logo am i right about that that's right yeah that's a whole nother story but that was a little bump in the road and yeah things like that they they uh they care about their intellectual property to an extent um so that's uh those those are some of the challenges but what's the so when we talked in 2018 and we did the video uh you had actually had a free tier that you offered and this is common for your building a sas model offer a free tier get customers charged for it was that really your plan or was it just a kind of so um yeah the free tier yeah has a lot of pros and cons but it did it did really raise awareness for our product um and so we had a lot of free plan users and yeah obviously the idea was hoping that they would convert into paid plan users but that didn't really work out the way we thought it would we got a lot of home users who never converted and so ultimately it was too much for us to manage on a support level and um yeah so we ended up stopped offering the free plan but at the time it was still a good idea and i don't regret doing it yeah i i want to bring it up that way because a lot of people i know were so i got some hate all right because i'd recommended you and said the free tier the uh there's some angry people commenting on that video probably still today tom you said they had a free tier and they don't offer a bait switch and things like that but it's there's here's the thing it's not like you had some intention to mislead people it's the we don't know when we're building some of these products we don't always unders it's hard to say until you do it and you're like oh cool i think these people will convert and when they don't you're like i have a business problem at some point if the free tier and you are not the first sas company to run at this if the free tier gets too big and you can't sustain the cost of the servers on the back end then you would end up actually toppling over as a company like oh okay cool i have a million users now that don't pay uh i'm paying more to vulture than i have coming in for the paid users my service is non-viable now yeah so to be like perfectly honest is actually right after tom made the first video about us in july 2019 i was the only person at the company and you know now we're like a team of eight people but um it was just me doing support marketing development everything and all of a sudden he made a video they got 11 000 views that's the biggest thing that ever happened to the company at that point we had like 2000 people sign up within like two days and uh they all needed help you know how do i adopt how do i do this and so it became actually a liability because um if i didn't help all these people which i did for like literally days like all day and all night i was worried that it was gonna give us a bad reputation if we weren't helping the free users they start leaving us bad reviews and it's like they weren't even paying customers to begin with and they never would have been so it became a real problem but um it's something we might revisit in the future but um as long as we can keep growing without free users it's uh it's probably not something i'll you doing again soon but it's but it was great at the time yeah and it's this is one of the things i want to bring some of the honesty to this these are decisions it's not like we don't want to i mean if i can give more things away for free i would but i have a sustainability on there it's like the reason we charge for the support that my company does is you know that's our business model and i've had people still angry at me oh you don't have the time to tell me like a whole recommendation of products and like not really i did a video about it i don't have one-on-one time it's not as i have to think about this as a business owner scalability and you do as well i mean we want to share as much as we can yeah we don't enjoy sharing we don't expect we don't have just like you i mean you don't have an expectation that no everyone is going to pay you money and either do i when i'm sharing it's honestly just to help people um and then you know a percentage of them do become customers but that's not the expectation now what are some of the questions you get said one of them i know that it comes to me a lot but i bet it probably comes even harder to you when you've done some of these other sas interviews and things like that about how you built the product is how do you hire people because you have a fully remote team and having a floor remote team how do you trust them like for me i did vetting all the people even when they work remotely at some point in time physically worked at my office yeah a little different i have contractors that never worked in the office that's different but they're contractors they're not a integrated as they are like you guys they're writing the code for you yeah so it's um yeah it's really an interesting topic um and taking a step further not only have i never met anyone i work with but none of them even live in the same country so i'm in the united states here in michigan and i have employees and i have three employees in india a guy in the uk a guy in germany a guy in ireland i've never met anyone before the guy's been working with me the longest safwan um he's been working for me for two years now and we've never met in person so it's yeah people are really surprised by that um but it's just really fun um because we're able to like get people that are like really passionate and talented um and instead of just searching for those people locally which i wouldn't be able to find them where i'm not they're not here to find that these people you know i have the whole world i can look for them and so yeah to answer your question how did we build up the trust um my first hire was safwan and he's in mumbai india he used to work for ubiquity i met him a year before i hired him he uh i had submitted a support ticket to ubiquity and he was actually riding me back that's cool and helping me with it and i you know i thought this guy's pretty smart he knows what he's talking about and then we actually became friends on twitter so this is very early days in hostifi because it was a year before i hired him and um yeah he he we just kind of became friends we talked for a whole year he wanted to start a wisp in india and we talked about that and um yeah we just kind of made a natural friendship and over time we gained more trust but even then it was still like wow this is crazy i'm gonna hire a guy in india like if if he did something you know i'm getting a lot of access to stuff and like you know you have to really trust somebody so it's it's a challenge for sure i mean even technically because you know the the if you're thinking about from things from a security standpoint the insider threat wouldn't they just try to steal your employees like that it doesn't happen as often the risk is never zero but it doesn't happen as often as you think i've never um i can't say never had it one employee that tried to steal some customers in my history um but for the most part the people that work here the uh all of them i've had to turn over keys to the kingdom they have access to a lot of proprietary information they have access to customer passwords and things like that they have to to get their job done and you just kind of have to trust them they have to touch the code i mean could he could he delete everything right now he has access to a lot of stuff yes but i mean there are there are um you have mitigations in place yeah but he could be very disruptive you you could get it's you have to give him access all at once either it actually took me a long time to give up that control and one of the first things i did was like implementing duo and some other things that made me feel more secure than now that it wasn't just me working on stuff i needed to have security more security in place and so that's that's part of it too yeah it's a really tough thing when you're building a business that you have to think a lot about is building a team that you can trust and putting them in places because if you turn over to micromanaging one they don't like it no one likes to be micromanaged i don't some business owners really have a thing for doing it i watch a lot of them and it can hurt your growth quite a bit it can hurt morale it also will just make them ineffective they throw their hands up there i'm not doing anything because they micromanage me so you do have to have a little bit of let go if you plan to grow that's just as simple as it is and uh now you've hired how many more people you said eight people seven people seven more people so i ate with me yeah wow so that's uh it it's small incremental steps but the other side of that that's what allows you to sit down here hanging out with me because you live about what two hours away yeah yeah drive down to running company right now yeah yeah and you also you did a road trip yeah i did i took a whole entire month off and i didn't really go on the computer at all i drove from here to california and back with my fiance and yeah literally for a month i took a vacation and i didn't work on the company yeah that was in may of this year you just responded to general things and like you stayed in communication with the team but you weren't actively the one doing it right and i've kind of done the same i you know i have a video where i did where i said do i sell my company or option b which is kind of link bait for those who didn't watch it i hired someone essentially that works here full-time title is vp but technically they run it i should just call the president of the company and move my name to founder but there's only a few of us here so i don't really need to be so technical to i i want to make videos and play with technology so i now have built myself an automation team that does that you build more of a functional automation software to do it but the concept's the same of where you want to go um what are some of the biggest challenges you ran into and i i we talked off camera about this i don't know if you want to talk on camera about missteps on uh project starter that didn't go that were sunken costs and yeah recovered i mean there's been a lot of um different challenges in scaling the business beyond just myself so um i mean the first biggest challenge was hiring my support employee my first support employee staphon and you know luckily he had a ton of experience with ubiquity and stuff but i still had to create a lot of systems and processes for you know how we do things and billing and all this different stuff and um so reading the book the the e-myth revisited really helped me think about like that's a good way i could remove myself and that's that's really where it started for me was reading that book because i one of the things in the book was the org chart and it was like write down an org chart and write your name next to every role and so it really forces you to think about um instead of you doing everything it's like okay i'm currently doing all these different roles but they're separate rules eventually someone's going to fill these roles and so yeah for me writing down support development sales marketing design and so like writing all this stuff down and now once i got to a million i actually a million dollars in revenue i could afford to hire a person for every role and so that's where we're at now we have uh three support people on our team we have a full-time developer designer um next can be a content person so it's it's it's starting to become it's not it's why it's so well it takes a while and it's but it starts with the foundation if you decide that you want to be an entrepreneur and i've said this many times and if you've heard me say this go i hate my job it's not a business plan and yeah the business plan isn't like necessarily something you need to pitch to investors it's it's talking about the structure and you creating that structure and then like you said putting something on the box and emits revisit that's a good book uh i'm trying to remember which other ones if i have some other ones i'll leave them linked down below that i've read i know i've got a list of them they just i didn't have them ready but uh there's a lot they all kind of preach in a different way the same thing though is starting to build structure in systems processes processes and even when you're a single individual starting a business whether that be an i.t company or something in a tech space like i work in or you want to start a sas company like riley the writing down a process especially when you're by yourself you're like i know how to do the process why should i document i still have documents that only i follow because at some point someone i will hand them off to this is the process for this and when you start from that mindset eventually i can have your work instructions from years ago when i started yeah are still maybe been modified and tuned up to be modern but i still always started with each of these processes then a person could be assigned to that process on that name on the org chart these are the steps the person has to be able to follow that helps you one higher for that position and eventually seat the lights into the tunnel that one day i won't be the one doing this yeah i won't be crimping cables anymore i haven't crimped cables though in about 15 18 years now i did it when i very first started my company and i realized one i'm not good at it uh two it's way better done by people who do it all day so now i always have contractors but it's still a process somebody needs to solve these cables i need to get this infrastructure done that's a position that position happened to be in my category filled by contractor external uh same with accountant right now we still use external accounting and uh but it's a process this is what has to be submitted to the accountant but at some point i can draw a circle around that because we want a person internal as i've become big enough uh i'm actually throwing it over to brett's side of the house now he'll decide when we're big enough for it but whenever we have to replace that but it's still each one's the same concept when you're uh doing this to to build to where you want to be let me think what was the i guess we can't talk as much about uh some of the uh hardship of hiring some of the places and things like that can we no i can talk about that stuff um i want to be real that there was some money lost here and there it wasn't you just didn't slowly build this and there's no losses yeah it's it's tough topic but uh what can we do to turn this into a learning lesson so someone else who is going to face this exact one what's a good vetting for hiring someone to be the coder to do some of this that's i feel like i'd be more comfortable talking about once we've like actually accomplished something set out to do like we're still in the struggle phase on that one but i'll talk about like uh just a little bit about it yeah so um you know i launched a a minimal viable product an mvp for hostify on wordpress coded it myself and everything and i'm not the best developer and so we've struggled with that as we've scaled we want to add new features like being able to reboot your server like from the host by dashboard or like do a lot of stuff that we do manually for our customers like adding ssl certificates and stuff like that um so back in i think it was may 2019 so over two years ago i started rewriting the website onto laravel where we'd have more control over the framework and we'd be able to add more features and customize it but i got in over my head because i'm like i said i'm not that great of a developer and as much as i tried to learn quickly i was also dealing with other sides of the business like marketing and onboarding and support and and so i got in over my head a little bit and i realized i need to hire someone so i did hire um an agency and they worked on uh the project for over a year and um there was a lot of cost involved with that uh developers are very expensive particularly when you hire an agency instead of your own team and so the the hourly range on that was like 150 to 250 an hour spread over a year part-time and um it adds up it was probably 80 000 or so um before um i realized that i hadn't really been involved in the project as much so i'm i'm definitely accepting uh the blame for that as well because i've you know i had other areas of the business i was managing but um i was looking at the end result and it wasn't exactly what i was hoping for and so i decided you know i need to get more serious about this hired my own developer part-time in germany great guy and um so he started working for me part-time and he looked at the code they wrote and he said well we need to throw this out we need to throw it out entirely and i was like no we need to just like you know make it better but he gave me all the reasons why we need to start over and technologies have changed even in the short span that's crazy thing is how fast stuff changes even in that short time spend things had changed so much that he was like we can do this a lot better if we use this framework and so yeah so then that was in january this year and he said this will take me like three months this website's super simple that's what i heard from the last team too and yeah i thought myself when i started working on it and um yeah and so now it's been nine months we're getting ready to launch the new website hopefully the next couple of weeks so yeah but uh cost it is september of 2021 so depending on when you're watching this uh well launch date is still up in the air it's it's intense but you're always watching the video in past tense so you may be watching this a little while it may be launched already but these are once again back to the transparency uh one you blog a lot about this two it's not all sunshine or roses you didn't just overnight you you see some of the success now and i want to make sure people are very clear it was a rough path there was uh money that we will cry over and sometimes i think back and i replay and you go to sleep and replay go what would i do with that you had that money i spent on that thing that didn't go anywhere oh yeah okay now won't dwell on it but let's get back to the future uh to wrap this up i seen you posted you're building a new office yes yeah so let's talk about where you're at now what you're doing is i've seen i seen that article about uh you know did they call you a micro sass as i think that was what the term was that articles i'll leave it linked down below oh yeah i've seen that post today i think you got tagged in twitter in it oh yeah i don't know you know it's one where you're writing an atv oh yeah someone who made a post about me yes they told me to post about you uh and i seen you building a new garage new office and i think that's pretty cool still keeping things small not going down your means i know that was i read the article i thought that was actually probably a good point you don't let it go to your head because you want to keep focused actually riley's been here a couple hours we were supposed to record uh a while ago he's got this whole tangent conversation about business and things like talking all day yeah we can just talk all day we decided at some point we probably record some of this but i'll leave a link to that article but right now you're you're building so you have a dedicated office because by the way you got all the way here and you other than living at a very low cost in um northern area of michigan or mid area of michigan uh where the cost of living is lower you're not paying those la type california housing rights it's really inexpensive to live here in michigan if you didn't know yeah google us look up some map price you're like i mean you you own a couple acres uh 10 acres it was 10 acres now you can't go buy 10 acres in california well you could but you would you would not have you'd have to have a much larger you can't have a micro sas business you have to be like google or something uh but anyways you're building an office now and what's kind of the future plans where are we going from here um yeah so yeah i'm building an office um that's that's kind of more for me than the business yeah but uh it's it's really just like a four car garage the second floor uh this guy two-story four-car garage the second floor is gonna have uh two bedrooms where one of them is going to be my office separated from the house be nice and quiet i can um do yeah hopefully do some tom stuff i would get a youtube studio someday that'd be awesome but yeah the uh he was checking out the suit that ended up being a big conversation piece of yeah you know i built a lot of this i'm not someone who's i geek out a little bit about film stuff and things like that but honestly i do it to make anything i can do to make content easier uh riley was kind of impressed when i clicked a button uh and automatically turned on all the lights the camera and it's it's awesome i'm sure he's going to take some notes for release here of all the stuff i bought so he can uh exactly yeah i'll have a new space for me to work in and um i'm really looking forward to it because um yeah it's the journey has been kind of crazy like i moved in with my fiance's parents for a year before we were able to buy our house and um now we finally have enough money that we can build uh my own office and everything and it's really exciting um and then for the business um we have a really great team now and things are moving so fast it's so crazy how much you can get done as a team and not just by yourself and so i'm really excited for um the next phase of the business it's actually a lot more fun now than it was a year ago or two years ago when it was just me especially and things just moving really fast so yeah we got a new website coming out we have um a lot of good stuff going on so yeah and i've seen you know you've been posting things about uh spending more time thinking about the business and this is it takes a while to get there but this is that whole you can kind of start taking these larger views and go all right what i can see all the team members working and because i'm not the one functionally having to answer every support you can kind of then start shaping the vision and keeping everyone together which is awesome though i mean it's the ultimately i i always think about it from a happiness standpoint because one of my biggest drivers myself for starting a business wasn't to get rich don't if you want to just make a lot of money go work in finance it turns out pays really well you can make a lot of money you go work on wall street as a lawyer there's plenty of jobs that pay money but uh happiness and freedom is kind of if those are better goals cool we do want to make money i mean it's still the goal of business but it's it is a longer journey a harder path and uh one that is like you said you had several things that we talked beginning that kind of flopped before we got there so that's still going to be the reality of it before you get to build your four-car garage yeah yeah but i will leave links below to previous interview and i haven't watched it i should have re-watched that one because boy what a difference uh two years next two years makes i know it was it was almost actually it's gotta be close to three years is it 2018 or 29th 2019 july 19th july 2019 wow so yeah it's just just a little over uh three years then but we're you know a whole pandemic away yeah it feels like a decade ago it feels like a decade ago everything feels like it was just forever ago yeah and the before times the four times but i'll leave links to all this i'll link to those five i'll leave links to that uh to his blog where you can follow the journey because you still have all that up right uh yeah i haven't posted a blog post in a long time but but it still starts with that earliest stuff and i think that's so cool you break down a lot of your thoughts a lot of your details on there you even have the cool little thing you got that you got that graph that shows how much revenue you make annually yeah that's so at r chase.com yeah if you click on hardcore year um from 2019 i i set a goal to get to 100 000 a year and every month i post updates about what it was like and and the progress i made and i ended up getting there thanks to tom a little early so i think that video helped well then i and i regret myself like i started my business all the way in 2003. i wish i would have been someone i don't i didn't create content back in 2003 and i didn't journal my life so there is a gap where i can it's kind of a blur from 2003 to i started becoming a content creator around 2016 or 17. um i don't know i did a lot of things i kind of know what i did like there's it's hard in that phase to document it because you're so busy too yeah i bounced around from so many different things i don't really have a journal of my life i may have a bunch of photos and memories of my life but not not like he's got this it's gonna be something you're gonna look back on because you're so young right now i mean you're a 28 yeah yeah you're so young right now you're like remember what it was like it was like because i mean i was i was like 26 or 20 so i'm 45 now and i started 18 years ago so i'm in my 20s when i started the business but because i didn't document it i was like i remember being really hard i don't know how much we did i i mean i can look it up in my tax records but it's not really the same as like what you did so i think that's really cool so check all that out all the links will be down below uh thank you for joining me on this maybe we'll make one more video before you leave i don't want to think about it so cool thank you for riding the tesla right yeah absolutely absolutely so we're going to go do some fun stuff take care all the links will be down below thanks thanks guys and thank you for making it to the end of this video if you enjoyed this content please give it a thumbs up if you'd like to see more content from this channel hit the subscribe button and the bell icon to hire a shared project head over to lawrences.com and click on the hire us button right at the top to help this channel out in other ways there is a join button here for youtube and a patreon page where your support is greatly appreciated for deals discounts and offers check out our affiliate links in the descriptions of all of our videos including a link to our shirt store where we have a wide variety of shirts and new designs come out well randomly so check back frequently and finally our forums forums.laurensystems.com is where you can have a more in-depth discussion about this video and other tech topics covered on this channel thank you again and we look forward to hearing from you in the meantime check out some of our other videos you

Channel: Lawrence Systems

Views: 11,156

Keywords: LawrenceSystems, software as a service, software as a service business model, saas company, passive income, how to create the perfect saas business, saas financial model, saas startup, saas business, hostifi, hostifi review, hostifi migration, hostifi vs, reilly chase hostifi, reilly chase, saas startup metrics, saas startup sales strategy

Id: hQDSaYmdn8s

Length: 29min 25sec (1765 seconds)

Published: Tue Sep 14 2021