Starting your Web Hosting Business
People start a Hosting business for various reasons. Some treat it as a second source of income. Some prefer it as a Run from home type of job. Some choose it for its reasonably low startup costs.
There are some reasons though, why you shouldn’t get into the Hosting business. Do not come into this business if you want a stress free life. Someone’s site going down is certainly not a piece of cake, especially when the customer is on the phone with you. This business is stressful, if you are a small business or if you have a million dollar hosting business. Web Hosts who have grown big are still stressed out, even if they have employees to take care of things.
Do not come into this business if you have strict time restrictions. This is a 24/7 business. Be prepared to sacrifice your social life if need be. Customers have problems at all times. Servers can go down anytime. Hackers are working on cracking your servers overtime. A Web Host doesn’t sleep easy.
Do not come into this business with visions of making big money in no time. A frighteningly large percentage of Web Hosts go bust or become dormant because they haven’t gotten their Return on Investment (ROI). Many are those who have underestimated the cost or overestimated the ROI. These Web Hosts quietly fold their businesses and suffer the losses. If money is your motivation, then prepare to be demotivated. Money doesn’t come easy in this business and requires a lot of work to get a decent amount.
What should you bring to the table
Ideally a new entrepreneur would bring in some Business experience to the table. If you have run some sort of Technical business such as computer sales, ISP, website design or E-business, it can give you a good start, because you would already know about how to run a Company in your area, accounts, taxes and legalities. If you have every owned a Website and have managed it, that would be pretty useful. If you have been working in a 9-5 job, you may want to brush up on Business basics, before you go further. This link can help you get started http://www.bankrate.com/
Technical knowledge would be a must. The hosting industry is filled with 14 year olds running their hosting companies quite successfully. What they have primarily is Technical knowledge. You should have preferably installed and studied about Linux and Windows. You should have some understanding of the various technical components of a Internet server and control panel software. If you have an idea of HTML and some scripting, it would be very useful.
It goes without saying that you should be a avid Internet surfer and be comfortable with running your business in front of your computer. A stable broadband connection is also needed for you to be online full time.
Choosing your Server
The real estate of the Web Hosting business lies in the servers you lease or own. Space on your server is what you sell. For example if your server has 50G of Disk space, discounting the Operating system and Control panel software, you can resell maybe 30G of it.
When you start your business, you need to get a Server so that you can host websites on it. Many newbies get confused here. Should they lease a server, should they go Colo, or should they start as a basic Reseller.
Your choices centre around Co location hosting (where you put your server in a data-center. The data-center provides bandwidth and physical space.), Dedicated server (lease a managed server from the Data-center) and Reseller hosting ( A reseller is a middle-man who sells web space on somebody else’s server. The most common form of reselling is something like this – Say the actual price of a hosting account is $10, the reseller gets it at $5, and can resell at whatever prices he wants. )
If you are starting on a budget, and have lesser than best Technical knowledge, you would be best taking on Reseller hosting. Its cheap, starting on an investment of under $100 for a reseller account. You would be managing the front end technical support of your clients, but will be spared the high end technical administration of your server. On the flip side though, you have no real control of your and your clients websites. Should the server go down, all you can do is tell your Web Host and patiently wait, all the while fielding calls from your clients.
Once you cross around 100 domains, you could graduate to Dedicated servers or Colo. In case you are getting into Web Hosting big time, it would be advisable to always buy a Web Hosting business. You get a ready clientele and can be spared initial hiccups. The going rate for a web hosting business is generally 1x to 2x times revenue. Make sure to check that the customers are happy, that they are all on monthly or quarterly plans, there is competent technical support in place and the servers are stable.
Remember your entire business plan is based on the Disk space and bandwidth that you are selling. No matter what server you are purchasing, remember a server can hold up to 300-500 accounts. This is the ideal figure. DO NOT base your business model on the premise that you can squeeze in 1000s of accounts into one server. Keep aside about 10% of your disk space and bandwidth for emergencies. The equation for disk space works like this
Saleable disk space = Total server space – 10% free space – Space for Operating system and software
Choosing Software
You need Control panel software, Billing software and Helpdesk software.
Control Panel software helps automate several Administration tasks. A large number of WebHosts use control panel software and customers expect to have a Client side control panel by default. Control panels available are Plesk, cPanel.net, Hsphere.com, Ensim.com and more. http://www.bobcares.com/ has a Cost and Features Comparison available to help you choose. Anyway, expect to spend $500-600 a year per server on your control panel. Of course, if you are a reseller, this cost is borne by your Hosting provider.
Some control panels, do not come with a good Billing software . If so you need to buy or lease Billing software. ModernBill and Ubersmith are some well known Billing softwares which can be integrated with popular control panels.
You may need Helpdesk software if your control panel doesn’t have them. Cerberus, Kayako, Ubersmith and Perldesk are some good Helpdesk software. Helpdesk software help you track and solve issues that your customers send.
Technical support and maintenance
Once you start your Web Hosting biz, you will get customers calling with complaints like “my email is not working”, “the website has gone down” or Requests for help like “How do I get my PHP script up and running”, “How do I use Frontpage and ftp to upload my website”. The kind of questions you can expect to get can range from the absurd to the most complex.
Make no mistake about this. If you don’t know Internet server troubleshooting and Linux/Windows in detail, DO NOT go about playing on the server. It can cause unacceptable Service downtime and worse.. Loss of Precious Customer data. Many Web host owners learn tech skills on their servers and customers(This is a scary thought). Such people actually play with the trust that their customers place on them.
If you are not a trained and Experienced Sysadmin, you can either hire local Sysadmins to help you, or you can outsource at a relatively cheaper cost to Outsourced Tech support companies like Bobcares.com. These companies have trained Engineers (Bachelors in Computer Science) who will take 10 mins to do something an untrained person may take over an hour.
24/7 Technical support with average response times of 1 hour or less is the expected Industry standard. In the dog eat dog world of Web Hosting, the only way you can differentiate yourself is through your customer support. If you choose to Outsource your support, take a good long look at the Testimonials and Plans of the provider. Cost shouldn’t be the only criteria when you choose to outsource. To save a few dollars, you may push your unsuspecting customers into Tech support nightmare. To check for Quality, look for company certifications like the ISO 9001:2000 standard which ensure that you get what you are told.
Credit card charges
If your clientele is global, expect to get paid via Credit cards online. Web Hosting providers generally use 3rdparty Payment Gateways like WorldPay.com, Authorize.net, Paypal.com and 2Checkout.com to accept credit cards. These Gateways provide an interface for your customers to securely enter the credit card information. In many cases, as a merchant, you won’t even see the credit card numbers, which makes it safer.
If you are a US business, your credit card fees should be around 2-3% of your transaction volumes plus a per sale value(like $0.50 cents a transaction). Some have monthly fees as well. International business will typically face a higher transaction value of around 5%-6%. However as your volumes go up, the rates come down.
Marketing your website
Once you put up your site, you need to effectively market it, if you need to be seen anywhere above the millions of hosts who are already out there.
Submit your site to dmoz.org, Yahoo and hundreds of Hosting directories like http://www.websitehostdirectory.com , hostreview.com, thewhir.com (there are many more).
If your site is the same every time Google comes to your site, It’s going to crawl it a lot less frequently – because it realizes you don’t update it as often – and there is no need to come a lot. So Make sure your site has a lot of relevant information, a lot of links and information has to be added and changed at least once a week. Adding a news section shows that your site is regularly updated.
Another way to promote your website is to use Pay Per click programs like Google ad words and Overture. Hosting is an expensive keyword and expect to pay $2 or more per click.
One interesting method that Web Hosts can inexpensively use is giving away Free Web Hosting to Popular websites in return of them displaying your link on their main page. This is a great way to generate Back links from popular pages, and is an easy way to push you up the Google ranks. Popular websites rarely pay for their Hosting charges, because Web Hosts line up to sponsor hosting for them.
If your client base is local, you could give away free hosting to locally popular institutions like Churches or schools.
Minding the Competition
There are thousands of Web Hosts out there and too many of them play the Cheapest host card. If this is your business plan, then stay away from Web Hosting. You’ll get your fingers burnt real quick. One Web Host famously said that he went from being the cheapest web host to the most expensive web host in One year without even changing his plan prices. Thats how bad things are.
The best way would be to identify Niche areas of hosting and be the masters of that niche. For example, Web Hosts provide Application hosting, like Oracle hosting.
Others provide Service hosting like Email or Data hosting.
Some others provide Hosting to certain Special needs customers. For example, Speciality hosting for Churches, Hosting for educational institutions.
The best thing about Niche Hosting is that you can establish your brand faster, and spend lesser on marketing. Many web hosts have different websites for various Niches areas. for example nicheareaoracle.com or nicheareaemail.com or whatever. Always find a way where you are special and different and be the best in that niche.
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