This article was originally written in response to several questions I received about starting your own webhosting service. I’m not an expert on webhosting or business, but from my own experiences, I’ve found that there are some very simple things you can do to get started and keep going.
Before you begin…
Most of you may not want to start a webhosting company, but would rather offer it as a service to help cover your costs. Before embarking on any venture involving money, though, please take the time to check out the law where you live, concerning tax and your liabilities.
1. Set your goals
First, figure out where you wish to to with your webhosting service. Do you want to start a business? Or do you want to keep it small?
At the very least, decide on your goals for the next 12 months. Ask yourself the following questions:
a. What kind of websites do I wish to host? (eg. small businesses, large businesses, personal website owners, bloggers, etc.)
b. What kind of clients do I wish to appeal to? (eg. high-end clients, individuals, people who are not so computer-savvy, etc.)
c. What will make my service special? (eg. low prices, excellent support, etc.)
d. What is my primary goal for this year? (eg. site pays for itself, make new friends & contacts, get experience in customer service, etc.)
It is advisable that you do not try to offer and serve everything at once, as this can get very tiring. Place a realistic timeframe on your immediate goals. Once you have set your goals, you will have a better idea of what to shop for when looking for “suppliers”.
2. Obtain supply
If you’re not familiar with the webhosting world, you’re likely to encounter a lot of strange terminology. At the end of the day, your supply boils down to three options:
i. Set up your own box - This means you buy a computer, install server software and purchase a permanent internet connection or a static IP. Managing your own server will teach you a lot in a very short amount of time. In addition, you will have full control over just about everything, from the packages you offer to the content you allow to what colour you spray-paint the case. You will also have full control over the space and transfer available to you. However, you do need to have some basic knowledge about server management before you begin. And static IPs don’t come cheap. Start-up costs can be quite high, but the potential profit margins are very decent and cost-wise, you will easily afford to grow your customer base.
ii. Rent a server (aka. colo) - This means you rent a server from providers such as ColoGuys or Rackshack. If there’s a problem, there are people you can call for support. You get a large amount of space and transfer that you can chop up into whatever-sized plans you like, and the convenience is far greater than setting up your own server. However the downside is that you forfeit a lot of control. Your space and transfer may be limited to what your provider offers you, and you also need some knowledge about servers before you begin.
iii. Become a reseller - This means you buy a plan from a webhosting company and chop it up into smaller plans to (re)sell to your customers. This is a great way to start out if you are not 100% sure of what to expect client-wise, as the start-up costs are low. You forego control, but you don’t need to be a technical guru to make things work. However, your profit margins are smaller and you are restricted to what your provider will allow, eg. the size of the big plan you buy will affect the size of the smaller plans you can sell.
If you want to stay small, or if you’d just like to start out small, a reseller account is the most economical way to begin. When the customers start rolling in, you can always change to a dedicated server.
3. Figure out your costing
Ensuring that you are covered in the worst case scenario is how you keep your ‘business’ afloat. In this case, if you purchase one unit of supply (ie. one hard-drive/computer, one server or one reseller unit), and it fills up, does your current profit cover you if a new customer signs up on your smallest plan, forcing you to buy a new unit?
Example: Say you buy a 60GB HD/400GB transfer package from Rackshack for $99/mo. You have a huge influx of customers in your first month and that package fills up right away. Now say a new customer signs up on your smallest plan (say a $10/mo plan) and you have to buy a new 60GB/400GB package from Rackshack. If this new customer is your only customer for the rest of the year, does your monthly profit from your first package cover the additional $89 ($99 - $10 = $89) per month for the rest of the year?
This step is nothing more than juggling numbers. Your numbers won’t ever lie to you, and taking half an hour to get it right will mean you can rest easy for a long time. Of course, the way you manage your risks will depend on your goals, the type of customers you cater for and the way you wish to run your business.
In my case, when I no longer wished to take on new customers, I kept my existing customers on their original rates, but advertised higher prices for new customers to ensure that my worst case scenarios were covered. TIP: If you do this too, you may wish to include a few courtesy links to other good webhosting companies offering better prices.
4. Market yourself
When you’re ready to go, it’s time to do your marketing or find someone to do the marketing for you. Advertise yourself - you may not want to host a big clientele, so you may only want to advertise by word-of-mouth, focusing on friends and family members. Either way, just make it known that you offer webhosting.
Build good relationships with your clients - show them that you are worth staying with for another year (that is, if you want to get repeat business from them).
Marketing is an art. It’s not a difficult art, but it’s an art - you have to find your own way to do it. If you are not gifted in sales and marketing, it can help greatly to pay a someone skilled to do it for you.
Nothing to it, right? Wrong. It’s no walk in the park, but if you are smart about it, you won’t have struggle to pay your bills or learn new skills.
Best of luck to all of you! Here’s to your success.