What You Need to Know to Start a Web Hosting Business

Want to be a web host? What you NEED to know!

After a good amount of time in the business of web hosting, I have come to realize many things. Learning these things has helped me in my business more then anything else! It wasn't any costly SEO company, it wasn't any overpriced Google or Yahoo ad program. It was hard work, it was hours and HOURS that turned into days and then weeks of time spent working on the website, editing the website (then editing again), making sure my keyword relevancy was up to par using my favorite keyword analyzer at Submit Express, checking to make sure my packages were priced to compete with other host's that offered the same quality services that I provide (not the kiddie host's that offer 25gb disc space and 200gb bandwidth for $5.00 a month), and also taking care of my clients to ensure they got anything they wanted or needed.

So anyway, let's get on to what has worked for me. Some of you other host's may disagree with me, or have had different experiences then I, so again, this is only what worked for me, and is my opinion only.

I started my first web hosting business in November of 2004. I can't disclose the name of that business due to the agreement of sale, but I can tell you that it was a very successful host, and was on track to be a big player in the web hosting game. I just burnt out and had to sell! I was working 16-20 hours a day taking care of clients via Yahoo, MSN, ICQ, AOL, Skype, PHPLive, and any other live chat program I could use, email, and phone. This leads me to my first assessment, and bit of knowledge to pass on.

1. Support : This is (in my mind) the most important part of a web hosting business, and can make or break a starting business FAST, either way. If you offer TRUE 24x7 support to your client's, and the support they receive is fast, accurate, and friendly. Your brand (host name and logo) will spread like wildfire, in time, you just have to be consistent with the support. You can't let tickets lay around because you had to go to school, or you had to mow the lawn, or your girlfriend wouldn't let you, or you just didn't feel like dealing with it.

This can prove to be a very difficult task after awhile. The first few customers you get will submit a few tickets a month. Then, when you have a few more, maybe 25, you will start to have tickets, live chats, emails, pre-sales questions, all of it pouring in at once. Then you get up in to the 50-100 client range and you are swamped. This is when you start to loose sleep and begin to burn out quick!

If you have 50-100, or ever 30 or so, you should look into an outsourced support solution. I have used BobCares and have found them to be the most professional and reliable for the package they offer resellers, and starts at $24 a month to cover 12 clients 24 hours a day 7 days a week.

Some hosts, and customers, frown upon outsourcing support, but until you have the money to hire your own support staff, I suggest you look into outsourcing. Another company I have heard good things about is Root Support, though I haven't tried them, I have noticed that they have some very good prices, and as I said, good reviews.

So that's the upside, the bad side is easy. You don't offer good support, and you find yourself in 3 months telling the 500 FREE hosting clients, and no paid clients that you have, that they need to find another host because you are shutting down.

2. Choosing a host: When you are searching for a reseller , or VPS host, you may be tempted by the low prices of some overselling host (run by a 15 yr old kid) that offers the world or, my favorite, "Unlimited"..LOL. You show me a host that has a hard drive with unlimited space, and I'll show you some pictures of Big Foot that I took in Buck Snort Tennessee! If you choose a host by price alone you are destine to fail. You will end up with nothing but downtime, nothing to tell your clients when it happens because your host is no where to be found, and when the server IS up, it will be so overloaded that it will run like an epileptic chicken!

I heard it described best on a forum, "There is no perfect host, there is only the host that is perfect for you". I suggest you look at Web Hosting Talk.com. Be sure to look in the "Advertisements" section, there are always a few good offers there for whatever type of hosting you are needing. You can also Google the words "web host review." That will bring up hundreds of different resources for use in choosing a web host. This can be quite overwhelming also, so try and be as specific you can in your search terms.
When looking at the prices offered by offered a host, ask yourself a few questions.

A. Does the website look professional, or does it look like something you could have made when you were 13? This is not always the best way to determine your host, so again, do not base your decision on the website alone either!

B. What type of server specs (CPU, RAM,) does the host say that your account will be held on? If you do some further research, you'll see that a reliable server with even a single P4 3.0GHz HT server with 1gb RAM is going to cost $150 AT CHEAPEST, and if you go up into the dual CPU servers, the price of a single server can go up to $300 a month EASY. So, if the host is offering 5gb disc space and 100gb bandwidth for $5 a month, you can be pretty sure you are not getting as good a deal as it may seem!

C. Check their support link, does it even work? If they offer live chat, use it, send them an email and ask questions specific to your needs, ask as many questions as you want, in as many different emails or tickets as you want, it's a very important decision, be SURE you get what you need from a provider that will GIVE you what you need.

D. Uptime: a lot of hosts offer shared hosting plans for as cheap as $1.00 for the first month. I suggest you sign up and pay for one month. Tell the host what your intentions are, and that you want your account to be placed on the same server that your reseller will be placed on so you can review the resources. Then place a free uptime monitor such as DotUptime on it and see what the uptime is like in a 1 month time period. Spending a couple of dollars to make sure you get what you want will save you a TON of headache in the future!

E. Search as many web hosting forums and / or Google pages as you can for "whateverhost". Look and see what others have to say about the host. But, keep in mind also that no host can please EVERY customer, and some people just can't be pleased.

F. Finally, is it within your budget? Don't be afraid to spend some money if you can, but don't go overboard either. Remember, you have to spend money to make money. I am one to go all out from the start. I believe that the more you put into a GOOD host, the more you get back, and the happier your clients are, in turn attracting more customers. So we have our servers at LiquidWeb.com . They have proven to be the most reliable in terms of managed dedicated servers.

3. Choosing a billing system : There are many different billing systems available, and searching for one that's fits can also be a wearing task. There are the first few big name scripts such as ModernBill, WHMAutoPilot, ClientExec, and Lpanel. Most of these options allow for automated account creation, meaning when a customer signs up and pays, it automaticly creates their account and emails the customer their login information.

It isn't wise to use this feature though, unless you also pay for a fraudgate to check all your orders before setup. If you allow instant (automated) account creation without a fruadgate, you will find yourself swamped with spammers and fraudulent orders that result in charge backs, in no time at all!

ModernBill is by far the best in my opinion, and goes for about $25 a month. It keeps track of everything you can think of, ands some very key features that others don't have, such as the ability to update package price depending on the upgrades they choose. WHMAutoPilot is the next step down at the same price ($25). It is still a very powerfull billing system, but lacks a few small features that ModernBill has. ClientExec is the best choice for a beginning web host, and starts at $12 a month. It is all you need to get ready to sell and keep track or your clients. It also has a built in support desk (most good billing scripts do). When you choose your billing system, be sure you read the description of that package. Some of them charge per client after a certain amount, and that can get costly.

4. Advertising : It's no secret that any websites success depends on the amount of traffic it receives. So, in order to get traffic you have to let people know that your website and packages are out there!
Some good ways I have found for doing this are:

A. Forum posts: Register at as many web hosting forums you can find in Google. Most web hosing forums have "Requests Hosting" sections, so you can post offers to requests there, and you can also post offers in the "Offers" section usually. Be sure of the forum rules BEFORE posting your offers though. If you post an offer and it is edited by a moderator and only reads "Read the rules" your not going to look like the most trustworthy host. Remember to put a link to your hosting website, and maybe a little sentence or 2 about your services in your signature on the forum. Try and make it eye cacthing, add some color, or some symbols (>> +ll whatever).

B. Look on web hosting forums for people offering ad space. I use WebHostingTalk.com for my ad searches, and it has worked very well. Don't buy ad space on just any website. Try to only buy ad space on websites that pertain to yoru market. For example, you wouldn't put ads for a hunting website on an animal rights activist website! Try to only place ads for your hosting business on design sites, or hosting search forums, hosting directories, script development websites, anything that they might need a web host for!

C. Banners: Some say banner ads are dead, but I disagree. I know when I go to a website and see an eye catching banner ad, I tend to click on the ad to see what it's all about. Whether this results in a sale or not, it is still a great avenue for brand awareness. So, if you decide to do some banner advertising, be sure to have an ad that looks professional, and eye catching. Otherwise you have an ad that no one notices.

D. Word of mouth: Without a doubt, the BEST type of advertising! When you provide good service and support to a client, he goes and tells his friends " Hey, I got this host you guys should check out". Then, those friends tell their friends, and their friends tell their friends, and their....You see where I'm going with this!

E. Local Market: Never underestimate your local market. You can start by making some fliers to post around town, or place some business cards on post-it boards. Ads in your local paper or ad magazine are sometimes good also. You can also think about sending a little packet of information about your business and what you can do for a client to small businesses in / around your area that might need a website and/or web host. If your budget allows for it, radio and tv ads are great sources, but can be very costly.

5. Prices: Don't try to be the cheapest host on the block, you will only run yourself into the ground over time. If you look at the "Big Boys", or as I like to call them, the "Oversellers who can", you will see that if you tried to beat their prices you would be out of business within 2 -3 months.
Instead, take a look at your hosting package, whether it be a reseller, VPS, or Dedicated Server, and do a little math:

Lets say you have a reseller package with 10gb disc space, and 100gb bandwidth (a little large for a starter reseller I know, but it's an easy round number to use J ). We'll say your reseller costs you $25 a month.
You can look at your costs in a couple of different ways, here's a couple that I use:

Disc Space Cost (monthly) Bandwidth
10GB $25.00 100GB
5GB $12.50 50GB
2.5GB $6.25 25GB
1.25GB $3.12 12.5GB
612MB $1.56 6.25GB

Or, you can split the costs and look at it like this:

Disc Space Cost Bandwidth Cost
10GB $12.50 100GB $12.50
5GB $6.25 50GB $6.25
2.5GB $3.12 25GB $3.12
1.25GB $1.56 12.5GB $1.56
612MB $0.78 6.25GB $0.78

Or, do a little chart like this:

Disc Space 10GB 5GB 2.5GB 1.25GB 612MB
Bandwidth
100GB $25.00 $18.75 $15.62 $14.06 $13.28
50GB $18.75 $12.50 $9.37 $7.81 $7.03
25GB $15.62 $9.37 $6.24 $4.68 $3.90
12.5GB $14.06 $7.81 $4.68 $3.12 $2.34
6.25GB $13.23 $7.03 $3.90 $2.34 $1.56

Remember to ad in your other costs, such as your billing system, your sitebuilder (if you have one), processor fees, and any other cost you may need to add.

After you have added up all of your costs, then decide what you think is a fair price to charge OVER your costs. So if a package costs you $5 a month, then maybe you would charge $8 - $7 - $6 a month. Just be sure to allow for enough profit to upgrade when you need to.

Again, don't try to be the cheapest, you'll be shooting yourself in the foot for sure!

6. Overselling : Overselling is the practice of selling more disc space and/or bandwidth then you actually have. So for an example, lets say you have 1 apple, you tell 8 people that you will sell them %25 of the apple. So if the people actually eat all of their apple, you are in trouble! Some overselling is ok, not a lot, you don't want to overload your reseller or VPS, or dedicated server. You can safely assume the following (usually).
If you have 10gb disc space, and 100gb bandwidth, you can sell it as if you had 12gb disc space, and 120gb bandwidth. It's a small percentage, but can help to increase profits. But be sure to keep a close eye on things, and upgrade when / if needed.

7. Professionalism : When you are posting an ad on a forum, replying to a pre-sales email, talking a to customer in chat, or replying to a support ticket, you must always maintain a professional attitude through your speech, or typing. A person looking for hosting isn't going to be interested in a post that reads like a 12 year old wrote it. Try to use proper punctuation, I am not the world's best at that (as you can see), but I try J.

Never discuss business matters or private customer information in public situations such as forums. This can lead to serious legal issues!

8. Free Hosting: A lot of hosts offer free hosting in hopes that the user will eventually upgrade. The truth is, only about %5 of your free hosting customers will upgrade to a paid plan. Also, it is usually those seeking free hosting that have no idea what they are doing and send hundreds of support tickets a month. Or, they sign up with a free host, send out a few thousand spam emails, and then move on to the next free host.

So to make a long story short, free hosting isn't worth the time or frustration. Instead, maybe offer a small, shared package for $1.00 a month. This is low enough to reel them in, and then have them upgrade.
If you do decide to offer free hosting, be sure to put free hosting customers on one server or reseller, and paid clients on another reseller or server. That way if one of your free clients overloads the server, your paid clients are not affected at all, and you have no worries of loosing them!

9. Firm, Fair, and Consistent: I have found that you have to be fair overall, but you must also be firm, and consistent with your clients. If they are late on their payments all the time, start to penalize them with a late fee, their payments will soon show up on time for sure. I don't mean to penalize them $100 for the first time their late, but there should be some sort of "push" to make them pay on time.

If you have a client who is requesting a refund because of an extended amount of downtime, you would want your money back to, so give it to them, always be fair.

Stay on top of your billing system and system resources, and when you come across a problem, take care of it right then, don't wait!

I hope some of this helps some of you!

Owner of My-E-Space.com. A web hosting business offering reliable hosting, and excelent support.

Mike Brown
My-E-Space.com
http://my-e-space.com