You can see web hosts offering tons of space and bandwidth for cents these days. Anyone can buy a server with 12 hard drives 400 GB each and to start offering a large number of space! And it will work for them! The “awful truth” is that those web hosts who made their decision oversell make at least twice more money than those who don’t.
Fishing for customers who are newbies in web site business is billion dollar competition in the Shared web hosting market. This article however is not about that. It is about those who want to start a web hosting business and those who need to understand web hosting as a business so they can make informed decision as a consumers.
Small Investment In Shared Web Hosting Business
Lets say you want to start a web host. You can do that with small investment. You need a dedicated or managed server that costs between $100 and $300 per month. The price varies of the server specification. It is very important to have a clear concept about your business goals. If you plan to host small family or personal web sites than you can go for a $150 per month server.
There are many dedicated server providers such as ServerPronto. This company offer configurations like this one: Pentium D 820 2.8 GHz, 1 GB DDR RAM, 160 GB HDD, 600 GB monthly Traffic, 100 Mbps Connection. The cost of this one is $140 per month. Let me say I will not put neither positive, nor negative review for them. I just remembered that one of my Canadian friends runs a classified ads web site on dedicated server leased from this provider. They have some issues from time to time but they are still with the same host. Anyway if you get a dedicated server similar to this one above you will pay for hardware, network, space and bandwidth about $1700 per year.
You can decide to buy a server and to colocate it with some colocation providers such as Colostore or Colo4Dallas instead of using leased machine. Then you will have to spend between $700 and $900. Companies like Rackmount Micro and Rackmounts Etc can deliver one however those will not be reliable business class servers. If you decide to buy a server then you will need to pay at least $600 year colocation fees. So the set-up costs go about $1500/year.
There is always an option to buy a machine by getting credit but this is an option that depends of your credit history and your own financial situation. I can not say if it is smart enough to get a single machine on credit. I can say however that using your own server will lower the business costs on annual basis but it will not calculate the risk of possible early exit.
Bringing Customers And Providing Support
You have already made your decision about how to start with hardware and network. The other important step is to design a good looking web site and to explain how do you do web hosting? If you succeed to do that you may expect to start getting customers. Be aware that it is always worth to be honest and to explain things like they are on your web site. If your brand new web host is an one-man-company or if you have only one employee to administrate your first server, it is better to state that.
It is better your customers to know that 24/7 support means you will get-up in 4 AM to fix a bug or to help them with a technical problem instead of misleading them you have many people working for your web hosting label as customer support operators.
No one expects from brand new company to be a reliable enough. Many people who prefer to be served from small businesses instead of corporations can decide to sign-up with a new company. They however will need to make sure you are working hard to provide a good service. I can suggest you to put your cell phone on the web site and to say you are ready to answer customer calls anytime they need to contact you.
Alternative Costs Of Doing Web Hosting Business
Let’s say you are tech guy who can make things by running a web server. Then you can start your business with $140 per month leased dedicated server. But you have to calculate the alternative costs of doing business – the money you can earn when you work for a web hosting company and all other benefits. Those will be at least… let’s say $3,000 per month, you can earn if you are employed from an American, European, or other company in a developed market. So the start-up costs for your first month as a web host will be $3,140. Let’s If you are good in Internet marketing.
What about if you know nothing about server administration? Then you definitely need to be very good in Internet marketing. Otherwise you will not be able to cover your the expenses for the hardware, network and system administration. They would run up to $3,000 – $3,500 for your first month.
Doing Everything To Sell!
Running a entry-level web server does not allow a new web host to provide business class service. That means you need to charge less than $10 per month for a shared hosting account. There are thousands of web hosts to compete you. Since most people get impressed of hosting offers such as 40,000 MB space and 900 GB bandwidth then you have a hard choice to make. To offer reasonable amount of monthly transfer and space and to get less customers or to start overselling.
If you build a reasonable priced web hosting plan with 1000 MB and 10 GB bandwidth you can host up to 150 web sites on a server with specification above. But if those web sites use their bandwidth quotas you will need to pay extra monthly transfer.
Let’s say your hosting plan is priced at $6 per month and customers sign-up for annual contracts. If you do not oversell you will make $10,800 per server. If you decide to oversell one way or another, but not too much, the revenue of the server would be about $15,000 an year.
But when you calculate the costs of the domain name registration your profit will be reduced 9%. The merchant solution will cost you at least 3%.
The costs of domain name registration and merchant fees however are nothing compared to those web hosts to pay to bring new customer. Many shared web hosting companies pay, or clam to pay their affiliates, commissions per sale higher than the annual price of the service they offer. Under these circumstances a new hosting company would be lucky to sell by spending 25% from its income on advertising.
There are other costs such as server and applications software, office space, accounting and etc. Those must be made and they also decrease the web host’s profit. This way any brand new web hosting company that plays by the rules would be happy to make $200 – $300 per month per server.
The only alternative for smaller companies is… to grow. To grow very fast. But fast growth in today’s shared web hosting market, means to sell for less than others.
I understand that consumers want to pay less. Me too! But the web hosting account is not just a place to store web pages. It is a framework for a web site’s business. It has to supply not just hardware but also to provide a technology and application infrastructure that can simplify and accelerate the development of any online business.
The implementation of new technologies allows IT businesses to cut the costs or at least to keep them low. At the same time the costs of living and the costs of doing business are increasing world wide. Web hosting is not a lonely island in business.
Cheap web hosting it does not worth. It is worth to pay reasonable price and to avoid both expensive and cheap providers. It is also worth to search for providers that offer expertise, software applications reach environment and good customer support, not space and bandwidth.
Have you convinced yourself that reliable web hosting service is not cheap! If you need a high quality, load-balanced and highly available service, you should get a Cloud Hosting account. To Cloud Hosting Provider website CloudHostingList.com. If your website has grown, you should consider a move to a Virtual Private Server. Check VPS Hosting Directory site VPSHostingDir.com for find a quality VPS account.