How to Start a Web Hosting Business with $50,000.00 USD available in funds: The Pricing Game
In our new series of articles on how to become a web host, we are covering the basic pricing of web hosting packages and how it needs to be put in comparison with how much a server costs per month. The numbers look very appealing and it shows one more time how lucrative web hosting can be. Here is an introduction to the numbers game.
Before you can start marketing your business you will need to come up with web hosting packages. Define features and prices. Put a fair value on your services. We do recommend not to compete with the low-price web hosts. First of all you cannot compete on price and expect good margins. It also attracts customers that are more difficult to deal with. The low price market segment is filled with bad web hosts and the few that are good will crush your efforts unless you already have good cash-flow and more cash than just $50,000.00. Don’t outprice yourself either. Check the market and pick a value somewhere in the middle. Make sure you can justify the price and offer competitive features.
You will also need to come up with a plan for how many customers per server is a good ratio. We recommend to go with a conservative number. Even if disk space and bandwidth would carry you much further, leaving room for spikes (CPU, memory) and customers in need for an upgrade (disk space, bandwidth) is critical. A stable server not being max’d out to the limit is also a good sales pitch. Customers will recommend your services if they experience excellent uptime and server performance. With that in mind calculate out how many customers you will need with your hosting packages to a) break even on the server and administration cost and how much profit you can make per server. Now chart out how much profit you make at 50%, 60%, 65%, 70%, and 75%. Don’t greedy, because those numbers can look very attractive and are maybe overwhelming. If you get a fair and good profit out of a server at 60%, go for that number. Why not higher? Stability and performance are the answer. Stability and performance will be a major piece of your success or failure. One server down for 12 hours is bad. The more clients you put on it, the more angry customers will yell at you. The more clients you put on a server, the more administrative work needs to be done. One bad written script on a server already running at 85% can put you over the thin line you are walking and server performance suddenly sucks and affects everyone on the server.
You get the idea. Be moderate and careful in your approach and earn the success you deserve. Don’t try to compete with the big guns or join the craziness for who offers the lowest price and the highest bandwidth allowance. It’s not worth it.
To better illustrate how profitable web hosting can be, we are showing two price calculation examples. Example 1 is very conservative in regards to how many accounts are on a server. The second example is a little more aggressive, but still considered conservative. In the end it really depends on how many static or dynamic websites will be on a server. However – the examples are really just to better illustrate the number game.