How to Start a Web Hosting Business with $50,000.00 USD available in funds: The Growth Phase – Part I
After running your business for a few weeks you will see orders come in and slowly see some numbers. Keep good track of the data that is available to you. Keep track of how much disk space and bandwidth customers really use. It is an important piece of the game to see how long your first server will take, before you reach the threshold for performance and disk space. Go back to your numbers of how many customers you want to put on a single server. Once you reach 50% occupation, I’d recommend to order your next leased server and to bring it online within a week or two. Put some of the new customers on it, but then continue to fill up server 1 to your self-set limit. This will assure availability of hardware for your growth and also test out that server after the initial setup. Putting a small number of new customers on the server early helps you to find problems, before the server hits full production. You have to judge which clients to place on the new server and you should keep an extra eye on them to make sure their experience does not turn into a nightmare – for you AND them. I would recommend to follow this path for the first 6-10 servers of your growing business. Once you reach 6 servers you can slowly evaluate how much co-location will cost you, what equipment you need/want and which provider in what city/state to go with. Remember that if you live close by a data center that you will not need "remote hands" to do work on a physical server. You can do this yourself and save money.
Keep a close eye on your support queue. Sooner or later you will need help to cover the helpdesk and you should rather act early than too late. You also need to keep an eye on 24/7 coverage. Up to a certain degree you will eventually get by with monitoring the queue yourself from 5.00 AM to midnight, but the lack of sleep and stress will catch up after a while. Start early to find one or two good employees/contractors.outsourcers that can be utilized as you go. There is no problem having employees/contractors/outsourcers in Australia, New Zealand, Europe, or a different part of the US. Train them properly and make sure they understand your business policies. Evaluate them often and early on to make sure your quality of service does not drop below a certain level. You can pay them per ticket or for time worked. Do your research and ask around. There are enough web hosting forums to find the information you need. You can also use companies like Bobcares or others (this is not an endorsement!) to outsource support for a while. Keep in mind that you might not always be able to maintain the high quality of service you want to have when doing this.
With more customers and more servers you will also have more administrative work to cover. Get an accountant and outsource that piece. You do not have to be a "Jack of all trades – Master of none". Concentrate on running the business and hand off stuff to experts in their field. By the way – good book keeping and being organized will save you many headaches. Start early with keeping these things under control.
At one point you will reach the level of where more money comes in than what you spend. Income will slowly cover the expenses and there is less need to touch your initial funds. Put money into a dedicated account and pay your taxes from it. Start to build a new, a second budget. Your monthly cost and income will need to be matched against each other now that you "in production". Start charting your cash-flow and make sure that you always have enough cash available to move to the next level. As an example – maybe you want to hire your first real employee. Until the employee generates value and profit he or she still wants to be paid after 2 weeks of work. You will need to be able to pay for the salary as well as the hidden cost (social security, unemployment, maybe even benefits, etc.). Plan accordingly. Don’t start giving yourself a salary yet. Don’t spend money on things that are not considered business related. Be frugal. Remember that we assume that you have outside funds/income to cover you for the first 12 months. The reason for that is that you want to build value and a business that can pay for itself (and your salary soon). If you follow this plan and things go as anticipated you should not have problems reaching your goal.