How To Start a WebHosting Company – Part 1

How To Start A Web Hosting Company

The webhosting industry is very different from 2001 when I started HostNexus but many things are still the same. It’s true the competition is fierce. It’s probably the most competitive industry on the internet today. But there is good news – the internet is not getting any smaller. In fact it’s always growing as more and more people get online each and every day. Since I started HostNexus ONE BILLION people have come online – a growth of over 300% in 8 years. There will always be room for more hosting companies as long as people keep putting up websites.

The Web Hosting industry literally powers the internet and is at the forefront of new technologies and new software advances. It’s a very dynamic and vibrant industry and accessible to almost anyone with a
working level knowledge of the internet. At HostNexus I’ve seen resellers graduate to servers and become very successful hosting companies in their own right. Sometimes I’m asked for advice as HostNexus has enjoyed some success over the years as it’s grown to over 3000 clients and 100 servers. So I thought I’d write a few articles about starting a hosting company and running one. I’ve done some things right, I’ve done some things wrong and I’m hoping some people will benefit from my experiences. So if you’ve
dreamt of running an internet based company, have drive and determination but no real design or coding skill – then hosting might be an option for you.

(1) GET YOUR DOMAIN

Firstly, and I can’t stress this enough (and it applies to any idea you may have), register the domain now, put up a page, get it noticed by Google. Because a few weeks/months into the project something might
happen that may cause you to delay things or in some way put it on the backburner. There is a lot of speculation about the Google sandbox and how widespread it is but most people believe there is a sandbox in some industries and some keywords. So even if you have a vague idea to set up a hosting company –
get the domain, put up a page and get it indexed. So even if you don’t start right away you are using the time to your benefit.

(2) TARGET NICHE

Before you even think about your site and how much money to spend on the business you need to do a lot of research. First thing you need to do is choose your niche. You simply have to target a niche. You can target a specific group of people or a certain type of hosting but you need to specialise at first. If you offer standard Linux Hosting or Windows Hosting you are competing with so many thousands of existing companies and it will be so much harder. If you had a large startup budget offering standard hosting could be done as you could sink a lot of money into advertising but generally this won’t be the case (lucky you if it is!).

So find your target niche and think how you are going to get clients. Just putting up a website and waiting for orders to roll in is not going to yield any results (understatement right there). For example we have a
client that specialises in hosting for Lawyer websites, another one specialises in Real Estate Agent Websites – these are examples of targeting specific groups of people that need hosting. You can expand on this by teaming up with a web designer to provide design services, website maintenance services or SEO services.

Another form of niche hosting is the software that people use to build and maintain websites. There’s still room in the WordPress Web Hosting niche (although that is quite huge now) but there are other popular things such as Joomla Web Hosting or OSCommrce Web Hosting. A vastly untapped resource is the increasingly popular Magento ecommerce script (www.magentocommerce.com) so you could target the Magento Web Hosting niche. Anything that is open-source and popular is a winner and if you become an industry expert in a niche’s early days your success is truly inevitable. And once you have
established yourself you can expand into other areas. But if you specialise in something, rank well for it in Google and become an expert in it this will give you a most excellent foundation for a new web hosting
company and you can start small.

(3) BUDGET

Once you know your business’s direction you can start to think about your start-up budget. The more money you put into the web hosting business the quicker the returns will be. Your budget will dictate your entry level into the business (Reseller, VPS, Dedicated) and how much you will spend on designing your website. Also it will govern whether you will start off part-time, get stuck in full-time right away and if you can hire any staff.

I started HN on a budget of $10,000 AUD and that included the site design, some software, a few servers, staff costs for 3 months (2 people) and living expenses for Chris and myself. It was a very optimistic business plan that I drove through by pure bloody-mindedness and refusal to accept the possibility that it wouldn’t fail to succeed.

But you can start a Web Hosting company for as little as a few hundred dollars – especially if you are a designer and can make the site yourself. A reseller plan or VPS isn’t a huge overhead and you can use open-source software for everything from your support system to forums to live chat to billing systems.

(4) HOSTING PLATFORM

What a choice there is a available these days! Back in 2001 it was a reseller plan (with limited features) or a dedicated server (with Plesk 2 or Cpanel 6 – also both quite limited). Nowadays you can have a Reseller
account that can setup other Resellers (with the new Plesk 9), a VPS which basically gives one all the feature of a dedicated server for a fraction of the price and managed dedicated servers.

If you are worried about diving in head-first with dedicated hosting then don’t be! We have many dedicated clients that don’t know and have no desire to learn SSH, server maintenance or security. The beauty of full server management is that we can do anything you ask so if you get a support request from a client that you can’t handle we will step in. And we can teach clients how to do simple tasks in SSH which will speed up your own support times. As you expand you will want to look into getting your own server admin just to streamline your efficiency but until you’re ready, feel free to lean on the HostNexus Support Staff.

A VPS behaves like a dedicated server so all the above applies to VPS Hosting too. If you need either access to Admin level of Plesk or access to root then a VPS could be a good entry level for you. A common misconception is that a VPS is more powerful than a reseller plan – this is not true. With a reseller plan you have access to ALL the server’s resources at any one time. And while doing so might get you into trouble if you have that usage over a long period of time the resource is still there for you to use. A VPS gives you more control but you have a set amount of RAM and CPU time that you can use.

But having said that, the servers 8 years ago had 60gb drives and 512mb ram as standard with 800MHz processors, comparable or even less powerful that your average VPS these days!

Your hosting platform options could be summed up as:

Reseller: Powerful, limited options
VPS: Limited power, more options
Dedicated: More power, more options

With a VPS you can always ramp up memory in 128mb increments and as long as you aren’t running applications with huge CPU requirements a VPS can serve a huge range of hosting environments.

(5) STAFF

You have your budget, you have a plan of attack in the hosting business and you know how much time you yourself are going to spending on the company. You are going be your company’s promoter, chief support person, main sales person. The more help you get the more time you’ll have to promote your company and get new clients. But remember no-one will care more about your clients than you so if you do hire help you always need to keep an eye on your client’s issues and review your staff’s performance in real time.

If you’re not going to hire help don’t advertise 24/7 support. Truth, honesty and integrity before sales – always! Outsourcing is great but pooling from your own network of contacts is better. Look into profit
sharing and reward programs to entice people to help you for a small sum at the start. Building a team with a vested interest in the company from day one will bring in many benefits as your company develops. If you choose this route then your first posts to fill would be a Support Manager and a Sales Manager. In a company’s early days the founding members need to where a variety of hats to maximise efficiency. Your ideal Support Manager will be taking care of tickets when you sleep but also be a developer (you’ll always need dev type work done). Your ideal Sales Manager will take care of sales and also marketing and hopefully one of you will be handy with design. Aim to build a team that covers support, sales, marketing, coding and design very early and you’ll have all the main things covered. Make sure the managers are willing to interact with your customer base via forums, blog posts, live chat and email.

So now you have a clear outline of what you’re going to do, how you’re going to support it and how much money you can invest. This is a good foundation to start building your company and if you are a beginner your staff can help you along the rest of the way so lean on their knowledge and expertise.

Next week I’ll post about Site Design, Collecting Payment, Supporting Clients and other things. Here’s to your hosting success! 🙂

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About the author

Laurence

Hi, my name is Laurence and I’m a web hosting aficionado. When I'm not cracking the whip at HN I can be found at the gym where I'm chasing that 500lb deadlift and kickboxing with guys half my age and still giving as good as I get. Yep, a rare breed of tech nerd mixed in with meathead.

    View all articles by Laurence

    5 comments

    1. Dan Somers

      Its been a pleasure to read your blog about hosting!
      I have always had a reseller account with a awful company so I decided to take the plunge and buy a small server to host my clients for whom I build websites and host them as part of my packages. I didnt think the server would be able to host many sites so I have decided to brach out and advertise hosting only packages. Your blog has opened my eyes on a few things thank you.
      Dan

    2. Shawn Stewart

      Great read. Thanks for explaining things so clearly — it’s not very often someone sets things out so well. Gives me something to think about.
      .-= Shawn Stewart´s last blog .. =-.

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