How do you create your prices? For example if to consider just space and bandwidth it is simpler, but how do you add support and other additional expenses?

hello labahost,
What i personaly do is count up how much additional bandwidth and storage cost and then add a percentage on top of that. For e.g:
GB/Bandwidth = $1
GB/Storage = $1

2GB Storage (would cost you $2)
4GB Bandwidth (would cost you $4)

Total Cost - $6/mo
Add a percentage (for e.g 50%) on top of that (to make profit)

Overall Price - $9.00

Regards,
Justin

I created my own pretty advanced calculation system to calculate my exact cost. For my retail price, I add a certain percentage to that.

Originally posted by Justin.K
hello labahost,
What i personaly do is count up how much additional bandwidth and storage cost and then add a percentage on top of that. For e.g:
GB/Bandwidth = $1
GB/Storage = $1

2GB Storage (would cost you $2)
4GB Bandwidth (would cost you $4)

Total Cost - $6/mo
Add a percentage (for e.g 50%) on top of that (to make profit)

Overall Price - $9.00

Regards,
Justin

With pricing like that, you're going to find it hard paying for support. You want to make enough profit so that for every 1000-1500 clients you have, you have 3 support techs supporting them.
Yes, you can do outsourced support, which I am also doing right now, but It's not really a personalized service if you will.

Originally posted by dbbrock1
With pricing like that, you're going to find it hard paying for support. You want to make enough profit so that for every 1000-1500 clients you have, you have 3 support techs supporting them.
Yes, you can do outsourced support, which I am also doing right now, but It's not really a personalized service if you will.

Thanks for the comment dbbrock1. From my understanding you recieve a large amount of new signups per month and so i was interested in how you set your pricing out.

Regards,

I created my own pretty advanced calculation system to calculate my exact cost. For my retail price, I add a certain percentage to that.
Asverse, what do you include in your system to calculate exact cost?

I created (err edited) a spreadsheet I found to basically do what DBRock mentions.

It's pretty much just fill in the colored cells and it will auto generate the plan costs, and estimate of what to charge.

Mind you it is basic and should be used as a guide... Hope it helps though.

<Edited post to remove attachment by request>

labahost: I really don't want to disclose detailed information. But I will say it uses space, transfer, and server cost. But it doesn't do it in the same way as all these other ones do (add price GB of space and price GB of transfer). That is highly inaccurate. If you want me to explain why, ask and I will tell.

I would be interested in hearing this. I took a strong look at my exact cost. From what I could see, I was paying for Bandwidth and Storage Space. It would be nice to see this from another angle.

Thanks,

Originally posted by Esr Tek
I created (err edited) a spreadsheet I found to basically do what DBRock mentions.

It's pretty much just fill in the colored cells and it will auto generate the plan costs, and estimate of what to charge.

Mind you it is basic and should be used as a guide... Hope it helps though.

I use something similiar to this spreadsheet. I wanted to see how it compared to my own spreadsheet. I ran the numbers and they were way off of what I am calculating. I started digging into why and I found a very important flaw in the way this spreadsheet is designed.

Take a look at Space Cost per GB:
It is dividing the number of available space in Gigabytes by the cost. In this scenario, your costs actually increases as you increase the amount of Space you receive for a fixed cost. According to this spreadsheet:

3 Gigabytes at a fixed price of $34.95 (The amount you pay for your space) is .08 per gigabyte.
5 Gigabytes at a fixed price of $34.95 (The amount you pay for your space) is .14 per gigabyte.
10 Gigabytes at a fixed price of $34.95 (The amount you pay for your space) is .28 per gigabyte.

As you can see, the cost per gigabyte is increasing even though my rate did not increase. Also, 8 cents does not calculate correctly for 3 gigabytes of space at $34.95.

I hope this made sense. I just wanted to make sure no one used this tool as it is designed because we have enough people who think $2.99/month leaves a nice profit on 1 gig of space and 20 gigs of bandwidth.

One other thing I noticed is the Cost Per Account was based on the max number of accounts you could place in your given space. I don't know if I feel comfortable with this. It seems to me that this number would change based on the mix of each plan in your given space. If you had more large plans and less low end plans, wouldn't that change the actual cost per plan? I may have to think about this one.

I am not going to go into all the details of the right and wrong way to do it. But here is an example of how to prove its inaccurate.

Say your server is $100/month. You get 80GB space and 600GB transfer. You want to give a client 40GB space and 300GB transfer. Now you would expect your exact cost to be exactly 50% of $100..correct?

Now this is the standard way people calculate their own cost:

a = Cost of server
b = amount of space (gb)
c = amount of transfer (gb)

a/b = Cost per GB of space
a/c = Cost per GB of transfer.

So for 40GB space and 300GB transfer with $100 cost of server:

100/80 = $1.25 per GB
100/600 = ~$0.16 per GB

40(1.25) = $50.00
300(.16) = $48.00

Final cost: $98.00. There is no way that could be your exact cost for 50% of the server.

Which proves it to be incorrect. You might say, well then your exact cost is just the cost of the space, or just the cost of the transfer. But that doesn't work in a lot of situations

For example, 3GB space and 80Gb transfer..

3(1.25) = $3.75
80(.16) = $12.80

Which is $16.55 (which isn't your exact cost).

Another hard example of this calculation being wrong would be 80GB space and 600GB transfer account. Which would be 100% of the server, which your cost SHOULD be $100..correct? (same cost of the server). Let's see:

80(1.25) = $100.00
600(.16) = $96 (would be $100 also but I rounded off the .16, which was .166666..etc)

$196. This can't be your exact cost, as its more than the actual price of the server.

As you can see, the normal way people calculate forces them to actually calculate like 2x more than it should be. But it's not always 2x, its different depending on different variables. So you can't just divide everything in half.

Believe it or not, there IS a correct way to be calculating this stuff.

Atomm - True I should've stated that it was by no means the perfect tool.
I tired to beef it up and fix it in a hurry and get it to this guy, but guess I didn't. (too bad I can t remove attachment :P)

Luckily, I mainly used it for finding max cleints per space and bandwidth ad not the prices of accounts :P

Thanks for advice, I will look into fixes (although I'm not that great w excell).
If you care to share your shreadsheet and/or make the changes needed to mine and send it back.
It would be appreciated :D

well nice to point out the WRONG way of calculating the prices, though i think it'd be eve nmore helpful if u posted the RIGHT way of doing this

hi

look around the market and use the formulars make sure you aren;t too cheap but not expensive either

Originally posted by labahost
How do you create your prices? For example if to consider just space and bandwidth it is simpler, but how do you add support and other additional expenses?

Search the archives to find out the cost of support. A good thread on support costs can be found here: http://www.webhostingtalk.com/showthread.php?s=&threadid=196621 Plus you have to total up all the other expenses from your business plan such as advertising, major purchases, yearly accounting fees, monthly cable modem access, software upgrades, office expenses, etc and figure out a cost per account. Realisticly, I don't see the total cost for a US based business built on a stable long term business plan going under $10/month per shared account plus the actual server costs.