I'm planning to sell web space and dedicated servers at loss.
That is, lower than the my cost.
But to keep in balance...I plan to charge it annually, so that I can still mantain it.
Will it work to give proper exposure to company...The losses I'm going to inccur in first 3 months....I'll recover in last 3 months of the year.

What you say ?

Have you really made your homework and put up some calculation sheet? How should this work? This will not work in the long term.
Or are you referring to over-selling? This is something all hosts do.

No...I plan to run these offers ( in which I loose) as specials...
( only for a month when I start my site )..
I'll get lotz of signups. ( I hope)
Get gr8 exposure...as my prices are too good to be true.

ALL of my clients will refer me....as they will be amazed by the quality of support, performance and service I provide.

I'll continue to get orders even after a month...coz. I'll be established by now, even a :) t a higher price.

Got it ?
:D

Two thoughts:
1. Many customers will not sign up for a yearly contract with a company which is new and unknown.
2. To rise prices is not something easy - it's a lot easier to lower them than to start charging more.
But no intention to stop you from trying your idea.

Why limit you future plans with a 1 year period only?!

See the things, in a, say, 10 years perspective.

During the first 3 years you establish your name and provide:

- very cheap hosting
- free domain registration
- free unlimited bandwidth
- unlimited domains per account

Your name will shine, believe me!

Money? You will gain it, later during 4th - 10th years of the business plan.

By the way, a VERY respected person suggested a good idea: free colocation! Check http://www.webhostingtalk.com/showthread.php?threadid=24570&goto=newpost for more info.

Originally posted by Anatole

- free unlimited bandwidth


There it is again... where's jimb? :)

There is nothing new or original with what you plan to do. Look at the forums here. Many companies do this. Now look at the companies who did this a year ago in the forums. I don't see many of them any more.

Affinity did this like 4 years ago with Hostsave. $6.95/mo four years ago was nuts. They succeeded because Affinity could absorb the cost. Then once their customers out grew $6.95 plan, they up sold them to the normal pricing Affinity offers.

Here is another problem. Basic hosting is a commodity. This means you will need to do more to get and keep customers. You can't do this when you are not making money.

Just my 2.

hmm a good place to start would not be at this forum but on paper. Try making a business plan. And talking to someone with a little bit of business experience.

I can promise you pricing below costs will positively lead to problems down the road no questions asked. And as a consumer, I sure as heck wouldnt want to host with someone taking a loss.

Well, this sounds like "Walmart" thinking, or what is known as a loss leader. It works well for the superstores because they have deep deep pockets, and, they anticipate once they have you in the store (the hook) they can make up for it when you pick up half a dozen other things on your way out the door (the reel in)

Unfortunately, this won't work for hosting. In fact, it is the exact same kind of thinking that caused the Internet Bubble to expand and ultimately burst. ( expectations exceedes reality)

Now, maybe if you had a bundled service where you could sell one aspect of it below cost, and make up for it on the remainder, you may have a better shot.

Honestly, I think you need to rethink this one through. You need to consider all your cost, and then what you need above and beyond those cost, to operate successfully.

Oh, and the word of mouth scenario will most likely work against you.... "bob" signs up for the ultra cheapie plan, and tells "sue" six months later down the road. But the ultra cheapie plan is no longer available, so "sue" ain't interested, and "bob" is on his way out to the next host, since prices are soon to rise.

Ya, I know. Tried and true business practices are boring and lack excitement.... but they do work.

sPoT!

Originally posted by Anatole
Why limit you future plans with a 1 year period only?!
See the things, in a, say, 10 years perspective.
During the first 3 years you establish your name and provide:

- very cheap hosting
- free domain registration
- free unlimited bandwidth
- unlimited domains per account

Your name will shine, believe me!

Money? You will gain it, later during 4th - 10th years of the business plan.


I dont think anyone will sign up for 10 years or even 3 years. Everyone knows that prices are crashing like anything if 100MB today cost 100$ per year than next year 100MB with good server speciications and so many advace features like CP an other will cost less then $75

Domain registration is not free you have to adjust $6.5 in hosting pack only.

To offer Unlimited bandwith is bad idea I guess.
What if somene make ftp server , IRC or mp3 download site

Yes unlimited account can be very good deal. Charge only setup fee for the domains.


:D :D

It's the worst idea I have ever heard.

1) Figure out how many hosting acounts can/want to put on each server.
2) Figure out your monthly cost.
3. Figure out how much to charge per customer per month to break even.
4. Add a % for future hardware upgrades, software upgrades and whatnot.
5. Add a % for your profit to make it all worth the trouble.

We all make losses during the first 3 months. Hell, I calculate on loosing money during the first year. That's nothing new though. New companies don't start up and make money from day one.

I anyone had told me 3 months ago that I would spend over $ 1000.- on advertising alone in october I would have called him nuts :(

I think that everyone is missing that Anatole was.... joking . :D

Anyway, you're only as established as you look. Nobody knows how many customers you're losing money with, they only see "wow, a professional looking site with just my hosting needs," or "crappy looking site with dumb plans."

And finally..... nobody likes a gimmick. They can be seen for miles away, and no-one likes to be treated like they're stupid.

For the sake of argument your server cost is $10 a month you sell a package for $8 per month but they pay you for the year. So they'll pay you $96 upfornt and you put it in your bank then what?
You still have to pay $120 for the year for the server but you only collected $96 so the difference comes out of your pocket.

You should at least get the breakeven point. I don't see how you can stand making losses. Say your cost is $100 which is also your capital. If you put into the bank, say 10% interest rate, you will get a risk free investment return of $110. So, you should get at least $110 if not more. No rational person would do a business which get zero or negative net present value.

Now I think we all have frightened him...
:D

Now I'm thinking of selling at 50% to 100% my cost price.

what you should really be looking to do first is finding methods of cutting your overall cost and then you'll be able to offer your services/products at reduced pricing. and furthermore the main reason the "internet bubble popped" is because of unrealistic spending, over valuation and because many of the people whom started them was not financial people but rather technical people, and they had to rely on other people(sharks, carpet-baggers, you get the point) to count their money ;) - NOT good for a company just starting out.

Look everyone is looking for a good deal and you sound like someone who really wants to give your customers the best deal POSSIBLE. just build your hosting company on ROCK and not SAND. so start with good sound business practices!
hope this helps
deeboy

Unless you have got a very deep pocket to support you, this isn't a good idea. The maximum you can do is sale at your cost + expenses , a no profit deal, but selling at loss. Boy I feel scary.
But that's just my opnion.

I really agree....

I would never sell at a loss... unless it was a special cirumstance that would get you a very big customer or something...

I would suggest selling at your cost to start with low prices...

Another thing to keep in mind... with prices that are too low, you will likely scare away the good customers... The businesses. They will recognize it as too good to be true, and go with something that seems a little more sound.

A good example of this, I knew somebody that was a software developer... He sold his program as shareware for $20... This software was very simliar to software costing around $500.
One day he decided to try a different approach.. He made a few modifications to the software (nothing major) gave it a different name. Sold it for $50 and make it retail, so that there was no way to try it before hand. He sold a lot more. People found it to be a more realistic price, so therefore they were more confident in buying it.


Just because your prices are not as low as they could be, doesn't mean they aren't a good deal, and it doesn't mean that your not going to get customers.

There's my 2 cents. Hope this helps.

Ya, that is called a Perceived Value. Think of generic foods at the supermarket. You have the store brand on the left, and the national brand on the right. Lot of times it is made by the same manufacture, but one cost a buck and a half more than the other :)

Marketing can be so much fun. And daretosucceede, don't forget to have fun with it, just don't go broke doing it ;)

sPoT!