Why Your Business Will Fail

This article is not about writing a business plan. It’s not about your lack of technology savvy, nor your inability to slap together a few decent resources and turn it into a web hosting business. And it’s definitely not an article about why you should not start your own web hosting business.

Then what is it about? Good question. It’s about why your business will fail, regardless of how good your business plan is, regardless of how much technological knowledge you possess, regardless of your experience and the resources you have available to you. Your business will fail. Why?

Web hosting is a very competitive field. As startups spring forth on a seemingly daily basis, competition continues to grow and in essence, everyone is after the same pie. Granted the pie continues to expand as well, due to the ever increasing number of businesses finally realizing that they need a web site, and because of countries whose economic condition now make the internet an affordable commodity.

Sure, we’re all after the same pie, and even if you are competing with businesses on a local level, you’re still after the same customers, customers who will pay you money to host their web site.

One question continues to linger on, particularly in an industry as competitive as web hosting: why should customers choose you over your competitors?

It is this question that, if left unanswered, will eventually drive your business into the ground in due time. Regardless of your marketing plan, or how much money you have budgeted for advertising. And no matter how many books you’ve read about managing servers. Answering this question ought to be a priority for web host startups.

Do I Have Your Attention?

Many web hosts have ventured into a plethora of different marketing strategies and explored different avenues when it comes to devising an advertising campaign that will reach their target market. But many web hosts fail to realize who their customers are, and ignore the fact that their very own competitors are out to reach the same customers.

Visit your favourite internet search engine, or more specifically, a web hosting directory and you’ll see what I’m talking about. You are instantly bombarded by a number of web hosts screaming for customer attention. But just how do they grab customer attention?

What? By showing off their features and price? How many times have you seen advertisements of web hosts showing off the features of their web hosting plan, along with the price, and, of course, the name of their company? Now multiply that many times over and that is what customers are seeing.

How does a customer choose amidst a flood of data, features that vary from one host to another, disk space and bandwidth numbers that don’t really mean much for customers new to web hosting, and prices that seem to be randomly pulled out of the air?

Compete By Price?

Okay, so one way of catching my attention is giving me the absolute lowest price imaginable for web hosting. That’s right. Give me your absolute best, ultra-loaded, gargantuan hosting plan for pennies on the dollar, and give me a free domain to boot. Do we have a deal? Yes? Well that’s great! Now, where do I sign up?

You’ve probably seen web hosts offering ridiculous offers with prices that are so low they make you cringe with fear. How do they get away with it? Do they even survive? Who are their venture capitalists, mom and dad?

Competing by price is the lazy marketer’s way of attracting customers. First of all, if you can not afford to offer web hosting at such a low price, why would you be tempted to offer it in the first place? In high hopes of up-selling your clients? Or perhaps because you think volume will make up for it?

Consider this: the people that pay the lowest prices for web hosting usually demand the most service. Let’s be straight up about it: they’re cheap customers. From the experiences of many web hosts who have learned their lesson after trying the ridiculously low pricing structure, it doesn’t make sense to charge customers a low price if they demand the most of your time and resources. You lose money. And you’ll eventually lose customers. Not to mention the fact that you will not make money taking this route. Your business will fail.

What Makes Me Different?

Ask yourself that question: what makes me different? What makes you different? Why should a customer choose your web hosting service over another company’s web hosting service? Don’t you both offer the same service anyway?

If you fail to realize the fact that you need to do something different in order to survive in this business, it will take sheer luck for you to survive. If you’re like everyone else, chances are your business will fail. Your business plan should have outlined a marketing strategy, but you should have also considered the competition, and what it takes on your part to generate enough business to grown and prosper.

Service Differentiation

Essentially, every web host offers the same service in the perspective of the customer. They pay you to host their web site. Wow, big deal isn’t it? With this kind of thinking, your competitors are set to fail because all you have to do is set your service apart from everyone else. Begin by brainstorming to yourself or with your team. How can we differentiate our service enough so that customers can see our service as superior to that of our competitors?

You’ve probably seen many claims including 99.999% uptime guarantee, or 24/7 support. In reality, these hosting companies are differentiating their services, although many are quick to jump on the bandwagon. Can you deliver an uptime guarantee to your customers? Do you provide customer service and technical support 24 hours a day, seven days a week?

What do you provide that your competitors do not? Do you use a control panel that makes it easier for customers to manage the features of their web hosting account? Do you provide free antivirus software that protects their e-mail? Do you provide a solution to SPAM e-mail?

Differentiating your services simply takes a bit of creativity and being able to see your service in the eyes of your customer. What will excite them? What feature will switch them on and see you as the ultimate web hosting service provider? What will make your competitors envy you?

Brand Experience

Web hosting is not as dull a business as you think. In fact, it’s more than just hosting your customers’ web sites and hoping the server doesn’t crash. It takes more than answering the phone and helping them solve their technical problems.

The experience that your customers have with your company is one that is very important, and should be emphasized. The brand that you deliver to your customers is one they should feel strongly about, again, something that excites them every time they interact with it.

Start with your company name. Is it another one of those computer generated, high tech, dot com names, or did you actually think of something clever, something your customers can feel emotionally about? Now let’s have a look at your web site. Did you splash it together using bits and pieces from the web sites of other businesses, or did you do something unique, and make it easy for your customers to navigate?

Are your web hosting plans designed to suit the needs of your customers? Do they have enough choice? Your ordering process – is it easy? Can customers order without running into problems or feeling inadequate? Can customers get in touch with someone if they are having difficulty?

When customers call for customer service or technical support, do friendly representatives answer the phone with a strong feeling of rapport with your customers? Do they genuinely care about the well being of your customers, ensuring that they do whatever it takes to keep them happy?

Let Them Talk

Unless your web hosting business is worth talking about, you will fail. The most effective way of promoting your business is out of your hands. It’s your customers that play an effective role in whether or not your business will succeed.

If your web host startup is just another mediocre, half-assed attempt to make money, or if it’s just a dedicated server sitting somewhere out there begging to be filled with data, you will fail. Nobody will even notice that you exist, regardless of how many ads you put up, how cheap your prices are and how technologically ingenious your team is.

The easiest way to get your business off the ground is to excite your customers and get them to talk about you. Think about it because it really is that simple. When was the last time you told a friend of yours about a product or service you really enjoyed?

Now, what can you do about your web host startup that will get customers to talk about you? How do you tickle them enough so that they get off their seat and tell just about everyone they know about how great your web host services are?



Copyright © 2004 Johnder Perez

awesome article johnder!

I'm quite impressed of how true that is. Good Job

Did you read our business plan and internal policies? ;)

Very well written post/article. It's on my top 10 posts of all time at WHT, and that says a lot (at least for me).

- John C.

Thanks for the feedback! And yes, John, I did manage to get my hands on your business plan... hehehe. ;o)

All kidding aside, it should be a wake up call for "me too" web hosting companies... which will be the topic of my next article.


JP

That article was excellent!! Everyone should read it.

<< signatures must be set up in your profile >>

Very informative and helpful post. Lots of good information and well-written. Thanks for sharing it with us Johnder. I spent about 10 years in the advertising and public relations business trying to figure out how to help small businesses compete and stand out from their competitors. A big ad budget is NOT the key. The key is to provide a good service at a fair price, and find a way to get your customers to tell their friends about it. That's the best way. Everything else is a stab at the next best. I Look forward to other great and even more specific ideas from others on the forum.

Thanks for sharing. I want to read the business plan can anyone kindly show me the link to it.

After reading this I got a few ideas that I didn't have before. I have been trying to get my hosting business off the ground for over two years and haven't had much luck. I will not give up. I will continue. I have spent a ton of cash keeping it going with little or no cash flowing in. For one it gives me something to do that I like to do. With my full time profession, I by nature, care for people and hate to see people being bullied or buffaloed into something that isn't what it's cover perports it to be.

I have been given different ideas in the past that have not paid off but, this article hits it on the head. Time to give it all a new "look into" and see what comes of it.

Bravo on the post.

Nice advice

Nice, but how would you go about advertising?

bravo bravo... excellent read

Excellent advice, certainly well worth taking on board.

Looks like johnder is quite a successful businessman himself

Yes indeed, a very good article.I myself used to look for webhosting not while ago.. and really I must confess I was always choosing what my friends recommended me .. never trusting banners and advertising.

I have to say, this was a fantastic read. Many thanks for writing this, it really helped me decide where I stand with my company.

Good read. And good luck to all.

nice post/info ;=)

Wow I am almost scared to even try and host

oh what the heck i will try

A good read.... Thanks!

awesome article pal.It gave me an idea of this biz
i'll try to implement it.

Great post.

Keep up the good posts.


. Aaron

great work!

Good read. To make any business successful, you need commitment. Many web hosting companies out there are just 1 or 2 man team running it part-time and probably just marginally substaining.

To grow to next level, a business plan is needed but more importantly the commitment to execute it successfully according to plan will serve to differentiate among so many hosting companies. Have to aim to be The hosting company and not just a hosting company. ;)

Good, comprehensive read

yeah gg guys very informative and useful seeing as i want to set up a site to sell sigs ect and banners and instaltions...however seeing as i am only 17 i am not sure if i will take it tooo extensive levels with the obvious problem of staff.

Very presentable article john. Nevertheless, what most people should do is not focus on what poeple say whether from your pops to poeple on the internet....losers visualize's the penalties of failure and the winner visualize's the rewards of success...quitters never win and winners never quit....our rewards in life will always be in direct proportion to our service. Don't think like it act like it and we can predict the futrue like cleo the physic.

We're already multi-millioniares mentally...it jus hasn't orchestrated itself into the phyisical yet. That car and that house you have it already, however, before you can have something you have to believe it's yours.

Watch your thoughts; they become words.
Watch your words; they become actions.
Watch your actions; they become habits.
Watch your habits; they become character.
Watch your character; it becomes your destiny.

Thoughts are the most powerful things around, if you don't believe something your dream is kilt before you even start the venture and if you don't believe something 100 percent you won't reach the goal there is no partiality...don't focus on I can't focus on I can...Life is what you make it...don't think about how your gonna get somewhere just know that you are and the answer you need will come to you in time.

Also, differentiate problems from decisions cause there is a big difference....don't mistake your misfotune for mistakes or your misfortune's for mistakes.

I was taught this from a very acute friend.

lol dam straight ;)

Great article, John. I will definitely keep these points in mind when running a webhosting business. Thanks and keep 'em coming.

Hello Sco0t,

I strongly advise you get someone to revise your site http://www.spitfyresolutions.net/

You have quite a few grammar and spelling errors. You should really read your composition several times before launching it as your main content. It looks very unprofessional. I'm not trying to knock your company or site just looking out for your best interest. They may not be spelling mistakes, maybe typos, either way it displays that time was not taken to review your own content what sort of time is put towards your clients? What sort of solutions do you provide? web hosting solutions?

Hi, thanks for letting me know. These mistakes are going to be mended. At the moment web hosting solutions but may expand.

unixparse,

I read over your previous post and noted quite a few grammatical errors. Look at yourself before judging others.

unixparse,

I read over your previous post and noted quite a few grammatical errors. Look at yourself before judging others.


I don't have the time to review the contents of my post. They are both two different scopes. This is for members of the community to read, the other is in regards to his business. Nevertheless, reviewing some of your previous posts you have grammatical errors yourself.

It's possible, if you could provide links, I would like to view them. As I try not to leave grammatical errors.

way to shatter everyones hopes and dreams in one swipe

I look at this article, and consider it constructive criticism.

It's possible, if you could provide links, I would like to view them. As I try not to leave grammatical errors.


"If you may provide the links" not "If you could provide links". Nonetheless, the entire sentence structure is horrid.

No need to search further. Look at your previous post.


I look at this article, and consider it constructive criticism.



There is no need for a comma (breathing space).

I never claimed to have perfect grammar, nor do I believe that my english excels other individuals. I was simply pointing out the grammar errors and spelling mistakes on his Company Website. I believe as an entity you should be proficient, skillful and have talent. I was not trying to knock anything of his company or his english. If you read the content on his page you would think a neanderthal wrote it.

Instead, you decide to attack me for the grammar errors in which I know exist. However, If you like, I may audit some of your other posts. Anyhow, I do not have the time for this. You are clearly nonpareil and ELITE!



You have quite a few grammar and spelling errors. You should really read your composition several times before launching it as your main content. It looks very unprofessional. I'm not trying to knock your company or site just looking out for your best interest.



Where do you see judging from the above?

I apologize for trying to edit you, I've been crabby lately. So, everytime I see something it's easy to try and correct people. My apologies.

Good reading. However explaining on paper is just one persons point of view. THere are so many ways to go about it but those mentioned in the article hits on the High Key parts.

One suggestion would be to make sure to integrate it all so that there is little need for staff. Use the computer to do as much as possible without human intervention. And have it email error reports if anomalies occur.

A great tutorial, opened my eyes somehow, maybe its a little "tooo depressing" i don't belive creating a webhosting company is all impossible. Try focusing on how to solve such problems rather than why people will fail.

Thanks for that it is an education on here :)

Great post. Mind if I frame it on my wall?

lol thats funny

This has been an intresting read, it has certainly given me more to think about.

Thanks ;)

wow thanks for the great advice :)

Thanks for your suggestion and direction for the web hosting business.
It is really good and encouraging.

May I request you to give your insight about the following most important part which is not covered in your topic "why your business will fail" I think most company are facing the basic problem.

Lot of people have the attitude " I want the quality, but I don't want to pay the price for it"

Wow. Very impressive article. Well thought out and written.

good info here. thanks

RECENTLY I WENT THROUGH AN AWESOME SITE:

Which gives a wide knowledge of Business setups.. Espacially in UK. But it covers so many points on international levers that you will defenatly get Help.

http://www.businesslink.gov.uk/


Hope you like.. Feedbacks are Welcomed :)

every time I see this thread brought back to the top, I have to wonder about the business he has in his sig. the webhoststartup one.

Originally posted by CD Burnt
every time I see this thread brought back to the top, I have to wonder about the business he has in his sig. the webhoststartup one.

Me too! Maybe he should have read his tutorial.

In connection to "What Makes Me Different?" - take a look at niggahosting c0m (sorry I wasn't allowed to post urls but I cant wait how I want to share) very good example :)

It's great things to start a business with customer centrics.

I agree with your articles that point base on the customer feedback and insider.

Thank You

Originally posted by CD Burnt
every time I see this thread brought back to the top, I have to wonder about the business he has in his sig. the webhoststartup one.


Actually, the business showcased on The Startup Blog (a.k.a. WebHostStartup.com) was that of a friend of mine, Jonathan Wold, and his attempt at launching a web hosting company.

I wrote this article based on my personal observations of the web hosting industry.

But I'm sure you're all wondering what happened to The Startup Blog -- all I can say is stay tuned...



JP

very nice for sure

Lot of people have the attitude " I want the quality, but I don't want to pay the price for it"

I agree that a lot of consumers have that mentality. Think of it this way...

A buyer walks into a Ferrari dealership and says... "I want that F360 Spider, but I only have $30,000." Do you think that dealership, in their right mind, would even consider selling to the buyer?

Don't let this mentality affect your own pricing strategy. There is a certain degree to which the web hosting marketplace will dictate prices paid for web hosting service. After all, it is based on supply and demand.

If you offer a quality service, charge the price you feel is right for your time and effort. Companies should only charge what they feel their products or services are worth -- and if it's worth a lot, charge a lot depending on what the market is willing and capable of paying. There is no doubt in my mind that there are customers out there who will not hesitate to pay a web host a much higher fee in exchange for more quality service.


JP

johnder,
Though it is an old thread, thanks for your reply. The strength, durability, reliability and serviceability all contribute to certain hidden costs which make the end products costly. If you add value to your service the customers will pay the price.

nice article !!

A very good article, indeed! You're a gifted writer! :)

An excellent read...

Great, great article. Highly advise any new webhosting startups to absorb its advice

Hello Sco0t,

I strongly advise you get someone to revise your site http://www.spitfyresolutions.net/

You have quite a few grammar and spelling errors. You should really read your composition several times before launching it as your main content. It looks very unprofessional. I'm not trying to knock your company or site just looking out for your best interest. They may not be spelling mistakes, maybe typos, either way it displays that time was not taken to review your own content what sort of time is put towards your clients? What sort of solutions do you provide? web hosting solutions?
He still haven't fix his site yet :D

johnder, good one and hope there is more articles from you.

Scary article :)

Its plain to see whats going on here. Selling cheap hosting with oversized oversold plans only works for so long.

I have learned from your article and cannot agree more that customer service is a priority. A happy customer leads to more plans and that works for us.

Thanks!

Very informative read.

Thank you :)

An *excellent* piece of writing. I can quite clearly acknowledge that you didn't spend 5 minutes on that. You deserve a real pat on the back. Very down-to-earth piece of writing.
Well worth reading.

After reading this I got a few ideas that I didn't have before. I have been trying to get my hosting business off the ground for over two years and haven't had much luck. I will not give up. I will continue. I have spent a ton of cash keeping it going with little or no cash flowing in. For one it gives me something to do that I like to do. With my full time profession, I by nature, care for people and hate to see people being bullied or buffaloed into something that isn't what it's cover perports it to be.

I have been given different ideas in the past that have not paid off but, this article hits it on the head. Time to give it all a new "look into" and see what comes of it.

Bravo on the post.

Trust me I know all too well what your saying. Ive been around for about a year now and I just lost one of my web design/programming/hosting customers because they went out of business. That was a big hit for me!

I am just now barely beginning to make a profit on the handfull of customers I have. I have finally just redesigned/programmed my website and automized sign up. Now I just need to modify my packages(which will happen very soon indeed) with a great naming/pricing sheme, add a custom package selector that I am working on, and put some personal pages about us to finish up the job of reworking the site.

What good is a site though if you dont have people willing to view it or care about it? I started using adwords on google and realized what a waste of time it is. Any ideas for advertising would be greatly apreciated. Please dont say top-10 hosts site or something though.

I dont think there is another business out there besides farming(whch I do also) where you put so much time in and make little or nothing from it. Maybe thats why I do it, because it reminds me of farming. Seriously We could both be working at mcdonalds for the same amount of hours and have made 50 times more money than we have(at least this is true for me).

Besides that , I really enjoy doing this though, and I have learned allot in the endeavor, although some additional payoff would be nice.

Hello Sco0t,

I strongly advise you get someone to revise your site http://www.spitfyresolutions.net/

I actually think your site is descent, I would get rid of the flash stuff as I found that it annoys rather than amuses customers for the most part. And believe it or not some people still live in the dark ages. Another thing I noticed was your not using the ./whmautopilot_folder/step_one.php?gid=1&xpid=1&tick=0&xpayment_term=annual url manipulation that is allowed with the autopilot script. You should use that to auto select a package for your customers when they sleect p1, p2 or p3.

I actually wish someone would be kind enough to make comments about my site. Maybe I ll make a post about it. (I am still reworking some major things including plan name/price point so please dont tell me my prices and features suck)

I have just found http://a-web-biz.com/starting-a-web-hosting-company.htm - it's a good site with some good honest info. There is a fair bit to read but it should give you a basic idea of how to get a business plan together.

That is a very nice tut m8 and full of info thanks again

I really liked the tutorial, and i noticed that i was not offering anything that is really any greater then a standard just starting out host! so i decided to offer a free domain name with all of my services. Do you think that is a alright start?

I agree, and a slow sizzle of people talking is how to win. If you try to dazzle and create a quick buzz, it quickly fades away.

why do newbs keep bringing this back up?

Nice job johnder

Fantastic article. It gave me a new perspective on running a hosting company. I will DEFINITELY be making changes.

thanks nice tut

wow this can really help you along the way. nice tutorial. im inpressed of all the hard work that was put into that tutorial. good work :)

Great read. I actually just opened a hosting company and the ideas behind this should help me greatly. Thank you.

Great read, thanks for teh advice man!

hi johnder , you are brillian....
keep work smart...

Thanks Johnder! Very insightful, it wraps up to:
1. Why customers should choose us over others
2. Let customers talk about us to generate business

hi Johnder! , here a qu3stion 4 you...
Why your business success?

wow, ill be sharing this with the staff.. thanks!

Great advice and really well writing thank you so much, a lot to think about

William

Nice. I bet you got alot of clicks just because of the title :D. Good article tho.

I am gonna plan for newspaper and tech magazine ads. will consider adsense too. thanks a lot.

A must read article.

10/10 - great post.

I also see that overselling is the mother of all havoc... it can lead to a total business failure.

If a business is in partnership, then there is high probability that business will fail because of disputes.

I have seen such cases many time and this is quite common in people around the World.

You should tell webhost jr what his first month or so of business before he closes down will really be like.

First of all being a new host the majority of your clients are going to be warez pirates or spammers. If you don't have another source of income to pay that bandwidth bill or the knowledge to set up your server so they can't run wild on your transfer allotment or get your datacenter's IP's blacklisted you'll not only be out of a server but you'll lose money.

My personal opinion (and mine alone) is that unless you have enough capital to start a real hosting business with the necessary software, personnel and marketing scheme there's a 99 percent chance you're allowing those type of clients and looking the other way. I know that's harsh but I feel extremely confident about saying it. If you are one of those host you'll end up getting caught in a bad place sooner or later and screwing over your datacenter no matter how well things seem to be going.

Unfortunately it's too easy to start an online business and there's too little accountability involved. I could start one, no problem - I have the skills, experience and a decent source of income outside of the business. Unless or until I can start one that offers something unique and do it the right way I'm not going to. At least the bottom feeders end up getting what they pay for eventually, there's some justice in that.

The only counter is that there's an endless supply of them. . .

very useful advice, thanks!

Good read and great advice ties up nicley with a good business plan.

The unfortunate thing is that the "slumlord hosting" model works, and it works well, though the upfront costs to handle such volume can be significant. I've seen it first hand with other companies. Attract millions of customers with a basement price, keep the ones who rarely use or even forget that they're even being billed for service, and tell people who use resources to "go find another host". They can afford to piss off customers because there are always thousands more looking for a deal.

Granted, the problem is not just the host, but that everyone is looking to get something for little to nothing. I'll never understand people who earn a few thousand dollars a month online, yet only want to spend $3.95 for their hosting.

I had plans for my hosting company that I am going to start. I have been thinking about it for over 2 years now. But due to money and other factors I am not able to do it. But I totally agree with you.

Do it with full zeal and professionalism and you would be a winner..

Thanks for posting this. It is very inspirational.

Very great article, and so true.
Thanks for spending your time putting this together, as said above it's very inspirational.

Very good post, made me think twice before starting one, though I want to keep my business small, thanks for the other point of view.

Written 6 years ago, but still priceless. I've always wanted to create a small hosting business, so I'm gathering information right now for the near future.

Very good article!

Very good article!

It involves cost. A successful business should be like that invest $1 and make $1+

Yes, you can invent some good software to get into the lead of the market, lower hosting prices to attract customers, hire professional staffs to provide superb services, everything is perfect, but it costs $1+ and you make less than $1

You business will fail.

Woww... very great article.:)

Awesome article :)

Nice article.Good Advice.

found it to be very informative thank you very much

Thank you for that article Johnder.
It is very informative, and I will try to take some of your advice.