In a another forum, a host was offering 200MB space, 5GB transfer, 20 subdomains and mostly unlimited everything else for $29 a YEAR. Someone asked if it was for real.

Another poster came along and said: "They are running on one of the RackShack Cobalt Servers, So if they put 250 of these accounts on each server... They bring in $7,250.00 - Pay RS $99 per month and Profit $ 6,050.00 Per Year Per Server."

Assuming the numbers are correct... Am I missing something, or am I a fool not to get into the hosting game?

umm not really. its a bit of a false impression.
throw in tax, cc charges, domain costs, overheads, and thats before the real biggies, admins support and sales staff. that 6k just dissapeared. it takes 1000s to setup a proper full webhosting company with servers. get a few more servers and things start to balance out. it takes investment and being prepared to run a loss for as long as it takes. 250 accounts, thats 250 customers, and about 8 trillion support requests lol. 250 people requesting attention, sure they dont all need it, but some need lots. it all balances out. either way its not quite that simple. would be cool if it was lol.

There's a lot more to hosting (quality hosting) than ordering a RS cheapie server and slapping domains on it.

Customer support - this is what I spend oh, 14-20 hours a day doing, if I hire just one MINIMUM WAGE tech support person that's roughly $11,000 per year, that's 2 full servers JUST TO PAY this person.

Advertising - luckily I don't do a lot of it, but this is just luck more than anything.

Maintenance/administration/security - oof do I need to even start on this topic.

oh their maths is also complete rubbish, 400 gb / 5 isnt 250. i went to school and they taught me it was 80. lol plus the hdd front, 250 mb space, ignoring the email and databases on a 30 gb hdd only allows 120 accounts. and thats totally ignoring the space taken up by the system.
sure you could sell 800 accounts of that size on a server and retire :) the minute they started to use their allowance youd be stuffed:)

hehe well said gary :) you havent done badly tho ;) good business plan, investment and luck . oh and lots of hard work. theres somuch more then havign a server.

You did forget about customer support, IMO is one of the most important. You can get all the clients you want, but they will all pack their megabytes next month when nobody is helping them. So next month your $7000 is $0 (or maybe -$7000).

<--- Still running losses for approx 2 years. But its getting better :)

Assuming the numbers are correct... Am I missing something, or am I a fool not to get into the hosting game?


There is more to webhosting than just getting a server and slapping accounts on it.There is hard work in running a hosting bussiness.At first your not gonna make $ 6,050.00 profit it may take you up to 5 years before you see revenue like that.You will be managing this bussiness 24/7 getting up in the middle of the night and activating new accounts.(no one is gonna wait till you get time).Then your not gonna have time to do what you like to do because you will have to devote your time to support tickets.

This is the reason alot of hosts dont last because they start up sell real cheap plans and then cant handle support and server issues and just close.

Originally posted by adieu
In a another forum, a host was offering 200MB space, 5GB transfer, 20 subdomains and mostly unlimited everything else for $29 a YEAR. Someone asked if it was for real.

Another poster came along and said: "They are running on one of the RackShack Cobalt Servers, So if they put 250 of these accounts on each server... They bring in $7,250.00 - Pay RS $99 per month and Profit $ 6,050.00 Per Year Per Server."

Assuming the numbers are correct... Am I missing something, or am I a fool not to get into the hosting game?

Unfortunately, too many people believe this farce.

Originally posted by Dixiesys
There's a lot more to hosting (quality hosting) than ordering a RS cheapie server and slapping domains on it.

Customer support - this is what I spend oh, 14-20 hours a day doing, if I hire just one MINIMUM WAGE tech support person that's roughly $11,000 per year, that's 2 full servers JUST TO PAY this person.

Advertising - luckily I don't do a lot of it, but this is just luck more than anything.

Maintenance/administration/security - oof do I need to even start on this topic.

where the heck do you live that you can find tech support wages at under 20K without outsoucing got to move there quick if it's in the usa

advertising - luck I agree with you, best is word of mouth, and if you ever get real buzz then you will have growth spurts that make your hair stand on end.

maintenance hmm- 15 minutes per server hands on time, then about 1 to 2 hours of scripts that are run accross the entire network. got to be careful when running scripts otherwise you will slow the server down.

security - 15 minutes per server every day hands on and about 1 -2 hours log review time

administration 1 hour per day when it's busy, 3 to 6 when it's not

e-mail - whom would have thought that there was so much e-mail. each e-mail I get takes 1 minute to read and 5 to 15 minutes to respond to. here is a hint, read all the e-mails first, save the hard ones for last.

-mike

Can't get decent techs for minimum wage, was just saying even AT minimum wage the salary for one tech is 2 full servers of profit (and a halfass tech is gonna cost at least $8 an hour). You can get a decent tech around here pretty cheap, especially when you dangle the "work from home on your cable modem and never leave the house" carrot. Actually can get 'em pretty cheap then :) hehe

Originally posted by adieu
Another poster came along and said: "They are running on one of the RackShack Cobalt Servers, So if they put 250 of these accounts on each server... They bring in $7,250.00 - Pay RS $99 per month and Profit $ 6,050.00 Per Year Per Server."

So thats $504/month ...which comes down to $2 per client. Are you ready to support a client for a whole month for only $2? For $500/month i wouldn't even get up in the morning (yes i would, but you get the idea). Anyways, you'll need at least 3 months to get started ...in those 3 months, don't expect to generate any income. I personally believe you can hit $100.000/month after 12 months or less, but it will require a large initial investment and hard work. This is not an industry in which you can simply sit back and wait for the cash to roll in ...you'll have to work.

Assuming the numbers are correct... Am I missing something, or am I a fool not to get into the hosting game?

It is the other way around.......You WOULD be a fool to get into the hosting game.....

cheers

Kiwi,

Did you mean $100.00/month or $100,000/month? :erm:

$100,000 a month.. in a year?

Screw web hosting, I want Kiwi to adopt me and my son!

Kiwi, I`m up for adoption too!

Please adopt me :crap:

Hosting companies that offer other services, like webdesign, domains, or promotion can sometimes break even because the other services will make up for the services that are not holding their own. That can help some of them get through the first 1-2 years.

It is a lot harder than it seems, to run a hosting businesses. But that goes the same for any business where you've decided to be main sales/support/billing/techie/sysadmin/GOD! :)

Originally posted by Kiwi
I personally believe you can hit $100.000/month after 12 months or less, but it will require a large initial investment and hard work. This is not an industry in which you can simply sit back and wait for the cash to roll in ...you'll have to work.


Sssshhhh hush-up kiwi, I'm waiting for them boys offering the 100 gigs at $20 to blow up and then go client hunting.

mike

oh their maths is also complete rubbish, 400 gb / 5 isnt 250. i went to school and they taught me it was 80. lol plus the hdd front, 250 mb space, ignoring the email and databases on a 30 gb hdd only allows 120 accounts. and thats totally ignoring the space taken up by the system.

Well, that may be. However, while I'm no expert, just because someone signs up for 200mb or 500mb for $25 a year, isn't it true the typical user will use less than 5mb, and less than 500mb of transfer, and four or five email accounts, maybe one autoresponder until they realize they are just annoying people on the other end?

Doesn't the business at the low end hinge on offering the world, or at least everything the low-end user might think they might need, and then sitting back and hoping everyone doesn't use what's offered? Some people here get upset that some firms offer unlimited bandwidth. Aren't they just applying the same principle that everyone uses to varying degrees?

And that's not a criticism. Many services are sold this way. It's legitimate.

If I offered 20mb, 1gb transfer etc, would I, at the end of the day, really be able to put that many more low-end users on said server than the host that offers far more?

I know none of this addresses support, which I'm sure is expensive. But I am intrigued by what hosts like 1000rpm (http://www.1000rpm.net) can offer for $15 a year. If they are still around in a year, and they keep most of their users happy, I wonder what it is they are doing differently.

Let me tell you running a web hosting business is hard work, not only to mention working around the clock 7 days a week. Hiring people for $7/hr is not enough. If they are willing to work for that price they know nothing. So basically your doing the work of two.

I have been in business doing web hosting now for 5 years now. And I have found that the support side is the most work. If you think that this is a money maker your wrong. Buying and maintaining all the equipment and lines will drain your wallet. We own and operate all our own equipment and lines. The cost just for this is outrageus. Most of your smaller companies are using bigger companies to host thier servers at. That is great until hardware failure or someone hacks your server. Then your basically waiting on the other techs to work on your server.

Thanks.,

Brian F

So umm Kiwi.

Like everyone else asked. Is that a period with an extra zero or a period that was meant to be a commo.

<kiwi>
$100.000/month
</kiwi>

Cause you know. If that should be a comma my family and I will be there in a couple of days. ;)

im pretty sure kiwi means $100,000/month, thats what im aiming for :)

and not forgetting after all that, $6000 per year for a fully stocked server isn't very much money at all.

$500 a month
$125(ish) a week.

You could flip burgers for half the hours, and get more money than that. and get a full nights sleep each day :)

$6000 seems pretty good when you pile it up into a stack, but 12 months is a long time to try to make it last.

Greg Moore

Well
After a couple of years of hard slog we are turning over a stable $30k per month approx.

How much of that is profit?

Not much.
Once the wages and bills are paid there is a tiny surplus that we put back into new equipment.
We have no debts.

I have actually killed 95% of our advertising and raised some prices in the past 10 days.
It got to the stage that the advertising was bringing in little apart from frauds and host hoppers.
A week after killing the ads our turnover is down about 20% but our profits are up.

The market is saturated.

We are moving into niche areas like high quality (=expensive) Windows 2000 hosting and Canadian hosting.
Smaller markets but easier to promote.

All our exiting services will continue to be offered but the market for mid priced hosting has all but dried up.
80% of customers leaving us are going to cheaper hosts (usually on servers at rackshack).
The other 20% are shutting their sites down.

If we were to reduce the Hostroute.com prices we would be able to sign up many more customers, but they would be the type who want you to fly over and set up their POP3 e-mail for them.
We would also end up chasing more and more bouncing credit cards for monthly payments.
Cheap hosting = more support.

Prices have collapsed since we first started and many hosts (even the rackshack ones) can't be making any profit.

On the rackshack issue, yes you can make serious money.
I relaunched our cheap brand on Rackshack servers to make cash so I could buy a new house.
It brings in a shed load of cash and paid a good chunk of the new house.
However, if we had not had the support and billing infrastructure in place it would have cost a fortune to set up and maintain.

I have decided to stay mainly at the quality end and hope that people value that sort of service while bringing in some cash from the cheaper brand for mass hosting.

On the UK side I did a price comparison yesterday and our prices were almost double many of our competitors but in their small print you find very low bandwidth allocations like 200MB or 500MB.
Ours are all in the 2 - 10 GB per month range.
I would rather operate that way than surprise people with unexpected bills but it makes marketing a struggle.

Gordon

Sure it's a lot of fun to be in this area, but it is very much so time consuming. You will find yourself up at 2 in the morning making sure all is well and will hover over your helpdesk to make sure responses are sent out in a timely fashion.

There are times when you will spend your own personal money just to make sure your customers are satisfied.

Don't get us wrong, it's a good industry to be in, we all love helping others out and that's why I believe we do it (and for the money).

Well, I was going to respond to this thread, personally, as my chauffeur drove me to the airport, where I would board my private jet bound to a small tropical island I bought last year. However, as I felt it not worth my very precious time, I told my Personal Assistant to contact my butler's secretary's secretary to type in a response for me. (Alas, it is so difficult finding good help now-days.) Unfortunately, after my private jet arrived on my private isle, I found the 5 Star resort I had built last November to be lacking. One of the 7 olympic-sized swimming pools' water had not been changed in 4 hours. Of course, this was unacceptable.

After firing the entire staff, I and my entourage--Mick Jager and Madonna are such cut-ups--boarded the private jet and whisked back home to my mansion (I don't care what Forbe's Magazine says, I do not consider it a palace!) in Beverly Hills...where we were promptly greeted by George W. (Big W to his friends).

Following a simply dreadful incident where the Pope was turned away from the gates of my estate (that will teach him better than to show up without an invitation next time), I sat down to finish reading this thread. It is so interesting seeing how the commoners work their lives away.

Signed,
Lamar's butler's secretary's secretary

Haha, funny...

Aspen again this year Lamar, or should we go slum it down in Manhattan for a change?

Greg Moore

Kiwi's right.... been there and done that within a years time :)

But it takes a good bit of $ and a lot of work

Originally posted by DanielP
But it takes a good bit of $ and a lot of work

When you feel you don't get enough sleep you're on the right track. :D And yes, i meant $100,000, sorry ...as in one hundred thousand.

Easier said than done! We have been in the hosting business for over 2 years, and barely making a profit. And that’s after giving excellent customer service with a client retention rate of over 99%.

------------------------------------------
netbasiks.com
sales@netbasiks.com

It's a tough game this web hosting. When I first got into it I could never imagine how tough it would be, but after two years at it, I can say that its been worth every minute spent, every 5am bedtime and 9am start. We've had a certain amount of luck along the way (Finding a top rate colo), and some great people to help us out in tough times. We decided from the begining that we wouldn't go for the cheap end of the market and oversell like mad, and its done us good, yes we may not have grown very quickly, but its been stable growth with no nasty surprises along the way and it's also allowed us to have 99.9% customer retention.

We mainly target business as they know all too well that cost is not everything and that if you want to get a decent service you usually have to pay for it.

Most of these super cheap hosts running on rackshack will soon disappear as they realise they can't make money out of webhosting, or they get such a bad reputation (because they have no money for support) that they are left with no customers. Don't get me wrong, rackshack is great if you know what you're doing, but lets face it, most of these new "hosts" haven't got a clue, I get the feeling sometimes that some wouldn't know what Cat5 Cable was if you strangled them with it.

Just my £0.02

It all comes down to business sense, really. If you're good at managing a business, you can be making profit in no time.

As for support - in the beginning, you could easily handle everything yourself. If it starts to get too much, but it's still early, just hire a part-timer on a $500/month salary (there are plenty out there; knowledgeable, too).

Start-up capital is the main thing you need. I would suggest finding a decent colo right off, as it gives you plenty of room to grow and you won't have to worry about moving customers to new places. Dedicated servers also work; Rackshack is generally the best for that.

It's a lot of hard work, yes, but don't be discouraged by a lot of the downers who have replied - they just don't want to share profits.

We've been profitable for the past 6+ months. No, we don't make $100K/month (yet), but we do alright. The key is automation, and self-service.

I personally spent hundreds of hours of coding time writing all of our administrative tools that we use today. (Purchasing, billing, user administration, affiliate program management, and a reseller management system.)

Then there's PerlDesk, which is free, and has saved us countless hours. The built in Knowledge Base is fantastic.

Since we have so much automation in place, and because we offer FAQ's and KB's, we can respond to customer needs much more quickly. We are always a step ahead, and every time we have to answer a new question we record it in our knowledge base so the next customer doesn't have to ask.

I strongly believe that customer service is key in the hosting industry. That's our strongest advantage. But, the only way we can do it is by automating our own systems and providing the customer the ability to help themselves. This frees up our resources to answer the tough questions, solve problems, setup new servers, and to do all the other nasty things involved in running a business. (Accounting... yuck!)

If you don't have the expertise to build these systems yourself, or the money to pay someone else to do it, your at a serious disadvantage in this industry.

Take care,

Brian

heh i dont doubt that for now people wont use the full 200 mb and xGB but to sell more then you have is called overselling. do a search for that on the forums, it should be as bad as unlimited. some morning you might wake up and find they used it.
this would leave your server lieing on its back facing skyward with a glazed look in its eyes making burbling noises. a non oversold one would be sat there with a smug grin saying next please.

ok so the chances of them all using everything are slim. but its still dishonest and personally i dont find is a suitable business practice.

Run down to CompUSA and buy an 80 gig drive :)

hehe yeah, true, this is assuming you can do all that inside 5 minutes ;)

I don't know if overselling is wrong. Airlines and many so-called respectable businesses do it. I don't know a business in the country that is totally honest. They all deceive and embellish, if not outright lie. In sales, it's called "winging it", and unfortunately it's generally considered acceptable.

I *do* think you should be honest with your customers if they ask you flat out if they can use all of that space and bandwidth if they need to. Be prepared to pay though if you do this. Seems better and safer to me not to oversell.

...just some thought.

I will do the search. I assumed it was standard practice. I thought it was just common sense.

I'm curious how much space would be used by 100 clients with 10mb allocation. Half the allocation? Would it be different for low and high-end hosts?

Currently my little site uses about a 10th of its allotted space. That will change, but not overnight. And even if it suddenly did, I'm only one client. It's not like 50 of us would get together and decide to fill our space at the same time.

Appreciate the input here.

Originally posted by adieu
I will do the search. I assumed it was standard practice. I thought it was just common sense.

I'm curious how much space would be used by 100 clients with 10mb allocation. Half the allocation? Would it be different for low and high-end hosts?

Currently my little site uses about a 10th of its allotted space. That will change, but not overnight. And even if it suddenly did, I'm only one client. It's not like 50 of us would get together and decide to fill our space at the same time.

Appreciate the input here.

I don't know that there is any good way to predict what people will use. We get clients that buy a Premium 250 package and run out of space and bandwidth the next week. Other clients buy a Deluxe 3000 package, and use 15 MB of space, and 100 MB of bandwidth.

If you find any reliable metrics on account size vs actual usage, I'd be interested as well. :-)

Take care,

Brian

Originally posted by chrisb
I don't know if overselling is wrong. Airlines and many so-called respectable businesses do it. I don't know a business in the country that is totally honest. They all deceive and embellish, if not outright lie. In sales, it's called "winging it", and unfortunately it's generally considered acceptable.

I *do* think you should be honest with your customers if they ask you flat out if they can use all of that space and bandwidth if they need to. Be prepared to pay though if you do this. Seems better and safer to me not to oversell.

...just some thought.

Overselling isn't necessarily dishonesty. If you oversell to a point where your resources are being used to the maximum, you buy more resources. The amount of diskspace you can add to a server, the number of servers you can add to a datacenter, and the number of lines you can add coming into the datacenter and the number of datacenters you can own are for the most part not strictly limited.

Run out of one item? Get more of it. Its that simple. If the airlines were constantly running out of seats on a flight from New York to London, what do they do? Ding, Ding! They plan a new flight on the same route.

Its not a hard problem, it just requires proper attention and planning. :-)

Take care,

Brian

if you can seamlessly move sites between servers and expand resources seamlessly then yeah your not overselling. because your just buying extra resources, your not selling more then you can offer, doesnt matter if you sell more then you have.
the only one i have a problem with are the people who get a server like at rackshack and oversell something thats hard to upgrade. if you take a server with a 40 gb drive and work out about 30 for hosting and sell say 200 accounts with 150 mb then thats fine, you worked it out. theres too many people buying em , dividing 40 by the number of accounts and then doubling the amount.
srry i should have added the caveat of not being able to upgrade easily. my bad

Overselling is selling more resources than you have and then not being able to cover yourself.

If you have 100 people paying $10/mo for 10GB, you are responsible for 1,000GB (or 3.125megs, approx). That's $1,000/mo income. Suppose you have 1meg and it costs you $400 (a reasonable price, some cost $500++). Suppose, then, that the vast majority of those are bandwidth hungry customers that suck up all 10GB (assume 90%). You don't have 900GB to provide to customers, you only have 320, so you need to buy more. But wait, you can't buy more because you can't afford to buy more -- you're only making $1000 a month and the bandwidth alone is going to cost you over $1100 a month. You're in the hole over one hundred clams a month if you purchase more.

What do you do? Dump some of those bandwidth hungry customers, of course. Tell them whatever you can think of to get them off: using too many server resources, they need a dedicated server, suspend their account and not answer their emails, etc...

*This of course is a non-cogent example.

In my opinion, that is overselling. We are responsible for more than we currently purchase. But why purchase 10megs when all you need is 5? That extra 5 megs is just sitting there, collecting your money you can use for staff and equipment. Same goes for hard drive space and anything else you can think of. As long as you can cover what you're responsible for to the customer when they need it and still profit, you'll be ok! :)

Originally posted by allera

What do you do? Dump some of those bandwidth hungry customers, of course. Tell them whatever you can think of to get them off: using too many server resources, they need a dedicated server, suspend their account and not answer their emails, etc...



Yes, but the sad part is that those clients depend on you to do the job. If you did not define the terms properly, that's your fault. I'm very happy that I've never had run into this problem when I was a client of a host. the one I delt with could handle the volume without a problem.

mike