Hello all ;)

This is mainly directed to those of you that offer extremely cheap plans such as $5 a month or < $100 a year.

Is there anyway to really make money doing business like this? I personally have been hosting websites for around 2 years, and I have never charged less than $20 / month. It seems like those of you that offer these extremely cheap plans, are hurting yourself and the rest of the industry.

Can you really afford to offer good technical support and quality service while only charging $5 a month?

Hopefully I won't get flamed too bad. I just want to better understand this. ;)

Thanks

Well i think that most hosts that offer 2 tons of bandwidht and all space that you can grab with two hands for 2,99 $ a month or 11,99 per ýear go out of business in few months, but i may be wrong.

My guess is that it depends on how much profit they are willing to make.

....or how much loss they are willing to incur

$5 per month is not "extremely cheap" in my opinion. $30 per year is another story, but $5 per month isn't that bad. I wouldn't go lower than $3.95 per month though. It's all about target audience. Someone with just a small personal site that only gets 100 hits per month wouldn't want to spend $20 per month.

We plan on selling hosting starting at $0.90/mo. or $10.80/yr. Yet we still plan on making a nice profit.

Originally posted by fractiousws
We plan on selling hosting starting at $0.90/mo. or $10.80/yr. Yet we still plan on making a nice profit.

Now THAT is extremely cheap. ;) If you can make that work, then go for it. I wish you luck.

Originally posted by ToastyX


Now THAT is extremely cheap. ;) If you can make that work, then go for it. I wish you luck.

Why thank you very much :cool:

Originally posted by fractiousws
We plan on selling hosting starting at $0.90/mo. or $10.80/yr. Yet we still plan on making a nice profit.
Is it hosted on a server with unlimited space? I'd seriously only pay that much if it had unlimited bandwidth!!



hehehe, hahaha
Sad thing is, some people actually believe/request that...

Well the broad range in dedicated server pricing has been one reason we see so much flex in "plan" pricing.
I think what alot of people fail to realize is there are sooo many other things that you have to factor in on the server...various expenses.

I dont see why a person cant provide cheap pricing like that.
I wont be surprised by $20/year even if the person runs the service on his home cable connection.
No overhead cost!

But customers are most likely to experience slow connection and downtimes and many many undesirable things.

I dont see why a person cant provide cheap pricing like that. I wont be surprised by $20/year even if the person runs the service on his home cable connection.


It is not really that bad. I'll be getting the servers at $139/mo. Then 350 customers per sever times 0.90 cents equals to $315
(350 x 0.90=315). $315 - 139 =$176 total profits off of that server.


Is it hosted on a server with unlimited space? I'd seriously only pay that much if it had unlimited bandwidth!!

lol, no unlimited here. :sickface:

350 per server? :rolleyes:

Originally posted by fractiousws


It is not really that bad. I'll be getting the servers at $139/mo. Then 350 customers per sever times 0.90 cents equals to $315
(350 x 0.90=315). $315 - 139 =$176 total profits off of that server.



If you have 350 on one server, can you really guarantee any type of uptime? Also are you happy with $176 a month? Here in St. Louis, it takes a little more than that to live. :stickout

350 customers, each sends one support e-mail every 5 days (6 per month) = 2100 emails per month ( if we assume that you need at least 3-5 min, for each e-mail, thus you need sometimes more, but not all of the customers send e-mail every 5 days, so it is equall) (2100 * (3+5)/2)/ 60 = 140 Hours ~ 5 hrs /every day and you will earn just 180 $ per month. And there are also other server issuess that i did not consider.

I dont think that this business plan would work, or at least you wouldnt be able to provide your customers with decent support.

:)

This is exactly why I posted this thread :) I just cannot understand how selling so cheap could work out for any company. It may work from a marketing standpoint, but when it comes time to deliver what was promised............. I am guessing this is when these companies fold.


Originally posted by Angel78
350 customers, each sends one support e-mail every 5 days (6 per month) = 2100 emails per month ( if we assume that you need at least 3-5 min, for each e-mail, thus you need sometimes more, but not all of the customers send e-mail every 5 days, so it is equall) (2100 * (3+5)/2)/ 60 = 140 Hours ~ 5 hrs /every day and you will earn just 180 $ per month. And there are also other server issuess that i did not consider.

I dont think that this business plan would work, or at least you wouldnt be able to provide your customers with decent support.

:)

Greetings:

If your target market is home and family as opposed to business, then "yes," they would not want to spend money, and $5 per month may be the max.

However, unless you have thousands upon thousands of those types of customers and your own data center, don't expect to make a fair profit which allows you to grow a company.

If your target audience is businesses, then we've found you can charge upwards of several hundred per month for shared hosting, and even more for dedicated and managed dedicated.

It all depends on your target market. However, pick your target carefully as the target market will dictate the business model you put in place and the profits you are able to generate under what conditions.

Thank you.

Originally posted by fractiousws


It is not really that bad. I'll be getting the servers at $139/mo. Then 350 customers per sever times 0.90 cents equals to $315
(350 x 0.90=315). $315 - 139 =$176 total profits off of that server.




lol, no unlimited here. :sickface:

Now to bring you back to reality:

Does the server at $139 per month include a control panel? What about a second hard drive for backups? If you're going to be offering phone support, what about the cost of phone service?

What about credit card processing fees? For example, with 2checkout, you'll only receive 40 out of that 90 cents if paid monthly. 350 x $0.40 = $140. $140 - $139 = $1 total profit, and that's not including taxes.

I'm sorry for nitpicking your business strategy, but I don't see it working.

To this day I dont understand the people that support all these customers and shove all these sites on a server to only make 200 bucks a month when you can throw 200-250 sites on a server and make 2k a month.. Even if I could have double the customers as we have now and only charge half the price you still end up loosing alot.. remember more is not always better with the exception of $$$

Originally posted by ToastyX


Now to bring you back to reality:

Does the server at $139 per month include a control panel? What about a second hard drive for backups? If you're going to be offering phone support, what about the cost of phone service?

What about credit card processing fees? For example, with 2checkout, you'll only receive 40 out of that 90 cents if paid monthly. 350 x $0.40 = $140. $140 - $139 = $1 total profit, and that's not including taxes.

I'm sorry for nitpicking your business strategy, but I don't see it working.

Absolutely correct. Plus you forgot to mention the time and frustration of putting up with clients who will only pay $0.90 a month and flame you once you don't respond within an hour.

From another angle - I think these prices are mainly offered by resellers (???)

Since most ppl need space to host their own site(s), this (reselling) is a good opportunity to offset the costs. If you're going to pay $20/mth to host your sites anyway, why not sign up for a reseller account for about the same price and hopefully "sub-lease" out your unused resources and offset some costs (get enough users and hosting for your sites are free!). The features of most resell accounts makes this possible and workable (eg. most support being redirected to server owner, plenty of space and bw to go around, etc...).

Not a lot of dedicated (server) hosters charge this low of a price because of factors outlined in above posts. That's why these hosters provides resellers accounts, which isn't much more than a basic hosting package with added features (WHM, Ensim, multiple domains, etc...), but with a nice price tag/profit margin (even if only around $20/mth!).

:cool:

Its worse if a reseller charge so low because there are people who will sign up for cheap hosting only to run scripts and cause problems. What if the upper level host deletes the reseller's account? The reseller can get into helps of trouble if he don't have control over the server..

That's true, but that's beside the topic of this forum.

;)

Originally posted by GlideTech


If you have 350 on one server, can you really guarantee any type of uptime? Also are you happy with $176 a month? Here in St. Louis, it takes a little more than that to live. :stickout

Hate to burst your bubble, you can pack alot more than 350 customers per server without problems. Also I am reffering to 50MB space and 1GB bandwidth. So it isn't really that much.

Originally posted by Angel78
350 customers, each sends one support e-mail every 5 days (6 per month) = 2100 emails per month ( if we assume that you need at least 3-5 min, for each e-mail, thus you need sometimes more, but not all of the customers send e-mail every 5 days, so it is equall) (2100 * (3+5)/2)/ 60 = 140 Hours ~ 5 hrs /every day and you will earn just 180 $ per month. And there are also other server issuess that i did not consider.

I dont think that this business plan would work, or at least you wouldnt be able to provide your customers with decent support.

:)

We have a deal worked out for the remaining techs from the RapidiSupport project. There will be 3 techs available at all times starting off, then we will get more when required.

Originally posted by ToastyX


Now to bring you back to reality:

Does the server at $139 per month include a control panel? What about a second hard drive for backups? If you're going to be offering phone support, what about the cost of phone service?

What about credit card processing fees? For example, with 2checkout, you'll only receive 40 out of that 90 cents if paid monthly. 350 x $0.40 = $140. $140 - $139 = $1 total profit, and that's not including taxes.

I'm sorry for nitpicking your business strategy, but I don't see it working.

We are working out deals with our provider seeing we are buying in bulk. Yes, it does include a control panel but we are going with CPanel instead.

As for the really low priced plans will only be available for yearly contracts.

How is this our business stradegy? I posted one example of our pricing. :eek:

Originally posted by fractiousws


It is not really that bad. I'll be getting the servers at $139/mo. Then 350 customers per sever times 0.90 cents equals to $315
(350 x 0.90=315). $315 - 139 =$176 total profits off of that server.




lol, no unlimited here. :sickface:

This is the reason why most of these companies will fail, it is a flawed logic. Now fractiousws, please understand that I am NOT saying that your company will fail, as I am making a general statement. First of all, you make $176 per server you are leaving a lot out. Some of the things that you failed to mention are VERY important. Things like credit card processing companies, support techs, business licenses, taxes, you know the things that are necessary for the companies survival. All of the aforementioned things cost a lot of money, and 176/month will not cover that.

-Steven

Originally posted by insiderhosting


This is the reason why most of these companies will fail, it is a flawed logic. Now fractiousws, please understand that I am NOT saying that your company will fail, as I am making a general statement. First of all, you make $176 per server you are leaving a lot out. Some of the things that you failed to mention are VERY important. Things like credit card processing companies, support techs, business licenses, taxes, you know the things that are necessary for the companies survival. All of the aforementioned things cost a lot of money, and 176/month will not cover that.

-Steven

What do think I am going start a hosting company with 1 server??? I think not. Belive when I say "I know what I am doing". I have been planning this out for months on end (around 3 or 4). Also like I stated earlier, we will be mainly focusing on offering reseller solutions, so 176/mo. won't be long adding up.

How much does a tech get payed? lets say 1500 $ per month x 3 = 4500 / 176 =25,56 . You will reach your Break even point when you get 9100 customers (26 servers with 350 users each). So afterall it is possible, but looks kinda hard to achieve.

:) hope you`ll make it and not end as many others

Originally posted by Angel78
How much does a tech get payed? lets say 1500 $ per month x 3 = 4500 / 176 =25,56 . You will reach your Break even point when you get 9100 customers (26 servers with 350 users each). So afterall it is possible, but looks kinda hard to achieve.

:) hope you`ll make it and not end as many others

Obviously you have not seen RapidiSupports prices before they closed. I even got more of a discount of the already low price.

:) hope you`ll make it and not end as many others

Thank you. :)

Originally posted by fractiousws


Obviously you have not seen RapidiSupports prices before they closed. I even got more of a discount of the already low price.

James, I'm sure you know what you are doing, but we are just trying to help you out a little. We are taking a look at the numbers that you provided, and to us it is hard to see any kind of profit making with that type of environment. There are many costs to which you have not listed, also just because you are going to focus on reselling, I hope you are not basing the brunt of your revenue stream from WHT users, if you do, you will be making a grave mistake.

In regards to the rapidsupport deal, probably the reason why they closed is that they could not sustain operating on such a small amount of profit that they were taking in?


-Steven

Originally posted by fractiousws
We plan on selling hosting starting at $0.90/mo. or $10.80/yr. Yet we still plan on making a nice profit.

My kickarse host (http://www.discount-hosting.com/) has ya beat ;)

Well if this keep going on , in few months Host will be paying their customers up to 10 $ and up to 99 $ just to use their shared or dedicated server :)

Originally posted by fractiousws


Hate to burst your bubble, you can pack alot more than 350 customers per server without problems. Also I am reffering to 50MB space and 1GB bandwidth. So it isn't really that much.

Sorry to tell you, but if you have to pack 300+ of your customers on one box, then something is wrong with your pricing. I am not picking at your business, but this is just starting to sound like C*I*H*O*S*T logic.

Well I would like to thank everyone for there comments ( I think :eek: ). I will think everything over and see what I come up with.

but as for this
C*I*H*O*S*T logic
That was just uncalled for. I would appreciate it if you didn't compare my company to such a discrace.

James,
This thread was not started as a personal attack on you. I think you just got caught in the crossfire.

As for my *CI*Host comment, I am sorry if I offended you. I just think if people charge a little more for thier services, they would see that they can afford to do more for their customers (including putting fewer customers per server).


I have enjoyed the reading in this thread so far, and hopefully some others will comment.

Originally posted by filburt1


My kickarse host has ya beat ;)

When did this become the new advertising forum? I am not quite sure what your post has to do with this thread :confused:

Originally posted by GlideTech


When did this become the new advertising forum? I am not quite sure what your post has to do with this thread :confused: I doubt if filbert1 owns or is affiliated with that company. But, I can certainly see the wisdom and the humor both in that post.

That company has been around for three years. :rolleyes:

Although the domain is scheduled to expire next month. another:rolleyes:

:D

I offer a 4.99 plan but that only has .5 gigs of bandwidth and 25 megs of drive space. overall I don't think that's a bad account base to have. but I would not venture to have that as a permanant base of clients.

mike

I am thinking $2/mo. for 50MB space and 1GB bandwidth with 200 customers per server. With an income of $400/per server minus expences.

I'll,answer the origional question. :) I used to work with a small local ISP which was sold to a larger one a few years back. The owner of the small one walked away with $40M in his pocket.

Back then you couldn't get a dialup for under $20 but the $99 a year guys were just starting to move into the markets. I asked the above mentioned guy how this was all possible. How the business plan worked and how those companied made any money.

He basically told me that they didn't. The whole business plan was to build a company over 2 to 3 years (it got to be 2 to 3 months shortly after) and basically hope that you had enough new signups every month to pay the bills. Over the long haul the companies would all fail if allowed to continue, but that wasn't the plan. The plan going in was to just make ends meet and sell after a certain amount of time. Customers have value. Back then a dialup customer was worth almost $2000. Build up a good base and then sell it to a larger company after a little while and get out with a nice chunk of change for your efforts.

I see alot of cheap hosting companies doing the same thing. Building a customer base and then selling out to a larger company and taking a nice chunk of cash. The customers finish out thier origional contracts and then are hit with higher hosting fee's from the new company.

Now, I'm not saying that this is the plan of the guys here, it's just one I've seen alot of over my years with various ISP's.

How can you support a customer that pays $0.90 a month? You hope that you have ALOT of them and that they never ask for help. :) If one customer calls you with a support problem you've pretty much lost that whole year worth of profit. You also hope that your customers don't take up to much space or bandwidth.

Do I think these types of plans can work? Yes, although I wouldn't do it myself. I perfer to charge my customers a little more and then offer great support. It just wouldn't be worth it for me personally to get $10 a year from somebody. I'd rather host them for free. That way when they complain I can always ask them what they expect for free. :)

Aaron

I've been hosting $7.50/month sites for 2 years and I don't plan on going out of business. Although I'm trying to sell some larger packages to make more.:D

$1500 a month for a support tech?

Not around here.

$100 a week, take home is my standing offer, I got guys waiting for my next opening.

Profitable? Yes, I'm quite happy with the income.

I pay the bills, business and personal, and have a bit left over each month. Getting rich? nah, but it's a good living.

I wouldn't get out of bed for 100$ a week.

$100 a week? You must be kidding right?! :laugh:

Are your techs 10 year old kids that work from their homes?

Just gotta know where to find them. All the guys I'm thinking of are middle 20's early 30's, typical computer nerd types stuck in an area (North Alabama) where "really cool" computer jobs are virtually non existent and none offer the option of working literally 95% or more of your time from home. They'll beat each other up over the chance to be a part, they're not working full time, I ask 'em to try and give at least 20 hours of real time per week, knowing full well they're on their computer about 12 hours a day anyway or more. Heck I could nearly sell tickets to go with me to the colo and look at all my cool servers.

I tried to explain many times why where I live is such an integral part of how to make the pricing structure I have in place _work_. I've mentioned time and time again, this wouldn't WORK in California, or Atlanta, or most places. Costs would just be too high.

I can also rent a relatively nice (not rat hole) office suite for $345 a month. Bathroom, 2 offices 10x10 each, and a front waiting area that's roughly 8x22. 10x10 will hold a nice number of racks and shelves. Only missing piece is cheap bandwidth but I'm working on a deal now that I'm "big enough" to get their attention. NO one wants to talk "T-1" but DS-3 or a fiber drop will spark attention.

sounds like you you have found a nice niche and have taken advantage on a unique opportunity. good luck with everything

I'm currently hosting my main site with Haisoft, a French non-profit web-hosting organisation, I've been with them for close to a year now. When I signed up it was 15 dollars per year, now it's 20, but it's still apallingly low. And I love it :p

I'm not doing too bad...

Originally posted by fractiousws


It is not really that bad. I'll be getting the servers at $139/mo. Then 350 customers per sever times 0.90 cents equals to $315
(350 x 0.90=315). $315 - 139 =$176 total profits off of that server.


lol, no unlimited here. :sickface:

Clearly you don't know how much time it will take to support 350 users. :-)

Also, you forgot to take out CC processing fees in accepting payments. Most take about 30 cents per transaction plus a couple of %. If your billing monthly, your only going to get about 0.55 cents of that 0.90 cents per month.

So, lets play devils advocate and say your numbers are correct and that your a complete genius (like me! :-) who can handle any support issue very quickly, and that your server never has any major problems that bring it down completely. Your still looking at a bare minimum 1 hour per day for supporting 350 customers.

So that's 30 hours a month, making $176 total. Or about $5.50 an hour. Dude - you could do better working at McDonalds! (Plus 50% off the food.)

Really though, you'll make less than that, so your $176 profit per month figure is inaccurate. You'll make more like $120 per month profit, which gives you about $4 per hour in profit. Now we're talking 3rd world country sweat shop rates here...

If that is "good money" to you then go for it, but you'll burn out quick. Thats an awful lot of work and responsibility for that little bit of money. :-)

Take care,

Brian

Originally posted by bigperm
I wouldn't get out of bed for 100$ a week.

I wouldn't get out of bed for $100 a day. (Hey its expensive living in the DC Metro area!) :-)

Take care,

Brian

I don't see why you can't make a decent profit on a server selling hosting accounts at $5.95 per month. For instance, here is an example:

Non-recurring:
$769 - 1.6 GHz P4 Server w/80 GB 512MB RAM, Linux

Monthly recurring:
$100 - Rack space + 540 GB of transfer
$80 - Billing related costs (chargebacks, expired cards, etc)

Amortizing the server cost over two years, that would be $32 per month. Your monthly recurring costs would be $212 for that box, and that INCLUDES the potential of spending $80 a month on billing costs and related.

We'll talk in round numbers and say you planned to top out that server at 350 accounts.

Now comes the question of support. Simple answer: BobCares @ $1.00 per account, per month -- or, once you pass 200 accounts, $200 for them to support the entire server no matter how many clients (on a full server that cuts your support cost almost in half). But let's stick with $1.00 per month to make it easy.

BobCares support is excellent, with guaranteed 1 hour response and 6 hour resolution.

You take in $5.95 per month, per account. Subtract $1.00 each for BobCares and you're at $4.95 per month. Suppose your credit card costs per charge are .30 + 2.5% (our costs are actually lower, but I think this is a fair number). That would be $0.45 per transaction, lowering your profit to $4.45 per month, per account.

I suspect that some folks would pay quarterly, if offered the chance, and thus you'll save a few cents there on those accounts.

At $4.45 per account, per month in profit, if you meet your target of 350 accounts you'll be clearing $1550 per month. Subtract your monthly recurring of $122 and your profit on that box is $1,338.

At $4.45 you would need to sign up 47 accounts to cover the monthly recurring. After 24 months, the recurring cost would also drop to $180 per month.

Originally posted by hostpath.com
I don't see why you can't make a decent profit on a server selling hosting accounts at $5.95 per month. For instance, here is an example:

Non-recurring:
$769 - 1.6 GHz P4 Server w/80 GB 512MB RAM, Linux

Monthly recurring:
$100 - Rack space + 540 GB of transfer
$80 - Billing related costs (chargebacks, expired cards, etc)

....

Where are you colocating to get prices like that??

Take care,

Brian