I know, so much has been written on this subject, and we still see hosts disappearing every day. A growth and survival plan is essential these days, and many factors can contribute to the failure of a web host. But what essential characteristics were they lacking? What makes them go down? Any of the older heads or maybe the young innovators care to share their ideas on it.

I know, so much has been written on this subject, and we still see hosts disappearing every day. A growth and survival plan is essential these days, and many factors can contribute to the failure of a web host. But what essential characteristics were they lacking? What makes them go down? Any of the older heads or maybe the young innovators care to share their ideas on it.

It can be many things. Lack of budget, intrest, initial startup plan, bad management skills or just thinking they can be rich over night lol

I know, so much has been written on this subject, and we still see hosts disappearing every day. A growth and survival plan is essential these days, and many factors can contribute to the failure of a web host. But what essential characteristics were they lacking? What makes them go down? Any of the older heads or maybe the young innovators care to share their ideas on it.

I would say the biggest factor in a lot of these hosts is the lack of motivation and passion - without that you're destined for failure.

I would say the biggest factor in a lot of these hosts is the lack of motivation and passion - without that you're destined for failure.

I must agree with you there. Starting off a new web hosting business requires a lot of patience since this market is so constantly competitive. Perhaps this is why many new start up web hosts give up because they're unable to compete with the existing and well established ones. It's tough to build up a solid reputation and it can take months and perhaps even years to see a decent profit.

I know, so much has been written on this subject, and we still see hosts disappearing every day. A growth and survival plan is essential these days, and many factors can contribute to the failure of a web host. But what essential characteristics were they lacking? What makes them go down? Any of the older heads or maybe the young innovators care to share their ideas on it.

1. Failure to plan.
Most hosters at the low end of the market are really web developers who provide hosting services to their clients and see it as a way to make extra money. They often don't have a plan to deal with success or making the transition to being a hosting services provider.

2. Failure to scale.
Again many of these web developer hosters make the mistake in thinking that one person will scale horizontally. Dealing with one client is hard enough but as the client number increases, it is difficult to provide the same level of service to all of them. And being small one person operations or even two person partnerships they don't hire the extra help needed.

3. Failure to handle growth.
This is more a continuation of point 3 in that the handling a few clients is very different from handling a thousand or more. If there is no proper helpdesk, no proper accounting and no proper management, many of these operations will fail and leave a big mess.

4. Failure to manage.
Running a business is about making money. Invoices have to be sent out on time and debts have to be collected. Taxes have to be paid and so do salaries and expenses. Some people get into hosting as a kind of Summer job and don't have the time or expertise to run a business. Consequently when they go back to school, they don't have the time to deal with the work of running a company fulltime. These hosters tend to fail within 18 months of starting.

4. Failure to win marketshare.
This is the big killer for small hosters. Once they move outside of their friends and family customer networks, they are competing with professionals with bigger budgets. If they don't have some unique selling proposition then they will find it very difficult to build up a clientbase. Many of these smaller hosters tend to provide webdevelopment services as a way into the market. However most of them just end up being web developers who provide hosting services and will remain small scale hosters.

Regards...jmcc

I would say the biggest factor in a lot of these hosts is the lack of motivation and passion - without that you're destined for failure.

I agree 100%. One of my friends opened a hosting company and later closed it because he got "bored". He had enough funds to run it for another year.

So yes, motivation is a huge factor.

I think the problem is people starting hosting expecting to make a quick buck during these summer months when school is out for most and then realizing they cannot compete, so they end up simply closing down / cutting their losses.

IMHO, having a clear understanding of the target customer's needs as well as the planning of the provided solution are key factors.

I would say lack of goals, quality and overall desire. You can not run a business and just expect it to take off and make you a hundred thousand the first year. If that was the case I wouldn't be living in Iowa - I would be along the coast. You need to have the drive / passion to have your own business. I think also people lack pride in their work and name. 20 or 30 years ago a persons word as all we needed. Now it seems as though you can give someone your word - promise them the world and we don't think twice about it.

If you own a company you do not have a 9AM to 5PM schedule. You have a 7AM to 9 PM schedule so get used to it. Its hard work having your own business but its an unbelievable feeling when you see the companies sales increase and when people say, "Hey, don't you own that company." Nothing will but a bigger smile on your face.

Lack of initial plan would be my vote for #1. Lots of folks jump into the industry thinking they can make a living because hosting is so easy. It's not!!!! I have owned hosting companies since 1996 and it is ALWAYS work.

To many think they are hosts 1st
instead of realising they are a business 1st.

I would say the biggest factor in a lot of these hosts is the lack of motivation and passion - without that you're destined for failure.

I agree 100%. I believe that goes for trying to succeed at anything.

You have to approach entrepreneurship by expecting to work harder than you would at a full-time job. At least for the foreseeable future from the beginning.

It should be easy to stay motivated because your destiny is in your own hands. There's no supervisor who needs to recognize your contributions and reward you -- just the market. If you have a hard time staying motivated you should question your motives. Are you primarily after money, or are you doing what you enjoy?

After passion and motivation, I'd say the next biggest factor in failure is not having a way to stand out from the crowd of tens of thousands of other web hosts. Most hosts I see compete on price. Give away the most for the least amount of money.

You don't compete with a big, conglomerate, hosting empires based on price (economies of scale -- they win). You need to do things they're bad at, like personal service and serving niche markets.

Hosts that just focus on low prices and high resources won't have the funds to innovate, and they'll have few ways to retain customers. If you're primarily attracting bargain hunters, then you shouldn't delude yourself that they'll stop hunting for bargains once they find you. Easy come, easy go. :)

Not knowing how to handle growth is one I see a lot of.

If you own a company you do not have a 9AM to 5PM schedule. You have a 7AM to 9 PM schedule so get used to it.
Or at first you have a 7AM to 6:59AM work schedule (24 hours lol). :laugh: Nothing beats calls at 3 AM when you first start out and have no employees yet. :stickout:

Onto the topic though... I think a lot of people see hosting as a quick buck. They think they can spend a few dollars on a reseller account and make a ton in a few months. Which most of us that have been in the biz a while, know that isn't true. It's a lot of hard work, especially at first, and not many new startups realize that. Your first few months, you'll be tired as crap, losing money, and angry at the world.

Onto the topic though... I think a lot of people see hosting as a quick buck. They think they can spend a few dollars on a reseller account and make a ton in a few months.

I suspect a lot of the larger outfits have concluded that reseller accounts are good way of offloading support/sales costs.

(lack of) Technical experience followed by business experience...

A large percentage of the posts in this forum could be answered by doing Google searches. Do you really want to host with someone incapable of doing a little research themselves?

Granted, IANAL, I have no MBA... but I have at least gone to the local community college and taken the classes which interested me (business law, marketing, management, etc). If more people took the time to do things like that, there'd probably be much less failing hosts in this industry.

I think the problem is people starting hosting expecting to make a quick buck during these summer months when school is out for most and then realizing they cannot compete, so they end up simply closing down / cutting their losses.

Yes AquariusADMIN, I think you are right, they do think there is a quick buck, but then comes the hard work and the late nights and the DNS issues etc etc. You are assuming people take on this as a summer job, but I am talking about the hard core hosters who failed. I don't want to name names, but I seem to think their problems are mostly support solution delivery problems.

Competing on price is one thing, but competing on service, well that's the challenge. That takes organisation and dedicated people. Take one of our not so well regarded Premium members on WHT, who has not even responded to the numerous outstanding issues for weeks. This has got to send a business down fast!

THanks for your insight. I will comment on the others as time permits. Nevertheless, I think this is an iomportant issue and we need to keep it in mind particularly during these volatile times.

Regards,

Michael

Or at first you have a 7AM to 6:59AM work schedule (24 hours lol). :laugh: Nothing beats calls at 3 AM when you first start out and have no employees yet. :stickout:

Onto the topic though... I think a lot of people see hosting as a quick buck. They think they can spend a few dollars on a reseller account and make a ton in a few months. Which most of us that have been in the biz a while, know that isn't true. It's a lot of hard work, especially at first, and not many new startups realize that. Your first few months, you'll be tired as crap, losing money, and angry at the world.

Very well put. I should add that people who think of web hosting as a "Turnkey" "Automated" business are doomed to fail. Lets face it, you do not just sit in a hammock all day long with a beer watching the money come in.

Here is my list

Failure to Plan for Growth - Sure it is perfectly fine to start out with a low end VPS or Reseller Account, but there is a chance that you may hit pay dirt and should think about moving to a more powerful dedicated, High End VPS or VDS. There are still hosts that have 50 unlimited master reseller accounts on 1 low end VPS.

Lack of a Professional Website - It is safe to assume that over %95 of your customers will purchase your hosting from your website. If your website looks like your 3 year old got into dreamweaver again, this will turn off potential customers. Make sure your site is clean, easy to navigate and free of Spelling Errors.

Customers Privacy Not Respected - This dips into professionalism, but it is safe to remember that you should NEVER post any of your customers information anywhere. It happens here all the time, especially when a host is trying to defend themselves from a customer complaint.

Have a "Summer Job" Attitude - Hosting is a 24/7/365 business. I always have to keep an eye out for anything, even on vacation.

Offering Too Much Too Fast - Boy I wish there was a "restricted hosting license", a new host really should try not to oversell or offer reseller plans until they fully understand how it works. New hosts should NEVER offer "Unlimited Plans" even if they have an unlimited plan with their reseller or host. Much like a Learners Permit, you need to take several months to get acclimated to how hosting works, both from a business AND technical point of view.

In three simple words :

Lack of Entrepreneurship

Everyone's responses have been great. Let's face it - some people just don't have the business skill sets to grow their organizations long term. You don't have to work long hours as much as you need to work smart. You don't need an MBA, but you do need to be persistence, professional and possess business savvy.

I agree to all the saying in regards to the closure of the hosting companies. I have resently joined a hosting company and the company is old and experienced. I have been with them for more than three months and I had lot of new customer's joining us because their old host lacked to provide them support and customer service on time.

I feel that the support and the transparency to customer's has to be pure as the relation of the customer with the company should be a long term relationship.

Our business has been improved in this past months for the quality support provided by our professional experienced executive.

I request to all the forums members to advice which I could bring in for better exposure of the company in the forth coming period.

Cheers...

" All that I know is a customer I loose is a customer my competitor wins. "

Don't sell your services at a loss. Never ever "buy" the business. We've acquired the business of 2 providers that were in many cases selling the service for less than it cost to run it. The mistake they made was looking at Go-turd and wanting to undercut that price, figuring they'd make it up in volume. Guess what - they didn't have that kind of marketing budget. In effect they were paying their customers! Server rental or colo, licensing, support costs, etc... that all adds up and you better have a business plan that accounts for that.

We tell customers that we aren't the cheapest provider they can find, and if price is the only consideration, we're probably not the right fit. In the majority of cases, people appreciate hearing that, and are eager to hear about what kind of VALUE you can provide them. What makes your slightly higher (but still reasonable) price worth it?

Wow I am amazed to read this post, looks exactly like what I have seen happening to hosts over the years.
We have started on the Israeli (local hosting market), since 2004 and seen MANY Israeli "summer time" hosts come and go (even as our clients - like kids who buy resellers or rent dedi boxes for CS servers). After about 6 months they go away – .trying to make an easy buck I would add.
And we, as a major player in the Israeli market get "stuck" with new servers and un-used racks, as we meet with the demands, but see them come and go so rapidly! - Its amazing to read this and actually be an eye witness for such things.

The thing is, we have had a "game plan" for all of these situations, and actually after they left their servers, we could provide better service for our own long term clients, as we have more hardware to spare, we could give our long term hosting costumers better services on servers which were close to dedicated in terms of population :-) – FUN! haha

This year we have made a leap into the international market, after we have seen a large demand, and I might say - Wonderful clients, no more kids renting dedicated servers for a month or so.

:-)
I really hope new hosts (or hosts to come) will read this post twice before they even think about entering the market.

And I shall add - Lack of technical expertise is a major factor on a failing host – seriously
You want to provide hosting? – Learn Linux, take an RHCE exam
Never relay on a point and click hosting control panel to do the job for you!
Understand routers and networking – take a CCNA course
Understand business – Hire a good manager to manage your finances for you
And most important – SERVICE SERVICE AND MORE SERVICE !

Anyhow, this post hit it right on the spot, I totally agree with all of the comments here!!

If you are offering a reseller account you are adding to your competition.
Some of you started with a reseller account,learned, found customers and then went dedicated, or even bought your own server.
Do you really think it is wise to offer a reseller account for 20 bucks to someone that will compete for the same customers and not service them properly either?
I for one do not offer reseller accounts.... if they want into the business, invest or join as an affiliate which we do offer and so do lots of others!

If you are offering a reseller account you are adding to your competition.
Some of you started with a reseller account,learned, found customers and then went dedicated, or even bought your own server.
Do you really think it is wise to offer a reseller account for 20 bucks to someone that will compete for the same customers and not service them properly either?
I for one do not offer reseller accounts.... if they want into the business, invest or join as an affiliate which we do offer and so do lots of others!

One thing I have learnd in life, Never look into someones elses plate.

Yes it is wiser to make all your own mistakes than to learn from others.
after all, what is experience without pain and failure???
Are you for real??? what do you think books and manuals are? they are "Looking at someone elses plate"
I am on the forum to look at everyone elses plate! I have tons of clients and NONE are writing bad reviews about me.... Because I see the problems before they happen.
While this has been the case since 2003, it will not last I am sure, but I am constantly learning and evolving like we all should be, with our personal experiences being finite, taking something away from others mishaps, is always a wise and prudent thing to do!!!

If you are offering a reseller account you are adding to your competition. ... Do you really think it is wise to offer a reseller account for 20 bucks to someone that will compete for the same customers and not service them properly either?
I for one do not offer reseller accounts.... if they want into the business, invest or join as an affiliate which we do offer and so do lots of others!

Nexterra,

I think you nailed it for me as far as resellers selling to resellers. I would not want to be a needle in the reseller haystack.

Affilate programs are way interesting way to bring in new business wthout having resellers.

Thanks for the input.