Just something that occurred to me, as I'm currently looking around for a virtual host. Are set up fees in your opinion a reasonable thing to charge for virtual hosting, considering the sort of work that gets put into setting up an account? For dedicated servers, I have absolutely no qualms with set up fees, though don't exactly feel too easy when it comes to virtual accounts.

Just wanted to know if it's justifiable in your opinion.

Not reasonable in my opinion. Love your site by the way. Spent alot of time there over a year back. :)

I would have to say NO!

I can not see paying for a setup fee unless you are getting hardware. The only exception being for extras like Miva shopping cart.

Most companies have the vhost automated anyway.

As this market has grown, setup fees (for the most part) have gone the way of the Condor. Setting up most accounts takes less than a minute. It was really just a way to make some quick start up cash IMO.

I would say it depends on the situation. For these hosts that advertise "$1 a month hosting!" then charge you a $50 setup fee, I'd say the setup fee is a little scammy. On the other hand, Rackspace charges a hefty set up fee, but I think they're just about the best in the business at what they do.

As a host, the best way to make money is to get signups and keep your customers as long as you can, and that kind of business model means no setup fee. As someone else pointed out, there really isn't much setup required with virtual hosting accounts nowadays.

Some hosts charge set up fees, and that may because of a standard that their provider [if they are a reseller that is] has required them to do. And that could be to pay a base price per each account creation.

I see no need in set up fees, unless it is a colocated server, dedicated server or reseller account.

As a customer, setup fees (where not spent on setup, i.e virtual hosting) just suggest to me that the host will be so bad I will leave after a month and they want to get what they can out of me before I leave.

double ditto:D

We charge setup fee($1) to prevent credit card fraud.

I don't think setup fees over $3 are reasonable. It takes no time to type in to a control panel "useradd foo", it's just quick cash as somebody else pointed out.

I don't believe in or signup with a host who charges for a virtual account to be setup. Simply because there are so many which don't.

I don't think setup fees make any sense for virtual hosting (besides the above cases, such as having to as a reseller), since it is completely effortless, and takes only a few minutes.

If I was going to offer any plans around $5/month, I would have a setup fee, because I don't want to deal with 20 $5/month accounts. I'd rather host 5 $20/month plans, and charge no setup fees, as this will also keep the servers less crowded (hopefully).

- Matt

Thanks. I guess there really isn't much work put into setting up a virtual account, as I would have expected.

p.s: Thanks NexDog :)

Setup fees aren't about the "work involved creating an account". That's never been the issue.

What about your capital costs? What about costs incurred by growth? Servers don't grow on trees. Datacenters don't build themselves. Employees don't work for free (OK, that's a recurring cost, but the idea is the same).

Reasonable setup fees help maintain the healthy growth of a business. Discounting them is a handy promotional tool as well.

Kevin

Sure it is reasonable, why not? new customers need more support, need things set up, etc. Over the course of a year, what the difference between:

Host A: $25 set up fee, $12/mo.
Host B: No set up fee, $14/mo.

After one year, Host A costs $169, Host B costs $168

Getting a bit more at the start, for more work at the start, seems reasonable to me (and pricing is completely relative).

I think whatever a host chooses to do is reasonable. While some companies may opt to charge a setup fee and others don't, there really is no right or wrong. It is only up to each consumer whether they will pay it. The fact that there are not a shortage of hosting companies which charge this fee and yet maintain customers is indicitave of the fact that people will pay the setup fee.

I don't see a reason for virtual... resellers and ded servers yes setup fees are understandable.

charging setup fees just allows you to recoup some of your costs up front instead of spreading them out over the course of the client's stay. As Chicken pointed out, the overall cost can be deceiving, or even the same. It's six of one, half-dozen of another.

Setup fees are useful in other ways as well. Waiving setup fees as an incentive to having a potential client sign up has been around for centuries in one form or another. You create a need (in this case lower cost because of artificially higher cost) and then you fulfill it (waiving the setup charge). Is that unethical? No more so than offering hosting for $15 when you could certainly do it for $14.

Setup fees can also be a way to maintain your influx of clients at a comfortable level. When you would like to keep clients from coming in temporarily (ramping up staffing etc) then you could 're'institute your setup fees, waiving them for temporary sales when you wanted clients later on.

There is no difference between setup fees for dedicated servers, virtual accounts, or memberships to a strip club. The setup fees aren't always about getting money up front in case the client leaves (although that is a consideration because they do cost money) but are another way to control your income and add to it.

There are more costs involved with setting up virtual clients than just the few seconds it takes to create the account. There are merchant charges, support costs (most support comes from new clients from we've seen), and client tracking, logging, etc. Some of these need to be recouped someway or another. If your target market won't pay more than X amount per month and your bills are more than that per client, you have to get the money somehow.

Sure, why not charge a setup fee? New customers need more help to start out with, and this covers your cost on staff/support for them. As long as it's reasonable, I don't see a problem with it. I see a problem with peoples perception of it, though....

It takes no time to type in to a control panel "adduser foo", it's just quick cash as somebody else pointed out.

it's not about that at all... and it's a little more than just "adduser foo". We provide value-added services that the setup fee helps offset, such as flash tutorials covering operation of all aspects of the control panel (great job Vito), if they have problems they can send us their site (if it's new) and we will do the initial upload for them, or move it from it's current provider if they wish, among other things. We don't need to do this for every client, but we do it for those who are first time hosts, and those who request it, and again, the setup fee helps offset this.

As a customer, setup fees (where not spent on setup, i.e virtual hosting) just suggest to me that the host will be so bad I will leave after a month and they want to get what they can out of me before I leave.

Again, peoples perceptions, and that's thanks to scam hosts who make it hard for legit hosts to help people understand why a setup fee isn't the "devils mark" they think it is.

And as stated, you can always run a promo with the setup fee waived, as an additional marketing campaign. You can also waive the setup fee on a case by case basis. I am sure there will be many who disagree, but such is life. If you think that what you offer warrants a setup fee, by all means, use it.

suppliers should always offer and adjust their costs to what the market will bear. If they stop getting customers by having setup fees, they'll change or go out of business. If they can't keep up with their costs without having setup fees, same thing.

from a client's perspective... when I was looking around for companies I dismissed any that charged a setup fee no matter who or what their reputation was.
Considering the amount of less then honest ones out there, combined with sometimes vague statements on what the account does and does not include I wouldn't even consider it.

(In my opinion offering a 30-day refund and a setup cost equals to no refund at all. The hosting I considered was between $10-20 and generally the setup fee was around $25 and not part of the refund)

I also wouldn't fall for the "we'll waive the setup fee if you sign up for a year". Too much hassle getting your money back (if at all) if you want to cancel for any reason.

However, something like $12/month vs $120/year is fine with me. This still comes out to $24 extra over a 12 month period and gives me the chance to try the host out for several months and if everything works out fine I'd upgrade to the cheaper "pay per year" plan.

Just my thoughts on it :).

There isn't much into setting up a virtual website if the admin is running good management software.

[off topic]
dynamic drive rules. :)
[/off topic]

Even if it doesn't take much time to setup the acctual account due to software which helps to take care of the process, there is still the time and money that went into that software. Should that cost be absorbed by the business or should a setup fee be charged? Whatever the company chooses. As I said previously, if people are paying it why not. Sure, there may be some that pass, but that is the case always. Personally, I've opted to have no setup fees, but I would surely never try and tell someone else not to have them.

Originally posted by GeorgeC
Thanks. I guess there really isn't much work put into setting up a virtual account, as I would have expected.


It still takes time to process an account, handle failed transactions, charge backs, cancel accounts, provide support for new customers, quality hardware is expensive, etc.

Generally, all US based hosts have the same daily operating needs. Cheaper hosts, including hosts with no setup fees, need to cut operating costs to stay profitable. Cutting costs generally means cheaper hardware, no hardware RAID, no hot swapable SCSI disc drives, no daily backups, less support, etc.

I wouldn't pay a setup fee to a host that uses a cheap $99/month server. I do pay setup fees to hosts that use the better hardware.

Now if I could only find a host the offers true 99.9% uptime, quality hardware, daily backups, good support, and no setup fee.

-Mike

I think in real life, the issue can be compared to tipping when going to a resturant. The question is whether you're going to a self-serving place like Macdonalds or not (the type of food not withstanding). By in large if setting up a virtual account and processing it is relatively straightforward and even automated, then the suspicison becomes whether setup fees are just an inside tradition to get something from the client as soon as possible, in case he/she leaves.

p.s: Thanks johnallen. :)