I created a similar post several years ago on a different forum, and have recently rehashed it and posted it onto our company blog. If you're thinking about starting a hosting business or have been in the business for less than 2 years, this article contains some great information for you.
One very important thing you need to ask yourself:
Are you in this to make some quick cash, or are you doing this to build a long-term successful company? If you are not in it to do the latter, then you will greatly suffer and lose out on long term rewards.
Suppose you would like to start up a web hosting company using a reseller hosting account or dedicated server. You would have to do sufficient research, and purchase all the necessary utilities: a reseller plan or server with enough resources, web design, billing system, customer support, etc. Completing these first steps gives you a great feeling of accomplishment, since you’re now ready to take the several months of planning and turn your dream into a reality.
The Beginning Stages
This is the part where most hosting companies will fail. After several months, you become so totally absorbed into your new business that you start forgetting about your normal, daily life. When you speak with friends or family, eventually the topic of your business will come up. The first question from them will always be “How’s your business doing?”, and then occasionally “How much money are you making?”
In the early stages, that question will absolutely CRUSH any persons entrepreneurial excitement. This is normal. You’ll need to swallow your pride when you realize that the answer to that question isn’t yet what you would like it to be.
Whether you realize it or not, you’ve now set an invisible goal for yourself. You now believe that in-order to prove to the world that your hosting business is not a failure, you have to show that you have a large profit margin.
You shouldn’t get discouraged if your business isn’t an instant success. Infact, most businesses in general do not usually turn a profit for the first 12-24 months. If you’re counting on being the exception instead of the rule, then you’re setting yourself up for disappointment.
Making Money and Building a Business are Two Different Things
This is especially true for startups. The majority of new web hosts invest copious amounts of time into the startup of the business, and then if they don’t see immediate results, they abandon their business with nothing to show except debt and lost time.
Not seeing the profit and cash flow after the first 6-18 months can be a very scary feeling. That feeling is what will drive many startups to give up or sell their business. This is a huge mistake.
Perhaps an analogy will help; My wife recently has been cooking some amazing food with home grown vegetables. Think of the time and effort put into a reseller web hosting company, as the time and effort put into a garden. If you were to plant a seed and water it, fertilize it, and after a few days or weeks you don’t see any vegetables. Would you give up on it so soon? Probably not, because you can see the physical growth and see your plants slowly developing. With a business, it’s the same idea, except not as easy to see, and is on a much grander scale.
My advice to you: Don't worry about making money in the beginning.
Planning ahead is imperative. It would not be wise for you to quit your day job immediately. Make sure that you have a strong business plan, and are financially secured for 6 months at the very least prior to starting out. Work on the business in your off time, and the business will
succeed if the right amount of time, planning, and effort is put into it.
Don’t give up and the next time someone asks that dreaded question, your answer will feel much more admirable. Good luck!