Web Hosting Talk : Web Hosting Main Forums : Running a Web Hosting Business : Cost Calculation - Any ideas?

[blacknight]

We're working on crunching numbers for our accountants at the moment.
For dedicated and co-located boxes the figures are very straightforward.
Our problem is when it comes to calculating the costs of virtual accounts. Although you can apply the costs for the entire server to a box, working out the cost for each virtual account is leaving me a little lost.
How do other people do this?

[NovaW]

For virtual accounts - it'd be easier to make an assumption on the mix of plans on the server - to calculate an average revenue per server & then take costs on a per server basis rather than by plan basis.

[blacknight]

I tend to agree, but our accountant doesn't see things that way :-(

[NovaW]

From an accounting perspective you have to book the full server cost to the P&L as a cost because hosting is a service & you can't place unsold server space on a balance sheet as inventory.

So, it's interesting to know your actual cost per plan but that is managerial accounting and is not needed to create your P&L - which should be the main concern of an accountant at $185 an hour.

[blacknight]

Andrew

Very true, though our accountant was trying to get figures from us for projections etc (Ireland is an odd country )

M

[NovaW]

You can still do projections. The cost profile will increase in steps as you add more customers and reach the server limitations and need to add more cost - so there is always that 1 customer that reduces your profits because they are the only one on the server until you fill it up with more customers and reach break-even on that server.

Maybe your accountant is trying to look at server costs as if it were a pure variable cost - so he can multiply the number of accounts by plan cost to make an easy projection. Personally I would avoid that type of analysis - but to calc the cost per plan in that case just take the server cost / total number of plans you plan to put on the server and ignore the fact that different plans may take up different amount of server resources.

Ireland isn't too odd - I've visited Southern Ireland 3 or 4 times and the Guiness is always superb - much better than in the US - I don't think it makes the trip very well

[blacknight]

Originally posted by NovaW

Ireland isn't too odd - I've visited Southern Ireland 3 or 4 times and the Guiness is always superb - much better than in the US - I don't think it makes the trip very well

Well - look us up the next time.

As for our accountant.. .. He thinks in terms of tangible goods and services, so dealing with virtual hosting accounts has thrown him quite a bit