Web Hosting Talk : Web Hosting Main Forums : Running a Web Hosting Business : Do setup fees turn you off?

[Khazun]

Hey all.

I am starting up a new website host very soon. The thing is, my packages are cheap-just enough to make enough profit to makeit worthwhile. Therefore, I cant really lose the 30c per month fee from paypal, and I can not yet afford another system.

If I was to charge a $3 setup fee, would that detract you from purchasing hosting?

Alex

[WirralNet Matt]

Originally posted by Khazun
Hey all.

I am starting up a new website host very soon. The thing is, my packages are cheap-just enough to make enough profit to makeit worthwhile. Therefore, I cant really lose the 30c per month fee from paypal, and I can not yet afford another system.

If I was to charge a $3 setup fee, would that detract you from purchasing hosting?

Alex

Price your prices high enough so that you are comfortable and the company can be sustained.

Yes, cheaper pricing might be more attractive, but I have raised the pricing for both my hosting and reseller companies over the last year due to increased costs etc....

I find most of my clients are coming via referrals from other clients, they come for great service at a fair price, not bad service at a low price

If you feel you service needs a setup fee, don't be put off too much by most other hosts offering free setup. I myself am currently deciding whether or not to levy a small setup charge on my reseller plans

[BF-Gary]

Alex,

I really think that depends on your target market. I know personally when it comes to buying a dedicated server I don't mind paying a set-up cost because I know that it is a standard within the market and they spend some time doing it.

What you could do is follow a marketing idea that if they pay a upfront set-up fee they pay less per month versus paying more per month w/o the set-up fee.

Just an idea

[HQHost]

Everything depends on your marketing policy. Firstly, you should decide whether it is able to replace some part of your expenditures on the monthly web hosting fees - if it isn't able then the only way is to make set up fee. But mention, that very often customers don't like it!

[Coach]

Originally posted by Khazun
Therefore, I cant really lose the 30c per month fee from paypal, and I can not yet afford another system.

I wouldn't purchase from a hosting company that couldn't afford a $.30 PayPal transaction, nor would I purchase from one where PayPal was the only payment method. With that kind of business model, it would be lucky for them to be in business for any real time frame at all.

I would seriously reconsider your pricing structure and what you're going into the hosting business for.

*moving from webhosting forum to running a webhosting business*

[Khazun]

Yeah. Take for example. I am selling a small package @ 55cents per month.

With the paypal fees around 20c is left. Not enough. Therefore I would add a $3 setup fee. Or should I add the option of a $3 setup fee or 30c extra per month until setup fee is payed?

@Coach

Paypal is not there forever. Just while I get set up. I cant a paypal transaction cauz I want to charge around 55c.

[Coach]

If you want to charge $.55 a month, then you're not going to be in business very long, PayPal transaction fee or not.

Period.

[mharoon]

The question is why would someone want to offer a 55 cents plan? Even a $3 setup fee can last for about 15 months or so in PayPal transaction fee. Do you intentinally plan on losing money after that, or do you not see your customers sticking for that long?

I totally agree with the first poster -- take his advise. Analyze your target market, come up with some decent plans, and run with it. The ultimate goal should be sustainibility, not cheap prices.

Originally posted by Khazun
Yeah. Take for example. I am selling a small package @ 55cents per month.

With the paypal fees around 20c is left. Not enough. Therefore I would add a $3 setup fee. Or should I add the option of a $3

[HiVelocity]

$3 is not a whole lot. I dont see how that would detract someone from signing up for your hosting service. If they are detracted by it then you probably dont want that cheap-skate as a customer. If you were asking for $20 then that is different, but $3, give me a break. Good luck to you.

[cdgcommerce]

If you are offering a $0.55/month hosting plan, you are in for a world of hurt financially. I don't mean this in any way other than in a respectful and honest manner but here's the problem with that kind of pricing:

1) You'll dissaude the best customers from signing up with you. They will look at your price and assume you are running it off a cable connection from your basement or worse... so you will actually be hurting your sales and impairing your ability to attract the really solid kinds of customers.

2) You'll attract the kinds of customers that you don't really want to focus on - the price-only focused customers who will generate a lot of support headache for no profit at all. They will still expect you to do a good job - they just won't want to pay you any more than the $.55/month you are asking.

Sell on value instead of price-alone and you'll not only get more customers and better customers, but you'll actually make money. I just do not see how a $.55/month plan is going to be either sustainable or profitable in the long run, nor can I conceive how it would be worth it to run it at that pricing level.

9 times out of 10 what ends up happening is that the Web host gets frustrated and fed up having to work so hard for so little... and then you see posts in the WHT "Offers" area for Web hosts selling hundreds of customer accounts that generate an net income of like $50/month and they wonder why no one wants to buy it.

[Intersabre]

If you want to have a $.55/month plan, charge quarterly, bi annually or annually. You can't let over 50% of your revenue get eaten up by transaction costs.

And if your customers choose you because they can pay $.55 a month for web hosting, I think they would balk at the idea of a $3 set up fee - that's 5 months of hosting for them! Imagine how hard of a time EV1 would have if they charged a $500 set up fee.

Then again, I can't recommend having a $.55 plan.

Minimum wage here is $6.75
$6.75/60 = 11 cents a minute

If you spend more than 5 minutes on an account, you're best off flipping burgers.

That doesn't even include advertising and server costs. Once factored in, assuming you scrimp on that part of your cost structure, an account put be worth 2 minutes of your time.

Setting up an account usually takes longer than 2 minutes. A typical support ticket can take 10 minutes to solve.

[PylonHosting-Adam]

For most the the services I offer, I do believe that setup fees will be a turn-off to my customers. I mean, it takes me what? ten minutes maximum to setup a new hosting account?

Now, when I do server administration for the client, like forum installation or database mantenance, I will charge a setup fee and/or for my time.

[iblive]

selling a service on price is dangerous. Just look at how many different hosts there are selling for cheap. When I ran a hosting business, we never competed on price and our business worked. We sold service, support, and a relationship with the client. That may not work for everyone, but it was a heck of a lot more profitable that way.

[Khazun]

Ill consdier going up a bit then.