Web Hosting Talk : Web Hosting Main Forums : Running a Web Hosting Business : Running a Web Hosting Business Tutorials : Starting Out

[Tina J]

(I recently emailed this to someone who asked for advice. I thought it might be of use here.)

Okay, first, the question shouldn't be "how much should I charge?"...but "who is my target market?".

Where do you plan to get most of your customers from? If you look to gain new customers from WHT, then you will have to compete with the bottom of the barrel hosts. If you just want to submit your site to the hosting search engines, then you will probably want to price mid to low range. If you want to target local customers from your area...aim high. Local customers are willing to pay a decent rate and will stay loyal.

Once you settle down and figure out who, exactly, your target customer is...you can figure out what range you should price your services. All types of customers have their advantages and disadvantages. You'll have to weigh each and decide which you want to cater to.

Of course, there are other things to take into account...how much are you paying for your reseller account or server? What other expenses will you have? Are you going to offer 24/7 toll free phone support or ticket based support only? Who will do your taxes and how much of your incoming is going to be paid out in taxes? Your legal forms? The list goes on and on.

Most importantly, separate your business expenses from your personal ones. Don't just look at the bank account and say "hey, I seem to have $300 extra in there...I think I'll buy myself that thing I've been wanting!" Make sure you establish a business bank account and a personal one. Set yourself up with a specific amount to deposit into your personal account each week...and
give yourself a raise often. :-)

Your business plan doesn't have to be anything fancy. It can be as simple as a Word document with a list of your expenses and a rough idea of how much money you need to make each week to cover those expenses. Also include your goals and how you plan to get there. My goals, years ago, was as simple as "I want to get my own server and then add more servers until I have enough customers to move into my own building.". Having goals helps you focus and keep on track. You look at those goals and, when you're having a really crappy day, the goals help you realize why you're working 18 hours a day for $39 a week profit.

1. What is the average ratio of support tickets to customers that is typical? (E.G. 25% of customers will need support, assuming 500 customers this would be 125 tickets /mo. But is 25% accurate?)

No clue. We host about 12,000 shared hosting accounts. I'm not entirely sure how many individual customers and how many of those are resold accounts. However, we get about 50 helpdesk tickets a day. The one thing that REALLY helps is to have very thorough documentation and FAQs. Step-by-step instructions, animated tutorials and links to other help sites.

Include quite a bit of information in the "welcome" email you send out. Including where they can find your documentation and also how they can get support, if needed. I can't stress the importance of good documentation enough. It will greatly reduce your need for having to provide tech support.

2. What is the average amount of time needed to resolve an issue for a customer?

It varies widely. I would say *average* time is about 10 minutes.

3. How much per hour does it cost to pay others to offer top quality support to each customer ($10/ hour if I outsource, $20/hr, $30/hr or what?)

It depends on where the person you employ resides. You can hire a tech from India for literally $1 an hour or less or you can hire a local college graduate for $25 an hour or more. You need to decide what the job responsibilities of your tech(s) will be and whether or not you want to outsource or hire locally.

Some people expect techs to answer helpdesk tickets, setup new accounts, fix server problems, etc. Personally, I've found that its best to separate the responsibilities into three categories:

1. First level support ("I forgot my password" "Why isn't my website working", etc.)
-These guys don't need root access. They just need to be very proficient in troubleshooting common hosting problems/questions.
2. Admin level support ("Apache is down. Fix it!" "POP isn't working. Fix it!" "I have no clue why Mr Smith can't log into FTP, since everything seems to be working except his account.")
-These guys obviously need root access and I would limit this to as few people as possible (we have 1 Senior Admin with root per 75 machines)
3. Billing support (Setup and suspend accounts for non-payment, handle billing questions, handle refunds or chargeback issues)

When you first start out, you should be able to handle 1 and 3 on your own for quite awhile. I think I hit close to 1000 customers before I started pulling out my hair over the stress. Of course, doing it all yourself means you can never get sick or go on vacation...so its a trade off.

You should be able to find a server provider who can offer managed servers or find a REPUTABLE admin service. Be very, very, very careful about who you let manage your servers. Its very easy to hire an admin based on a 1 hour AIM chatting session. Don't do it! Don't hire an admin because he talks about all that servers he runs and he sounds like a really cool guy...and he can do it pretty cheap! Hire based on referrals from other
companies who are using or have used an admin in the past. Check references and make sure your admin is available WHENEVER you might need him to fix something. Since a properly run server won't have too many problems, a good
admin will be able to keep it running smoothly so he doesn't have to work too hard.

Personally, I prefer to pay people a weekly salary...rather than hourly. I do this for two reasons. I don't get hit with any surprises, when something goes wrong and we need people to put in extra hours. Also, the staff doesn't get hit hard when they are out sick or have an emergency. It works out well on both sides, I think. Also, there's no way an employee can "pad"
their hours to make it look like they were working more than they were. Either the jobs get done or they don't...and if they don't, you find someone who can.


4. Do you need to oversell in order to make any kind of profit of
webhosting?

You know, I was completely opposed to overselling at first. It seemed wrong and scary. When I first started out I didn't oversell. I then found that I had a HUGE amount of resources left over on each server...and even after a server was full for awhile, the usage didn't go up. I slowly started overselling by a little bit until I hit what I considered to be an acceptable amount of overselling. I can't really tell you what that acceptable amount is, except to say that you want to make sure that the amount you oversell is not harmful in any way to your customers' accounts.
You absolutely don't want to overload a server and you don't want your customers to start out on a really speedy server and then notice, after a few months of adding more customers, that the server has slowed down to a snails pace. But I think to not oversell would severely cut into our profit margin.

I'm sure there's much more that could be added to this, but this was all I was asked for. If anyone cares to add to it, feel free.

--Tina

[Cael]

this is a great article. very very useful indeed.

[AdWatcher-Boris]

Thank you, Tina - people will definitely benefit from this knowledge.

Boris

[colossus]

wow. This is great. Best web hosting article I have ever read, honestly. Tells you everything every new web host asks?

[a1wh]

Thank You that is real good information there and again thank you

[Derrick]

Great article Tina Thanks for sharing.

Derrick

[PremiumH0stednet]

Nicely put down. That helps everyone and gives them a good idea of what hostings all about.

[overulehost]

great resources.....

thanks for sharing.. hopefully everyone should get something out of it

[RexAdmin]

Nice article.

But, overselling bandwidth, sql server, ... is NOT good in any way.

Good luck.

[Tina J]

We've been overselling bandwidth for 7 years and 1000s and 1000s of customers. Never had a problem with it. You can't just blindly oversell, you have to know what you're doing and make absolutely sure you aren't overselling too much.

--Tina

[~Karen~]

Great post Tina. There is alot of great information in this post.

Karen

[peace68]

<-- before reading
<-- when reading
for you<-- after reading

[webepic]

Great job, I think I owe an article to write for WHT from all ive learned from using these forums! Definately a good article... .. ill tell my friends to look at this one

[majik]

Indeed, great information. I'm positive it will come in handy!

[nzbm]

an awesome article