Startup/Planning/Details...ideas, help or opinions?
I'm making this thread to get peoples opinions/ideas/help/etc on a bunch of things relating to starting up a hosting service...again...
A little over a year ago, I started up a small time host for a few reasons...it was something i was interested in, i got a 2 year plan for 30g/300g space/bandwidth reseller account for $300 bucks...that was nice , and i wanted a little money on the side. I still have a few of the clients...host them for free now though.
To start off...I realize i made some huge mistakes the first time around, not doing a business plan, not taking the time to plan things, matching lower prices when i shouldn't have, not putting in the money i should have to get things going smoothly, etc, etc, etc...in short version...i screwed up
So...now...I want to start again...the right way...so I'm here researching just exactly what that 'right way' is.
First plan...before anything is done, i will be incorporating
Next off is determining if i should start with a reseller, vps, or dedicated. I'm looking mostly at a dedicated solution...i feel it would give me a better chance to actually control everything as well as beable to offer somewhat cheap prices and still be able to sustain the business.
So...although I'm not 100% sure about the dedicated...i'm 90% sure...so that's what i've been researching lately. Now my first question about that is should I start off leased to have a lower upfront cost, or throw down the cash in the beginning to get some servers and go colo? What would be the smarter thing to do here? I've already done some research for my local area businesses and some other things to have a small little local niche as a starting point, so while i can't be 100% positive...i'm pretty sure I could get a decent sized client base (50-100) within the first 3 months...if not more.
Second question on that subject...whether i chose leased or colo, either way do you think it'd be better to start off with maybe a dual core P4 or singe xeon, or go straight for some dual opterons or woodcrest straight away to beable to provide that quality assurance and allow the room to grow quickly if needed? My problem here is i'll go to places like layeredtech or liquidweb and start with the low end server...but then i'm like...'well...for $50 more i can get..., or $100 more i can even get...' and that's just a rush for me...is that being dumb or thinking to far ahead by wanting to start with those high end servers?
Now...onto a little bit more detail in the servers...i always want to go for the huge drives...250/500gb raid 1 with a same size backup. I don't think i could even use that much space on one of those P4 servers because the load would be unbareable if i had that many customers on one server...right? Would those drive sized be reasonable on a dual core, dual processor woodcrest? or should i just stick with some standard 160gb drives per server?
I'm not asking people to make my prices for me...or tell me what percentages, blah blah...i'm just looking on advice to how to accurately figure out how to get those prices/percentages.
Right now...i've just been doing a simple "I pay this much for this amount of space/bandwidth...so i have to charge $per gig/band to break even." I know there is more to it than this, processor fees, support costs, control panel (i'm going with hsphere), 1800 number, possible server management if i go unmanged server. My question here is how do I figure out my break even cost per customer with all that added in...when i don't know how many customers i'm going to have? Guess?
Also...all that stuff I just mentioned...is there anything else service/productI'm forgetting in things i will need to buy that should be included in the cost per customer, and what things shouldn't be calculated into that price per customer? (i know i'm not going to calculate the purchase of a custom website into that for instance)
I've got a bunch more questions I can think of (not at the moment though...lol)...but i think most of the other ones i have been able to find pretty good answers to in other threads.
I'll really appreciate everyones opinions/views on the stuff i mentioned above...so thanks in advance to all those who reply.
just posted...just remembered
Would purchasing some small companies if i can obtain the funds be a good way to start a better customer base or would that be a 50/50 chance because the customers might leave when they find they are being sold?
I will try to field some of your questions. I have been in this industry for a few years now and have ran and worked with a few hosts in the past so this is all from personal experiance. I always started with a dedicated server. A reseller plan was a bit to controled for how I like to run things. You dont have the freedom to do as you choose or run diffrent types of software that you may want to run. A VPS is a little more better but tend to bog down often (due to high mysql traffic, etc, etc). They are not well-suited for premiere customers. The reason a dedicated server is a better choice is becuase you have the feedom to do and install whatever you would like to offer. There is a major downside to dedicated servers though. If you do not spend the extra money to get a managed server and do not have Linux experiance you will run into problems when the server starts acting up. It really isnt a IF question its more of WHEN. Its going to happen if you like it or not. So you need to have some kind of plan for when this happens.
On to your 2nd question. To lease or to own. Here is the BIGGEST problem with buying a server and coloing it in a datacenter. WHEN (again, not IF) the hardware fails it is YOUR responsibility to fix and have parts available. When you lease a server if there is a problem you call the DC and they will fix the parts and it will be done. When its your server you will need to send or buy the parts and then pay remote hands to replace them. If you need to send parts this could takes days to be done resulting in massive downtime and unhappy customers. If you dont have local access to the server then you may want to start by leasing or hire someone to work on site with your equipment. These all need to be looked at before you make a final choice.
The starting server is your choice. If you want to spend $1000 a month you can. I suggest you find a SOLID network with a decent server. Anywhere from a Pentium 4 2.8+ 1GB RAM and 80GB+ will do jsut fine. For starting you dont need to go all out and get a Quad Xeon with 10GB of Ram. You can always ease your way into these servers. I always find its best to see if the company is going to work before I spend large amounts of money on the equipment. I have found my ideal servers and with time, you will too.
Simple, you are in business to make a profit. Make sure you make at least a 10% profit margin. If you dont make at least 10% your wasting your time (In my opinion). Of course, 10% is just a starting figure.
You also need to take into account Credit Card processing, 24/7 support, a phone # if you decide to go that route, sales help, server costs, unexpected expenses, advertising, control panel costs, billing software costs, ETC, ETC. You need to make a spread sheet (or something similar) with all your start up and monthly expenses. Then you will have good ideas as to what you need to make to break even. You may also want to make an average of how many sales you think your going to get and how much each sale will bring it.
There is A LOT more to this then what you as asking. So do your research.
Thanks for all the Ken. A few things to say about it...
The things you said about the servers were helpful. I'll definately be going managed, already decided on that one (by the way...if anyone knows a good manager of hsphere servers...throw in a name if you wish please). As to the server spec, i've been looking around at that...and so far found some nice servers with liquidweb and others that are high quality (min dual opteron) for around $300 a month...i might go with one of those...or i might just get a p4...i think the reason i want to start with the good server is I think it will help get customers being able to advertise using high quality stuff...
The rest about profit and expenses...I'm planning on using 2checkout and paypal payment pro to begin with, already have a plan for the phone (simple 1-866 number for $10 a month to begin...then up to 19.99 when i need it), control panel is going to be hsphere so billing and helpdesk is covered by that. The one question you didn't answer (which is understandable...lol)...is how to figure out the base cost...i've pretty much got all my figures for what my expenses will be...but figuring out that last part you mentioned...the figuring out how many average sales....that's where i'm stuck...do you just pull i number out of thin air? I'm not really sure where to start research on the amount of customers one could expect starting up.
Originally Posted by KenThomp
...do your research
undoubtably!...i'm not planning on actually starting for at least another 6 months...i wanna do it right this time.
Well, not nessisarily according to the hosting world, but many people use a standard 33% increase above costs to determine profit margins. It's not as cut and dry as that, and doesn't need to be, but you can use that as a starting point anyway.
Jim - 2Macs H-Sphere Web Hosting
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About your base price. What you need to do is research other hosts and their plans. You are not looking to clone them but instead you should be looking at the "going rate" of these plans. When I select my prices I look at my expenses and then decide how many sales I think I will have. You asked "Do you just pick out of thin air?" and the answer is yes (in my opinion). You have to reasonably choose your nubers. In your first month dont say 'Im going to sell 1,000 reseller plans for $99.99 a month'. They have to be reasonable numbers. They are just estimates to help you decide how much revenu you will produce. When you forcast remember that your total sales is only your gross revenu. So if you say "I will sell 30 plans @ 4.99/month I will make $149.70", This is true but now you need to look at your expenses and do the math. Some hosts can afford LOW LOW prices becuase they are large enough to back themself up. Starting hosts they have drop low prices usually get taken down.
It really comes down to your business model and plan. I hope this helped. Feel free to contact me on IM or email. I would be willing to help you.