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  1. #1
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    Questions for hosting businesses with more than 5000 clients.

    Hi.

    I would like to know:

    1. How long it took you to build a 5000+ hosting business.

    2. What's the average profit per hosting account for hosting businesses with 5000+ clients.

    Thank you very much for taking time to answer my question.

  2. #2
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    Seems like this question is asked every two weeks...

  3. #3
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    Sorry... I just didn't find the answer so... I thought I'd better ask...

  4. #4
    I think only hostingplex can answer your question.

    Else, if you have a business plan it's quite easy to analyse a rough profit rate from 5000+ customers.
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  6. #6
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  7. #7
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    Originally posted by net-trend
    I think only hostingplex can answer your question.
    That's my line, damnit!!!
    AussieHost.com Aussie Bob, host since 2001
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  8. #8
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    Well wheres hostingplex?
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  9. #9
    Well wheres hostingplex?
    They are busy at their desk deciding how many clients they want to say they've added this month....could easily be up to 10,000 or more by the next time they post.

  10. #10
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  11. #11
    Originally posted by Aussie Bob

    That's my line, damnit!!!
    First come first serve Mr. Bob.
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  12. #12
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    Re: Questions for hosting businesses with more than 5000 clients.

    Originally posted by ldcdc
    1. How long it took you to build a 5000+ hosting business.

    2. What's the average profit per hosting account for hosting businesses with 5000+ clients.
    If you price your accounts at $1.99/month, it'll take much less time than if you price your accounts ar $19.99/month. 5000+ customers is not hard to do if you have rock bottom prices, but then you have very little profit, which equals poor support and planning many times.

    It takes years to build a larger client base (> 1000) with decent profit margins. 6+ years here

    - John C.

  13. #13
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    Our company is in business for about a year and we got 800 clients in that time.
    Last edited by Chicken; 11-17-2002 at 12:54 PM.

  14. #14
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    Seems like this question is asked every two weeks...
    Everyone wants instant $$$ in the shortest amount of time. Maybe we just need money trees. But that did bring up something I'm curious about. What is the avg client base for most hosting companies?

  15. #15
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    Hosting is the next "get rich quick" scheme... it's the Amway of the future!
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  16. #16
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    Actually we don't have 5000 clients but we do host over 6500 web sites.

    So heck I'll chime in anyway

    It took a year, I started Oct 24th 2001.

    Profit margin is good, I don't have an exact figure but rough estimate is it costs about 60% of our intake to cover the costs. Per account is misleading, I have $19.95 per year customers, and then I have resellers paying $150 a month for their service. So there's not figure for "per customer profit".

    I can say, if I had 5000 $19.95 a year customers and nothing else I'd quit the business and go to Domino's and deliver pizzas. The profit in a $19.95 per year account isn't nothing to crow about, if you had 5000 of them and nothing else you could if you were very careful maybe make a living, but I can make a living delivering pizzas and I won't have the stress of 5000 customers greying my hair prematurely
    Gary Harris - the artist formerly known as Dixiesys
    resident grumpy redneck

  17. #17
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    congrats Gary! Seems you're on the right track.
    ( better update your About Us page )

    - John C.

  18. #18

    *

    Originally posted by CDHost
    Hosting is the next "get rich quick" scheme... it's the Amway of the future!

  19. #19
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    Re: Re: Questions for hosting businesses with more than 5000 clients.

    Originally posted by JohnCrowley


    If you price your accounts at $1.99/month, it'll take much less time than if you price your accounts ar $19.99/month. 5000+ customers is not hard to do if you have rock bottom prices, but then you have very little profit, which equals poor support and planning many times.

    It takes years to build a larger client base (> 1000) with decent profit margins. 6+ years here

    - John C.
    This is a good point. I have never been impressed with any company that sells cheap hosting to get customers. Why? Because anyone can do it. People can do it for years before they realize they are flawed.

    What impresses me is host who get to 5000 buy actually running the business like a business. By offering quality services for actual prices that will allow you to grow your business long-term.

  20. #20
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    Hosting is the next "get rich quick" scheme... it's the Amway of the future!
    Just be sure you are at the top of the pyramid!
    Going out of business in our 10th year.

  21. #21
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    Re: Questions for hosting businesses with more than 5000 clients.

    Originally posted by ldcdc
    1. How long it took you to build a 5000+ hosting business.

    How long a host takes to build a client base like that is dependant on many factors. Maybe you've got a few million in VC $$$ and you've set some targets through your customer acquisition programs. You could easily acquire 5000 clients by purchasing smaller hosts or using any one of 100 marketing strategies. So you could hit the 5000 mark in a matter of weeks. Hope you've got all your systems inplace and ready to go etc.
    2. What's the average profit per hosting account for hosting businesses with 5000+ clients.

    That depends on what you mean by profit. Nett profit or gross profit etc. That also depends on your cost structure and plan structure. I guess sit down with your spreadsheet and try to forecast some numbers. According to my spreadsheet, I make 32.86% profit. That's before tax and after all expenses etc. Many, many variables to take into consideration here with your question.

    If you're putting together a business plan for VC funding, then you'll need to go into great detail etc. If you're just wanting to just get started in the industry, then get a reseller plan and work your way forward etc. You'll then get a feel for your plan pricing, your marketing, costs etc. Just depends on how you want to attack this. There are so many things that you'll learn from running your business, that can't be written into a business plan.
    Thank you very much for taking time to answer my question.
    No worries at all.
    Last edited by Aussie Bob; 11-18-2002 at 02:06 AM.
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  22. #22
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    you dont need any business plan to get into hosting nowdays, get some $300 of capital, and you've got enough for a $20/mo reseller for say 6 months, a merchant, domain, and ssl and you're basically in business (crude as it may be), unfortunatly getting past that is another matter, i've seen some resellers grow from like 2 accounts, to 20 accounts, to 200 accounts (in that order, in 3 months).

    Good thing about building up a relatively large client base is recognition, and if you hike your prices later (within reason) you'll have a sturdier client base for new signups, then starting up with no reputation and $20/mo accounts (which is nearly impossible). Lets just remember, sell stuff below profit, and the 3 ghosts of cyberwings will come and get you when you sleep! .

  23. #23
    I can say, if I had 5000 $19.95 a year customers and nothing else I'd quit the business and go to Domino's and deliver pizzas.
    $19.95 x 5000 = $99,750 per year

    Bloody hell - if Domino's are offering that much for pizza delivery, then count me in!


  24. #24
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    Originally posted by I, Brian


    $19.95 x 5000 = $99,750 per year

    Bloody hell - if Domino's are offering that much for pizza delivery, then count me in!

    Deduct staff to assist them, around 4% of that for the processor, around 1/2 of that for the servers, i mean they do want webhosting right? Most likely not the invisible type.... that leaves you with uh, next to nothing, dominoes is competitive at that point .

  25. #25
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    Originally posted by porcupine
    i mean they do want webhosting right?
    You're being pedantic Myles...

    Gary

  26. #26
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    Originally posted by Editor


    You're being pedantic Myles...

    Gary
    Erp. stop using big words dang you! , it's 4:10 am here, i dont deserve this ... big worded treatment anyhow, im off to bed, i guess by the next time i post in here, something big will have happened, i can guarantee you that much

  27. #27
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    How about this - how much cash did you spend on starting up your business? (Directed to hosts running servers).

    I think with the site, vbulletin, servers, staff from the outset, support tols like desk and other custom stuff, merchant account set up and other things - cost about 10kUSD, maybe a little less, can't remember...
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  28. #28
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    We eased into it very gradually. You planned ahead over time and launched, so that's something you can put a value on. It's more a case of what did we give up over time to build what we have now.

    Gary

  29. #29
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    Yea, that makes sense.
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  30. #30
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    And if you can build up your business over time, be cashflow positive, incur no debt or require the need for finance, you're on a good thing.
    AussieHost.com Aussie Bob, host since 2001
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  31. #31
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    Originally posted by NexDog
    How about this - how much cash did you spend on starting up your business? (Directed to hosts running servers).
    That's the question you should have asked in the beginning. LOL. I'm interested in hearing others reply's myself.

    As a reseller, I haven't down any more than $500 to get started and buy service upgrades (merchant accounts, etc..).

  32. #32
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    Originally posted by I, Brian


    $19.95 x 5000 = $99,750 per year

    Bloody hell - if Domino's are offering that much for pizza delivery, then count me in!

    This is the problem. Someone will come by and belive this. No one every remembers equipment, taxes, business expenses, labor, etc... Find someone who can help with support with 5000 customers for less then $20,000/yr.

  33. #33
    Originally posted by UmBillyCord


    Find someone who can help with support with 5000 customers for less then $20,000/yr.
    And find me an outfit with 5,000 customers that has only one or two people handling support efficiently. I know we couldn't (and wouldn't try to) swing 5,000 accounts with only two people.

    It's been said before and will be said again: People can't expect to get into this business to "get rich quick". Those who do usually have a long line of angry customers.
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  34. #34
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    Find someone who can help with support with 5000 customers for less then $20,000/yr.
    Sweat shop?

  35. #35
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    Originally posted by Alex042


    Sweat shop?
    I guess we should contact Kathy Lee Gifford.

  36. #36
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    $19.95 x 5000 = $99,750 per year

    Bloody hell - if Domino's are offering that much for pizza delivery, then count me in!
    $19.95 per month x 5000 clients = $99,750 per month or

    $1,197,000 per year


    Per year or per month?? Per month would be a nice business. Per year would be insane.
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  37. #37
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    No actually we were talking about $19.95 per YEAR, $19.95 per month X 5000 is VERY viable without a doubt.
    Gary Harris - the artist formerly known as Dixiesys
    resident grumpy redneck

  38. #38
    Originally posted by NexDog
    How about this - how much cash did you spend on starting up your business? (Directed to hosts running servers).

    I think with the site, vbulletin, servers, staff from the outset, support tols like desk and other custom stuff, merchant account set up and other things - cost about 10kUSD, maybe a little less, can't remember...
    That depends, if you are just starting I wouldn't recomend hiring staff other than yourself and maybe a partner right off the bat. That is something your business plan should call for as you gain more customers. Unless you start the business by buying out another company, then you may need staff to support everything.

    But I can say just for my scenario, starting up initially cost me about $3,000 out of my pocket. Assuming we don't need anymore servers for say 6 months, expenses for 6 months will be be about another $2,000. So as you can see, it isn't a get rich quick thing, there are a lot of expenses required when you do things right the first time.

    Granted, we could have spent next to nothing by getting a cheap reseller account, not purchasing software like modernbill, not outsourcing our web development, getting a 3rd party processor as opposed to a merchant account, etc... but that wasn't in our business plan.

    We didn't want to be put in a position in say 6 months when we have too many clients for our accounting software to easily manage, or not having a good control panel and having to upgrade, or redo our website, or try to switch to a merchant account in the middle of having a bunch of existing clients... to me, that makes for a big headache, and you end up spending more money than you would if you had just set it up that way to begin with.

    The downside is, you don't start making a profit for quite a while, and you need the initial money up front. I know not everyone may agree with me here, but that is how we are handling it. This way we have everything in place so if we get some unexpected growth we won't be caught off-guard, and there will be less critical transitions to be made in the future

    So, I guess to answer the original poster's question.. plan for the worst. No, we don't have 5000 clients, but we planned for it. We know what it will take to support that many, know the expected profit margin to make it worthwhile.. etc. Plan plan plan! that is the answer to everything

  39. #39
    Personally I still believe in a solid well thought out business plan -even if you are just planning on growing slow and taking things as they come. A business plan will help you to decide where to spend your dollars and which way to move forward - it saves you from growing up a bit, having an extra $5k in cash, then dumping it into marketing - realizing afterwards that it was wasted as you ruined your reputation by not being able to support the new customers from that $5k... (theoretical - if you had a marketing campaign that nice for 5k... deal me in.) Bottom line is a business plan is not a big monster that is impossible to write - its just some nice little papers with your goals and the way you want to get to your goals written down.
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