# Thread: What are the chances of braking even?

Join Date
Nov 2002
Posts
150

## What are the chances of braking even?

I need some insight into this please ...

Let's take the following scenario:

Assuming no set up fees or set up fees already payed.

* I rent a Dedicated Server (DS) for about U\$100
* I get a monthly CPanel licence for U\$20
* I will NOT include the DC provider tech support fees for this calculation.

* The DS provider gives me 200-400 GB p/m.
* The DS has 40-80GB HD
* The DS is a P3/P4/AMD with 512-1024MB Ram
* OS is RedHat

let's say the plans will range from:
200Mb - 1GB HD
5GB - 25B BW

So the calculations would be:

HD: 40GB = 10*0.2GB + 10 *0.5GB + 10*1GB + (~23GB free)
BW: 400GB = 10*5GB + 10*15GB + 10*25GB - (~50GB oversell)

BW Overage Worst Case: U\$2 p/Gb = U\$100

Client Payment: U\$5/U\$8/U\$15 resp.

so the BIG equation:
10*U\$5 + 10*U\$8 + 10*U\$15 = U\$280 Gross

Best: Net = U\$280 - U\$120 (Rent) = U\$160
Worst: Net = U\$280 - U\$120 (Rent) - U\$100 (Overage) = U\$60

I purpously put in the overage charges just to make it more fluid.

Now taking tax (mine is 40%) away, the grand total would be:
Best: U\$160 - 40% = U\$ 96 Nett Profit
Worst: U\$60 - 40% = U\$ 36 Nett Profit

Now asuming I could get the prices drom the DS supplier:
1) I am the sole owner/operator/tech guy
2) Due to #1 above there is no way I can provide 24/7 support.
3) I have no control of the server so I can not guarantee 99.9% uptime.
4) I will get people asking me for help, threatning my dog, threatning my mother, posting on WHT (Worst case)

I have three questions:
1) Are my ROUGHT calculations/estimations feasible or am I missing some big chunk of the equation here?
2) If correct, for U\$36->U\$96 p/m ... do I really want to have the hassle of a hosting business. Or is this about the correct starting amount and in time I can increase the number of servers I rent and therefore increase the profit margin.
3) Do all my calculations go out the window when I start overselling HD/BW madly and putting way too many people per server? I know a LOT of people do that. But beside being rather dishonest can this come back and bite me in the butt in a big way, or if managed properly, can increase my profit margin?

Thanks

PS: This is NOT an advert for a host so please do not treat it as such.
PS2: I am NOT looking for a host currently so please do not post/pm me with quotes.

2. Combat Vet, prepper and author
Join Date
Sep 2002
Location
Phoenix area
Posts
1,121
why are you only calculating 17G instead of using the whole HDD? Most likely they won't use their whole account, but even if they do, you haven't oversold it by then. As long as you keep up on their usage, you could even oversell that for a little while and then just put new people on a new server as your usage comes up. As long as your cpu usage stays ok, you don't start getting script errors, and you're fully burstable, you should be ok putting several people on the server. It all depends on what they run, though. you could put several hundred and it could be fine, or you could have problems after the third client.

If you're just starting out, you probably won't break even for a while. That's why a lot of people start out with a reseller account until their income is about as much as a ded. anyway.

3. Corporate Member
Join Date
Aug 2002
Location
London, UK
Posts
9,037
There are 2 ways to start in my opinion:

1. Spend up front, get your server, techs, merchant account, scripts, domains, site all upfront and start off in the red.

2. Get the very basics and buy the rest as you gain customers (the harder but less risky approach)

The 1st option is fine if you are in the game for the long haul and can afford to spend some money up front.

The 2nd option makes it harder to start out with and harder to provide a quality service but there is less of a capital outlay and less sunk costs if it all goes horribly wrong.

4. Eternal Member
Join Date
Nov 2000
Location
Tasmania, Australia.
Posts
3,587
Originally posted by skelley1
why are you only calculating 17G instead of using the whole HDD?
I find his foreward planning calculations refreshing. We do similar when looking at any new situation. But you can never plan on calculating the whole HDD space...there's rotating log files, mail and mysql space, not to mention the system and associated space necessary to be put aside on a 40GB drive. I'd say 17-20GB of plan specific allocated space would be a good target on a 40GB drive.

Cheers

Gary

5. A#* Duke Of New York
Join Date
Jun 2001
Location
Chicago, IL
Posts
1,953
You are forgetting a cost or two

6. Web Hosting Master
Join Date
Feb 2002
Location
England
Posts
677
Not bad though, I think hes done quite well, ... some people on here just think "Dedicated Servers ... site = HOST!"

Join Date
Nov 2002
Posts
150
Ok ...

So that's what I'm asking ... what are those cost or two that I'm forgetting ...

8. Web Hosting Master
Join Date
Aug 2002
Location
Earth
Posts
1,802
>>What are the chances of braking even?

50% chance you will, and
There is 50% chance you will not.

Ok, on the serious side: it all depends on your business plan and how you are planning to run things and offer things.

9. Web Hosting Master
Join Date
Dec 2001
Posts
5,221
Greetings:

"What are the chances of braking even?"

0%

Now if you asked the question,

==> What are the chances of breaking even?

Then maybe there is an answer <smile>; I didn't know "braking" was a word ;-)

Have you written a business plan?

Have you written a market plan?

Do you have realistic, measurable, plans on customer acquisition and growth?

What is your unique selling proposition? What makes you different from the 2,423,768 hosts out there (note, figure is illusionary, but hopefully you do understand there are teens of thousands of hosts)?

Is your only differentation, how cheap you are? Or the value you add? What values do you add? Why you over them?

Who are your target customers? Will those target customers choose you given the lack of 24x7x365 support and no up time guarantee?

Will you be able to afford any insurance in case you do get a law suit against your company?

Check out http://www.ebigroup.com/ for templates for a hosting business plan and hosting marketing plan.

Thank you.

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