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  1. #1

    Question 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?


    Any suggestions/comments would be appreciated...
    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. #2
    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.
    Learn survival/prepper information from a combat veteran at Graywolf Survival

  3. #3
    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.
    Matt Wallis
    United Communications Limited
    High Performance Shared & Reseller | Managed VPS Cloud | Managed Dedicated
    UK www.unitedhosting.co.uk | US www.unitedhosting.com | Since 1998.

  4. #4
    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. #5
    Join Date
    Jun 2001
    Location
    Chicago, IL
    Posts
    1,953
    You are forgetting a cost or two
    Chicago Electronic Cigarettes: Tobacco Free, Smoke Free. 3 E-Cig Models, 11 flavors, and accessories.
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  6. #6
    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!"
    dot5hosting.com
    [email protected]
    "We look after our customers, or someone else will"

  7. #7
    Ok ...

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

  8. #8
    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. #9
    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.
    ---
    Peter M. Abraham
    LinkedIn Profile

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