Web Hosting 101 / Part 1
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So you want to start a web hosting business eh? Are you sure about this? All that can come of such a venture is pain and misery, heavy on the misery. But if you must torture yourself like I did, I’ll steer you towards the right pasture.
Examine Your Cowmpetition
Just for fun, mooosey on over to Google and type “web hosting” into the search box. Hmm 313,000,000 results, daunting isn’t it? Well pay no attention to the results at the top of that list because that isn’t your competition. We’re more interested in the folks on pages 10 and beyond. Sure, you may aspire to be at the top of the list with the likes of RackSpace, The Planet, EV1, 1&1, and iPowerWeb but we must take baby steps.
One of the first things you’ll notice with any of the webhosts large and small is how little they charge for their web hosting services. How the hell can they make any moooney at this? Volume baby!
Set Up Shop
Decide on a business name or a “DBA” (Doing Business As). Make it catchy, something you can imagine stitched on the front of a ball cap. You may get lucky and find that your chosen business name is also available as a domain name. You may want to take an extra step and register your name with local and state authorities. You’re going to need to protect yourself and your business from potential fraud and liability. This is one of the reasons to choose a business name other than your own. Besides would you buy hosting from a company with a name like Billy Bob’s House of Hosting? Another method for protecting yourself and your business is to organize as a Corporation or Limited Liability Company (LLC). What these company structures will do is protect your stuff. So if for instance one of your customers sue you because their homage to troll doll website was offline for 10 minutes, they can’t take away your brand new 52” plasma! There are a lot of great websites that will give you the low down on company structures. Check out Nolo. Make sure you get this aspect all sorted before you head to the bank! The bank will ask to see articles of incorporation and your Tax ID Number.
Go To The Bank
Once all that mooney starts rolling in you’ll need to have some place to keep it. You’ll need a few accounts to move the mooney around with. First you’ll need a business account at your local bank, all of your money will end up here eventually. Next you’ll need a merchant account. This is the account that can accept deposits from credit card companies like Visa, Mastercard and American Express. More on why I hate American Express in Part 2. Usually your bank will have some sort of online merchant account package that you can use that will have all the features you might need. Lastly you’ll need a payment gateway. I won’t use any other payment gateway other then Authorize.net because well……….they just kick ass. You may be asking “But Bo, doesn’t PayPal or somebody do all this stuff?” Well sure they do but to me this approach makes your business a little more legitimate, but that’s just me. Oh remember when you went and got your Tax ID number and your articles of incorporation? The bank will be asking you for these so have them with you.
Build Your Barn
Since we are just starting out in this business, chances are you don’t have a huge data center somewhere just waiting in the wings. What to do? Go get yourself a dedicated server from your friends over at the DC of your choice. They’ll set you up with a server, bandwidth and other little things you’re going to need. Usually you can lease a dedicated server for as little as $100 USD up to as much as $500 USD per month. My recommendation is to start small and remodel as needed. One great thing about leasing a box from the big guys is that they usually have web site account provisioning scripts pre-installed for you. They cater to the website hosts and re-sellers.
You will need a few things to help you manage your web business. First thing is a payment interface for your website. This is the little piece of heaven that will facilitate taking money from your new customers. The payment interface I like the best is ModernBill, again because it just kicks ass. One of the real cool things that ModernBill does is it integrates with most of the website provisioning scripts available (more on these later). Payment interfaces will usually have some sort of accounting dashboard where a sexy cow like you can keep tabs on his or her customers and their accounts. You will be able to generate all sort of reports, send nasty emails to people that haven’t paid their account, etc.
Website account provisioning scripts do all the work so you don’t have too. Take your pick; cPanel, Ensim, Plesk, Helm, HSphere…..the list goes on. My personal favorite is cPanel. I have found that cPanel is the easiest to use for the customer and the web host admin (that’s you). Also cPanel integrates seamlessly with ModernBill which makes your job so much easier.
ModernBill can also integrate all sorts of other features to help with your business. Features like fraud alerting, credit card gateway plug-ins and domain name registrar plug-ins.
MOOORE TOO COME IN PART 2!
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Great writeup. I’ve always wanted to start a web hosting company but it seemed to difficult. Thanks for the info.
Thanks Kevin! Always happy to help a member of the herd.
– Moo
Yeah, same here. Now I can start. lol
I think there are too many web hosting companies / web hosting resellers out there. I guess there are too many blogs too. LoL
Ya but there are always people jumping from one host to another. The key is customer support. If you can provide customer support then the amount of people leaving will drastically decrease.
yeah, i will hold off on this one till i have a successful blog to my standards!
I have been in the hosting industry since 2001 and still believe there is room for startups. I sold back in 2003 for a nice amount and still have connections with in hosting. I believe I could start up again and go somewhere with it.
Just remember that those who do go in to hosting will be expected to give 24/7/365 support… so make sure you plan for someone to help from the start… or to sleep next to your laptop.
Cool Post,
Hosting sites has its up and downs, we have our owns servers and we host all our client’s sites on them.
We have never thought of promoting the service further than that, maybe this is something we should look into.
I did the web hosting thing for a while. In my opinion run, don’t walk, away from starting a hosting business. Prices will only go down not up. Your profit margin will shrink over time. In addition you are faced with answering questions about email passwords to the same people over and over who don’t write anything down and always seem to reformat their macbook pro at 3 in the freaking morning. Wanting to know after if all their email is magically saved.
If you really want to be a web host, go high end, charg a butt load and don’t do email. It will keep your margin high and your maintenance and phone support lower.
Id agree with going high end and that is where I would aim for if I were to do it again.
Funnily enough I have also found that those who buy the larger plans require less support then those who buy the smallest plans.
That’s a lot when you think about it. Also, with hosting plans costing like less than ~$5/mo, you really need a lot of people to sign up before any real money is made. Best time for this hustle would have been early, early 2000’s. Big money and time are what is needed now, especially since some people are experimenting with hosting their own sites.
very nice writeup … looks like you did your homework on that one!
[...] My personal favorite is cPanel. I have found that cPanel is the easiest to use for the customer and the web host admin (that’s you). Also cPanel integrates seamlessly with ModernBill which makes your job so much easier. … by Bo Vine at 4:18 AM [...]
Yes I agree. I used to have a webhost that used cPanel but not anymore. I can now see why people like it.
[...] to Google Latest Content Web Hosting 101 / Part 1 – 21 hours ago So you want to start a web hosting business eh? Are you sure about this? All that [...]
There are millions of hosts, but if you can find your niche than you’ll be okay. But don’t expect to make millions right away, thats for sure! I would say if you have a passion for web hosting than go for it, otherwise develop another one of your ideas over starting a hosting company because it takes a lot of time and energy to run one. Much more time than running a blog thats for sure.
I recommend ClientExec (http://www.clientexec.com) or WHMCS (http://www.whmcs.com) if you need a billing script. ModernBill imho is very bloated, not very functional for those of us that have carpal tunnel syndrome, and overall I hate the newest design.
[...] so we have covered the basics of a web hosting business in part one. We have a way to set up accounts and take in mooney. Now I will continue dispensing my knowledge [...]