How to Start a Web Hosting Company

Web hosting is a billion dollar industry that will be around as long as the internet. You can make a lot of money if you build up a good service and market it correctly.

I have looked into starting my own web hosting company in the past. I wasn't hoping to become a millionaire. All I wanted was a piece of the pie. In the end, I decided it was not the route I wanted to go down, however I did learn a lot about the industry and what hosting companies need to do to deliver a good product to customers.

In this article, I would like to break down the areas you need to examine if you want to start making money selling website hosting.

Realistic Expectations

Before you even start looking at how a hosting company operates, you need a dose of reality about the work involved in launching a hosting company.

Starting a web hosting company requires a lot of time and energy. It's hard work. If you look at what those in the industry say about running a web hosting company, you soon realise that your life will not be your own for at least the first year or two of the company's life.

Unless you have a massive budget and can afford to hire full time staff from day one, you can expect to be working long days seven days a week. If you fail to put in those kind of hours, it is unlikely your hosting company will be successful.

Make no qualms about it. Website hosting is a cut throat business. Every day hosting companies go out of business because they could not make ends meet.

Profit margins are rarely high and large established hosting companies use aggressive marketing tactics to keep their position in the market. It is not uncommon for big hosting companies to pay affiliates over $100 in commissions for bringing in a customer that purchases a $5 or $10 monthly plan. They enough money in the bank to lose money through many customers in order to cement their position.

I am not saying any of this to purposely discourage anyone from moving into the world of website hosting. However, I think it is vital that everyone who starts this journey walks in with their eyes open. :)

Hosting Hardware

A popular entry into the business of website hosting is to purchase a reseller hosting plan. These plans can be purchased for as low as $10 per month and allow you to easily add additional domains to your hosting package.

A VPS plan is a better entry point as you will have more power, more resources, and more flexibility, at your fingertips. VPS hosting plans normally retail from around $20 per month, but can cost over $100 per month if you upgrade to a hosting plan with more RAM and a better CPU.

If you are just looking at making a little money on the side by selling hosting plans to friends and family, then a reseller plan or VPS plan are viable entry points.

However, if you are serious about launching your own web hosting business, you need to purchase a dedicated server. This ensures you have full control over your hosting space and guarantees that only you and your customers are hosted on your own server.

If you are sharing a server with other customers, there is an increased risk of downtime and you will likely have to move customer websites to a new server when you do later upgrade; something which customers may not be happy about.

Dedicated server prices start from around $100 per month and can go as high as several hundred dollars per month.

You will need to decide whether to go with a managed dedicated server or an unmanaged dedicated server. My recommendation is to purchase an unmanaged dedicated server as there never any guarantee that a hosting company will provide you with the quality of customer support you need to run your hosting business.

By choosing an unmanaged server you can select the company that administrates your server. If the quality of that support ever drops, you can move to a new server management company. It is without doubt the best route to go down.

Server Administration

If you have a lot of experience administrating servers, there may be a temptation to administrate the server yourself. I do appreciate the benefits of doing this, particularly if your budget is tight, however ideally you want to outsource this responsibility.

Hiring another company to manage your server will free up time for you to focus on other areas of your hosting business. The company will configure your server the way you want it, deal with security issues, and help you any server related issues.

Prices range from $25 per month upwards. I use Server Surgeon myself and have always been happy with them. There are many other alternative services out there with great reputations so be sure to have a look around.

Server Surgeon
Server administration companies such as Server Surgeon help configure and manage your server.

I do not recommend using your hosting provider to administrate your server as there are nearly always limitations on what they will do for you. Whereas a server management service will do anything you ask them to do, most hosting companies will give you a “Sorry, that is not something we can do” response when you ask them to do a particular task. By outsourcing server administration you will stop yourself from being trapped in a situation where you cannot administrate your server the way you want.

Please check out my server management services page for more information about what server management companies can do for you.

Billing Customers

Billing software should be practical and project the professional image that your company should have. The software helps automate everything to do with billing.

You can expect to pay anything from $10 to $40 per month for billing software. The final price you pay largely depends on branding e.g. whether you remove the billing company's credit link or not.

The most popular billing software for hosting companies is WHMCS. It is an affordable solution that is packed full of features. It helps you create beautiful PDF invoices and automatically sends payment reminders to customers.

It supports multiple payment currencies and a staggering 75+ payment gateways. It offers features such as tax support, quotes, one-off and recurring billing, a credits system, and late fees. Charges for providing support can also be added to billing automatically.

WHMCS
WHMCS has a great reputation among hosting companies.

Another great option to consider is Clientexec. It is a complete hosting automation service that helps you set up hosting accounts, manage customer subscriptions, and manage support. A built-in live chat module is available too.

Clientexec
Clientexec offers a lot of great features.

I recommend checking out the customer and admin demos of any billing software you are considering. Look at the software interface and review what it can do and what it cannot.

Please check out my billing management page for a comprehensive list of billing software and services that is available to you.

24 Hour Support

The most important things that a hosting company can provide are reliability (i.e. uptime) and support. Failure to provide these will see customers leave in their droves.

Good customer support can be the difference between a good hosting company and a bad hosting company. If you fall into the latter category, your customers will make a point of letting others know about your poor customer service.

The internet is full of companies that have went broke because of their reputation for bad customer support. You should therefore make support a priority.

There are a number of ways you can can provide support to customers.

Hosting companies normally provide support using a combination of the following:

Many local hosting companies only provide support via business hours. This is something that I could never accept as a customer. You never know when a problem will arise, which is why I believe it is vital that you provide 24/7 support.

Don't worry. No one expects you to sit at the computer twenty fours a day and seven days a week. Most small to medium sized hosting companies outsource a large part of their support. For example, many provide core support during business hours and transfer support to a third-party outside those hours.

Support companies normally charge on a per ticket basis. For example, Bob Cares ticket prices start at $3.99. A 50 ticket plan costs $199.50 per month and a $25 setup fee.

Be sure to check out my guide on third-party support companies for a selection of support companies you could use.

All major hosting support companies hang out at Web Hosting Talk. I recommend posting a thread there with your requirements and you will find a good support company in no time.

Website Design and Marketing

As the old cliche goes, the first bite is with the eye. You can provide perfect uptime and first class support, but if your website looks like crap, you are going to struggle to get new customers.

You need to build a website with a professional design. With content management systems such as WordPress around there is no excuse not to have a good design as there are thousands of great website templates available at places such as ThemeForest. Stores such as ThemeChilly sell designs for your hosting website and themes and addons for the billing software WHMCS.

You also need to ensure that there are no spelling mistakes on your website and no “To be added” pages. If a page is not complete, do not link to it. Be sure to add a lot of information to your website too. You should have a detailed frequently asked questions page and your packages page should explain exactly what customers will receive.

I also believe it is prudent to host your website on a different hosting plan or server. Perhaps even host with a different hosting company from the one that hosts your customers. This means that if your main server goes down, your customers can still contact you.

Once your website is complete, you need to focus on promotion. The start of a web hosting company's life will be its most difficult period as you need to generate interest in your services.

There are a number of ways you can promote your new company.

  • Pay Per Click (PPC) Advertising – Services such as Google Adwords and Facebook Ads can bring you in new customers quickly, but be prepared to pay for it. Clicks for the hosting niche can be very expensive and only a small percentage of those visitors will convert into customers.
  • Affiliate Program – A well paying affiliate program will help encourage others to promote your services. Some hosting companies pay as much as as $150 for referring one new customer. Others offer a recurring commission of the revenue the customer brings in. This can be anything from 10% to 50%.
  • Referral Program – A referral program is designed specifically for existing customers. You can reward them for referring new customers by offering them credits against their own payment plans. It is a great way for customers to save money and you can bring in new customers without spending any cash up front.
  • Word of Mouth – If you provide a good service, customers will want to share their positive customer experience with fellow website owners. It is therefore essential that you provide good support to customers.
  • Content Marketing – An active blog that publishes informative articles can help generate traffic on your website through incoming links, social media sharing, and an increased SEO presence. You can also guest post on other blogs in order to generate links to your server, while being helpful in a webmaster discussion forum or a hosting forum such as Web Hosting Talk can show others that your service offers good support.
  • Competitions – A fun competition that offers a good prize can be a good way to generate incoming links and social media shares. Get in touch with blogs and see if you can partner with them and offer a prize such a year's hosting with your company.
  • Hosting Directories – Getting listed in web hosting directories such as The WHIR will send you a little additional traffic.

Once you have created your hosting website and configured your server, billing, and support, a large portion of your time will be spent marketing your company in order to bring in customers.

Do not under estimate how competitive the hosting market is. If you want to have a successful hosting business, you do not have to just offer a good reliable service, you also have to spend time selling the service to others.

Good luck.

Kevin