Common Myths about Reseller Web Hosting - The Profit is Just a Matter of Math

That may be what it looks like on the face of it, but as with many things, there’s more going on than meets the eye. To explain this, let me start with why many people think it really is just a matter of math.

Let us suppose you find a hosting company from which you can get a reseller web hosting package for about $100 a month. This package includes 80 GB of hard disk space, which is not exactly the easiest thing to find, but not impossible (Hostgator has a 20 GB package for $100 per month; on the other end of the spectrum, PowerHost offers 100 GB for the same price, but since the time this article was written, they have proven to be difficult to find). You may decide to resell this space in 25 MB blocks at $5 per month.

Each gigabyte is 1024 MB. To use round numbers, let’s assume you can sell 40 accounts for every gigabyte of space you have. Multiply 40 by 80 and you get 3200. Multiply 3200 by $5 and you get $16,000. Subtract your own $100 per month, and you’re left with much more than $15,000 in sheer profit. At least, that’s how the reasoning goes.

If you think that bit of math covers everything you need to know about turning a profit in reseller web hosting, you’re all but destined to end up bankrupt. It’s not just a matter of the cost of the hardware or the space. You can’t put 3200 accounts on a single 80 GB server, because you will overstress the machine. That will lead to increased downtime and support tickets, not to mention unhappy customers.

Remember, too, that storage space isn’t the only important aspect of online accounts; you must also consider bandwidth. Just as servers come with a limited amount of space, they also have a limited amount of bandwidth, which dictates how much online traffic they can handle. You should explicitly try not to sell all of your machine’s bandwidth, in order to allow some kind of safety margin.

It’s true that many websites won’t use all of the bandwidth you assign them. But some might, and some will even eat bandwidth for breakfast, at least sometimes. This is particularly true if one of the websites you are hosting gets “slashdotted” (mentioned in Slashdot or some other news-related website). Websites with active forums could also be an issue, as well as sites that feature podcasts. Do your homework here; it could save you a lot of headaches later.

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