Planning Your Web Hosting Business
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Just as you wouldn’t travel in territory you don’t know without a map, you should not proceed in business without a plan. That’s as true for the web hosting business as it is for any other. In this article, the first of two parts, I will mention the six important parts of any business plan, and discuss three of them.
Many people who get into the web hosting business figure that it’s just a numbers game. While it is important to get the numbers right, those figures that add up to a profitable business on paper may be hiding some mistaken assumptions. Let’s look at someone who plans to sell web hosting for $5 per month. He does the math for his business at 300 customers. Here is what it looks like:
Gross income=$1280 (300 times $5 minus credit card fees)
Server cost=$100
Control panel cost=$100
Advertising=$300
Customer support=$350
Total Costs=$850
Net income (profit) =$430
Net income per customer = $1.43
That might be a nice projection, but there are a lot of things it doesn’t take into account. How is he going to manage until he actually gets those 300 customers, hmmm? Until then, he’ll have to cover his costs himself. Likewise, how did he figure that his advertising cost would be $300 per month? That number can’t just be drawn out of a hat. How will he advertise? How well can he close sales?
If you want to go into the web hosting business, you need to treat it seriously, just as you would if you were starting any other business venture. A good place to start is by taking a job with another web hosting company to learn the ropes. Another way people start is by becoming a reseller web host, but even that is a serious business and should not be treated casually.
However you choose to start, you’re not going to be able to escape the responsibility of doing your research. That means reading books, asking questions on forums, checking out the industry online and at conferences. There are certain questions you need to be able to answer before you turn on your first server, and certain issues you need to at least be thinking about. In other words, you need a business plan.
If you are just starting out, and the business plan is chiefly for your own edification, you may be able to get away with just a few pages. But you should be thinking of the future, and what you plan to do with your business five years down the line. There are plenty of books that describe how to write a business plan; I’m going to cover the most generic elements of a business plan here, with a focus on web hosting. Even if you don’t see these elements as applying to your business—yet—you can benefit from reading all the sections, as they will get you thinking about the areas of your business you will probably need to address sooner or later.
Next: Key Parts of a Business Plan >>
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