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Starting as a new webhoster - going big or starting small?
It's not me thats going in to the webhosting business ( I already have a small company in Norway for a few customers, paying top dollars to host with me). But I have a friend that want to start in the hosting business. His plan is to make money of this.
He want to buy large servers, like this one from Hetzner, that costs allot.
He also have to have some kind of backup system. All in all a very expensive start. It's not LEB, but kind of LEB, just in Norway. But there all thing is expensive. The smallest plan starts at around $15/mo (512 MB RAM 50 GB disk) and the largest plan $45mo for 8 GB RAM 1 TB disk)
I'm saying that it's better to start small. Buy smaller servers, fill them up, then expand with more servers, then when you earn good money, buy new expensive hardware with all the bells and whistlers. Actually it will be more issues with one large server, if there is a hardware or network issue with that server, all customers loose connection.
If he uses several smaller servers, only a few customers will be affected.
I think it takes time to build up a good customer base that stay, pay at time, and not abuse the server. So with a large server that can host 30-50 customers, he will loose money every month until he has so many customers on higher plans that he makes money on the big server.
On the smaller servers, he need just 2-3 customers to don't loose any money.
I know that the best thing is high end servers, with SAN storage, or with a really good RAID setup. Backup servers onsite and offsite. Using a host that has excellent support, that change hardware failures within minutes etc. But if you don't have money to all that, what is the best thing of the two mention, or is there other better options?
And yes, i know, I will be short handed in the start, probably a one man show. Maybe two.
So no support staff on 24/7/365. But he will not offer managed hosting, just unmanaged.
Hope we can get a good discussion in this thread, and not just only "don't do it", or you have to invest $1 million and get a 30 man support and sales crew from the start.
I think many of the host both on LET/LEB and larger companies started out small, if they did not have a larger company behind them, or if they did not have lots of cash to spend for a long time.
Comments
1) Shared/VPS?
2) What the USP?
3) Does he have any current potential customers?
4) Does he have enough to front the cost of the server for x months till it is self sufficient?
5) Does he have the technical knowledge to run and maintain servers?
It depends really, if you dont have any sort of guaranteed clients but have some form of unique selling point, I would say start off small, protect your money and give yourself a backup plan. If however you already have some local businesses that want to work with you or something like that, you may be better off going it big as you already have money to work with, plus your own savings to put towards it.
As long as he has a backup plan (Especially if this is going to be a main source of income) then thats really what you need to think about. That and how much money you are willing to plow into something, that may or may not work.
If he is targeting Norway based customers it might work. If he wants to target international customers it would be much harder, since labor is very expensive in Norway, he would make more money by just getting a job in Norway.
Well for VPS hosting, the bigger servers from Hetzner are not a good choice because you can maximum get a /27 per server. From What I have observed, it is always a good idea to start smaller but still no compromise should be made on quality. Get a server with a decent CPU, RAID 10 with a RAID card. If he's offering SSD storage then taking backups should not be an issue but if he's offering big storage upto 1 TB like you said, it would be better to leave the backups to the customer or offer them at additional price as you would be providing unmanaged services so it is the responsibility of customer to take care of backups unless he is willing to pay for it.
Norway will be his marked yes.
I agree.
wych, SNetworks1, fametel & rds100 have already made some good points. Only thing I would say is if you choose Hetzner, don't expect instant drive replacement when they are failing. Many a times they replace your drives with other failed ones without testing. I would prefer OVH(not SYS/KS) or Online over Hetzner for cheap servers.
He should go work for a hosting company for a while to get a feel for the work, decide if it's something he really wants to do, etc. As a customer, I don't want my provider learning on the job.
But of course, from day one he'll promise "enterprise grade, committed customer service," etc. Just like everyone else.
You need to answer these questions:
"what do I offer that is different than tens of thousands of other hosts". Because otherwise you are delivering a commodity and trying to sell into a grossly oversaturated market. "Great service" and "low prices" are not differentiators - everyone promises those.
"how much will I make in the relatively near future?" It's OK to lose money for a short time, but if your plan is to break even in year 4 or something, forget it.
"how much will I make compared to what I could elsewhere with my time?" If you work full-time for $20,000 but could make $40,000 at a day job with benefits, retirement, etc. then it's a stupid decision. Heck, even if you made $50,000 it's a stupid decision because you're taking risk whereas risk is much smaller with a job. Add up the hours - if you're making pennies per hour, why would you want to do that? That's also the reason you'll close the web hosting company in a year because it's too much work for too little reward.
I'd focus more on how you're going to differentiate yourself, where your customers are going to come from, and how they're going to hear about you, and less about server specs. The server admin is really the easiest part. Finding and retaining customers is the hard part.
I think thats one of the main reason why he want to start his own business. Norway is a long and small country. If you don't live down in the south there all the big cities are, you are out of luck when it comes to getting a job you maybe want. If you live far up in North, you can live in a Town with 100 people, and have to drive 4-500 KM to nearest "big city" (type 40-70.000 people). So there is no hosting business there he live that he can start working at (and in Norway, you have to have a Bachelor/Master for almost any IT job that is not just sitting in an office answering on the phone)
So because Norway is like it is, 2532 KM long, with almost just small towns up North, and all the big cities and workplaces down south, yea you get the point.
And no, it's not very easy to just move. Up North you can have a big house for maybe $50.000, in the "big cities" here down in the south, you can't get a toilet for $50.000
There is nothing worse than having a large outlay and getting nothing from it, take it from me that knows and that was at a time when hosting was a good business with no shortage of new and existing clients.
He needs to start small, go with shared/reseller hosting, decent VPS with cPanel and build from there up. Keep the running costs down and the exposure up.
Honestly some are great techs but lousy sales people, others are great sales people and lousy techs. But right or wrong, a good sales person that is lousy tech will sell more than the opposite.
You can't say which if either you are good at until you try. But trying to offer all things to everyone is not the answer.
Servers are important, but the main thing is the network: datacenter and connectivity. Bad connectivity and a subpar datacenter SLA will make even the best server unappealing. I would start by searching a good datacenter with good service and ability to support expansion, then the hardware will get what's left of the budget. I assume that there is a business plan that dictates the allowable spending per month. If not, it should be done ASAP and further decisions such as the size of servers will be much easier.
On the other side, is it a bad idea if he goes for the large server, putting all his "eggs" in one basket. Most likely it will be a brand new server (at that price I hope Hetzner sell him a new one) with new hard drives, hardware raid, can have multiple network interfaces up to 10gbit connections. Etc etc.
Probely he will loose money on the short term, but if he can get enough customers, he can make money on just the one server. But if it get any hardware issue, or the network goes down to the DC, all his customers is offline to the server is up again.
If you can't plan to make a 100% loss for the first 12 months don't do it on that scale? This is is one of the most competitive markets, a new entrant unless going for the LET market with unrealistic offers will take that long to get established and trusted.
Yeah.. A "friend".
Judging from your posts and your endless amount of threads asking for help on quite basic things, please don't start a hosting business. Not yet.
It's really a friend. I have my small hosting business I, had it for 5 years now. Only for small business local here I live. Just a hobby business, still, my customers gets the best service they can get. But they are not the demanding type. They want me to do everything, so thats a part of the deal. It's also I part of the deal that it can take up to 72 hours before I reply, because of my real job) I update their pages if they have some new info, I keep all WordPress sites updated, the servers updated etc etc.
The companies is smaller type 1-2 million dollar year revenue companies, there they just want it to work. And my websites do always work.
Because of this, I have a trusted customer base that willing pay me $560/year just to have their site hosted on my servers, and that I update their page when they need it (like once or twice per year at the most per customer).
But I have no plans expanding my business. After using hosts since 1999, I know how hard this business is. I have playded with it in my head sometimes, but then I think of all the demanding customers, that don't want to pay anything, but still want the world, the best hardware, the best network, the best support (but of course they order unmanaged), free DDoS protection, backups, more backups, RAID, SANs, more RAID and even better hardware. And if you don't reply in 5 minutes after they have opened a ticket at 2 AM Saturday night, they do a chargeback and calls you a scammer.
No, I will keep my trusted customers, they tells others, and the word from one person has now reach 13, that make me around $6.500 a year, and thats the most I can earn without registering for VAT and have to send in tax reports and have to hire an accountant. But that will cost me $2000/year, so then I have to get 4 more customers, and I do no ads at all. The only ads I get is when other customers tells about me to their friends etc. And I don't take a customer that don't make at least 1 million dollar per year on their company.
My endless amount of threads asking for help, was my project moving my main sites from IwStack, to my own servers at Hetzner. I had never used Hyper-V before, and not used Ipv6, so I wanted to learn how. I moved my sites this weekend, and all is running good on my new servers. On server for my customers and some personal sites. Then a server for my self, (Owncloud, FTP server, backup server etc).
I can run my business, but there I have full control over all things. The customers don't even have a login password for their WordPress sites. I have a "fail proof" system with several live backup servers, DNS fail over via DNSMadeEasy, several Virtualmin backup servers, uses Navicat MySQL for database replication and DB backups several times per day. When ever I have updated a website, I take backups, never loose anything.
I can turn off my main server at any time, and one of several backup servers is online within 2-3 minutes (the time it take to update the DNS). I can also turn of the backup server, and the sites is up on my third backup server. All with different hosts, in different DCs etc etc. If all of my hosts goes away at the same time, I will take me around 30 minutes to have all the sites up an running on any host that can setup a VPS right away. Thats because I have the updated backup files on so many places, that I always have access to the newest one.
Thats how I run my business. But I'm not an expert, thats why I use this forum, and other forums to get help. And I do not call me a webhoster, just because I have some few customers, and making a few bucks.
Wait up. Since when is renting a single Hetzner server considered a "large investment" for a hosting business?
Maybe when you don't have a hosting business and want to start one...?
Det liker jeg svært godt!
Still trying to figure out how you're supposed to start a business without a minimum of 5-10k initial down for business licensing, registrations, website setup, software licensing, servers, etc. and a steady 1k+ monthly to keep yourself afloat during the initial 0 return period of all new businesses.
Thats what I'm trying to say to my friend, and thats the reason why I think he should start with smaller servers (cheap ones, but still good) then when he have a good customer base, that can takes years, he can upgrade to the state of the art hardware.
Ikke lett å være norsk her på LET....hehe.
Folk skjønner virkelig ikke at jeg spør for en venn, og ikke meg selv.
@Jonchun
I doubt even 10% of LET providers even had that much upfront when starting, although I am not a provider but i am guess they started with 1 or 2 servers and just kept getting customers and money which allowed them to expand. If you need proof, although this is a sickening example, look at GVH jonny, im pretty sure when he was 14 or 15 he did not even have anywhere close to 1k when starting, but he is still getting money because of people who prefer to pay so little for crappy service (which does not make sense to me, hence why I never got any of there services)
But it's 2015. Not 2012. Things have changed in 3 years. LET is a perfect example. You don't see any new exposures nowadays (these concerns were mentioned in the top providers polls) The market has shifted now that "Low End" pricing is a common thing (less support/quality in exchange for better prices). You can't get people to join your services on price alone anymore.
You can start a world-class, enterprise, 24x7 support, blah blah shared hosting business for $20. Get a cheap reseller account from Hostgator (WHMCS is included), put up a template, and you're open for business. You can make the same promises as the rest.
How much does it cost to rent a dedi server? A hundred or two a month? A few more bucks for Solus and wah-lah you're providing market-leading, high quality, customer-focused, global enterprise blah blah cloud/VPS hosting.
I really can't imagine why someone would want to start a hosting business in 2015 because it's hugely oversaturated, you're competing with the third world, and there's very little if any money to be made.
Maybe your friend just needs to move. Seriously...if you live in a rural area, be it Norway or America, you're going to have to move for job opportunities. I don't buy the "big cities are really expensive" story. They're expensive here in the USA as well but that's where IT jobs are. Your friend will need to live in an apartment for a while or have a roommate...just like everyone else starting out.
Perhaps he's stumbling into hosting because he can't think of any other kind of online business to run, and that's a lousy reason to start a host.
@raindog308
Although it doesn't seem to be the case here, I'd like to say that I started hosting in 2014 KNOWING that there is a saturated market, and that it'll be hard to gain clients. Some of us are in it for the love of being able to provide services in an industry they admire while being able to sustain ourselves (even if barely). I don't know what exactly it is, but it feels good to make a sale and have a customer submit a ticket a month later telling me that everything has been great and that they just wanted to let me know (yes, it's happened a couple times). It just wouldn't feel the same if it wasn't a business that I personally started, and servers that I personally rented/bought and setup (granted some management was hired).
Just some thoughts to help you
I understand what you say with the market being saturated and all. But that is not the case for Norway. Only a handful of companies offer VPS solutions, and they are very expensive. So there is a marked for hosting in Norway.
And you have the possible to specialize like me, just on a few companies or a special marked, and still make money.
I don't think he has plan to be the next Digital Ocean or something...
I don't think it's a great idea. "I'm Norvegian" isn't a reasonable differentiator, particularly when your server is in one of the mass hosting hotspots (DE). A good test for such things is to turn it heads-up and ask the other way around -> Any Norvegian can offer that same advantage as a mere reseller at almost no startup costs. What if your friend commits around 2.000 € (6 months) front up, invests in a nice web front and 3 other guys come up with mere reselling but some really attractive differentiator and everyone goes there?
Sure, almost everyone can buy a WHMCS license and a dedi and become a VPS provider. And yes, being a local in the local market is a plus, albeit a small one. But then you'll be a victim in the price contest cruncher.
Starting in a saturated market with lots and lots of "everybody can do that" players you need some strong cards.
The point your friend needs to understand is that investing in any hardware/dedi is basically but a growth issue (unless you start with lots of money). It's a way to lower costs and enhance margin (and ye, to gain some more operational freedom and independence). The big version of that is to have a suite in a colo rather than some dedis rented. Same principle.
My advice: a) be sure to have a very solid tech. know-how basis and b) absolutely have a differentiator that not anyone with a dedi, WHMCS and someone speaking Norvegian will and can do next week.
And then probably the reasonable compromise is a small dedi to start with as others have already said.
Another advice: Don't sell your first 3 or so VPSs. Give them away for free for 3 months or so to friends and tell them straight and clear to expect some hiccups in the beginning. Only then really sell. But then you'll have a proven, better, working product (and reasonably some self confidence).
I'd say start small because he will make mistakes and it's inevitable when starting out on any business, so start small so he can start again and again...
paging @BharatB