How to start a web hosting business
Starting your own hosting business is one of those things that seems so simple, you wonder why everyone isn’t doing it. While there is plenty of competition, there is plenty of room to grow. Starting your own hosting business can be cheap, easy, and safe. Since every company, and many individuals, need their own websites, providing hosting services can generate significant returns.
If you are a company that deals with IT infrastructure or web design, adding a hosting service to your existing platform can bring in new revenue and clients to add sustainable growth to your business. A hosting company can bring in new revenue streams and products to offer upcoming clients if you are just getting started.
But why bother starting your own hosting business when your plate is already full and your business is running fine?
3 Reasons to Start a Hosting Business
Here are some of the best reasons to start offering hosting services to clients:
1. It’s Easy
Really, the web hosting provider is doing most of the legwork. They handle the technical difficulties that scare most people away from the industry, and keep services running smoothly. All you have to do is keep your individual clients happy and provide the right hosting solutions for them and their organization. Once it’s running, most websites tend to keep running without much effort or expertise.
2. Additional Revenue
Starting a hosting business can put extra padding in your pockets without losing your day job or adding unreasonable amounts of work. Aside from the initial setup and registering new clients, you can simply watch your bank account grow. An overhead price that covers your costs and brings in decent cash flow keeps costs and prices straightforward for you and your clients.
3. Great Upsell for Digital Firms
If you already run a digital business, especially web design, then throwing hosting into your package makes your service more “all-inclusive.” This could give you the edge you need over competitors and can make you a bigger and stronger organization. By offering hosting to your clients directly on your own platforms, or without having to manage separate users on separate hosting providers, you simplify things like account management and software solutions that must be installed on client machines.
To top it all off, it’s easier than you think to get started. In fact, you can have your own hosting business up and running after only 5 simple steps.
How to Start Your Hosting Business in Five Easy Steps
1. Find Your Niche
In the web hosting business, competition is fierce. You won’t be able to compete with the giants of the industry (at least not yet), but you can still target a specific niche group and start growing from there.
It’s essential to offer something unique to separate yourself from other companies and make your organization more distinct. That could be an additional service like web design, a competitive or revolutionary pricing plan, or maybe you’ll target a specific community (like webcomics or homemade jewelry stores).
It’s important to separate yourself from the crowd and cater to unfulfilled needs. By finding a great niche, you can offer custom solutions that fulfill their needs and aren’t offered anywhere else.”
Whatever your niche turns out to be, it’s necessary to figure it out first before you get into your hosting business’s nitty-gritty. This will give you the upper hand against competitors and help jump start your business by offering services to a specific industry.
2. Research Competitors
Next, you want to separate yourself even more from other hosting companies within your niche. Ideally, you will want your offering to be so unique that you’ll have no competition… but that’s rare. Even if you’re specializing in your market, you’ll still have more than a few competitors.
Research competitor business models and see what they’re doing that works, and where there’s room for improvement! Analyzing your competitors is the best strategy for discovering ways to outdo them.”
This will give you an advantage when providing new services, looking for clients, and identifying marketing techniques and product offerings. Because the hosting industry is fiercely competitive, it’s important to gather as much information and data as possible to separate yourself from the crowd.
3. Choose Your Server Type
Assuming you’re reselling server space from a hosting company like Liquid Web, as opposed to building your own server in your garage, you still have a few different options to choose from.
As the name suggests, a dedicated server is a server dedicated to a single client. While the features are extensive, it’s the most expensive type of server. A single machine provides more robust features for larger clients, including the ability to have more security or HIPAA Compliant Hosting.
A dedicated cloud server is a great tool because you don’t have to worry about scaling your server or infrastructure — even with an unexpected spike in traffic, performance remains consistent. While not as expensive as dedicated hosting, dedicated cloud hosting falls somewhere in the mid-range, in terms of pricing.
A Virtual Private Server is a single server (cloud or otherwise) that is partitioned to suit multiple systems. While space is limited, it’s easily the cheapest option, and a good place to start for beginners in the hosting business. This will allow you to host multiple clients on one system to keep costs slow. But features may be more limited than other types of servers.
Cloud Servers, or public cloud hosting, is a highly available and scalable cloud solution that pools resources from across multiple servers using virtualization. This is optimal for websites with unpredictable traffic, fast-growing startups, or small eCommerce portals.
There is no one “best” server type. Instead, you’ll want to choose the one that fits together with your niche and business model.
It’s best to stay away from shared hosting for your infrastructure, as it won’t provide the performance, security, or scalability you will need to grow.
4. Create a Business Model
Now let’s get into the “business” part of the hosting business. You’ll need to fine-tune the details of your niche marketing as well as invent your brand.
In this stage, you need to finalize plans for the following:
This includes your company name, logo, and tagline. Be aware of which domain names are available since you’ll inevitably need to build a company website. Your name should be memorable and easy to find.
Hammer out the details of your pricing plans to find that sweet spot between how much the hosting infrastructure costs you, and how much your clients are willing to pay for your services. This can also play into your niche marketing if you’re trying to undercut the cost of your competitors.
As with all digital industries, your web hosting company’s website is it’s the main storefront, so spare no expense in making it top notch. The quality of your website can reflect the quality of your services, so make strides to make it the best it can be.
5. Launch Customer Service and Support
Customer service and support is optional in theory, but in reality, it’s so important that it’s practically a necessity. Consider handling customer service and support as part of your hosting business.
In the web hosting business, part of your appeal to potential clients is that they don’t need to worry about the technical concerns. Even for hardware engineers, these tidbits can get frustrating, so you can imagine the anxiety it causes laypeople. Clients rely on you to keep their websites and services up and running without a hitch.
If you aren’t able to provide this level of customer satisfaction, clients may choose to host their websites somewhere else.
Customer service should be a top priority for your new hosting business. That’s why we here at Liquid Web invest so much into our Support Team so they can be the Most Helpful Humans in Hosting. Our customer support is what endears us to our clients and keeps them loyal.
Features like our 59 Second Guarantee and 24/7 access not only set us apart from our competitors but also turn what could be a negative customer experience into one of our company’s greatest strengths.
When you are hosting your infrastructure with us, your clients gain the benefits of our support programs, and it can take some of the load off your back in the process!
You’re Ready to Resell Hosting
Now that you know the 5 steps for forming your own hosting company, you can get started today! You have found your niche and researched competition, selected servers, and defined pricing plans, and understand the need for customer service, so you can start reselling web hosting.
Start Reselling Hosting Today
Liquid Web has a Reseller Program that is a perfect fit for those looking to resell hosting. Or download our Hosting Buyer’s Guide to learn more about your hosting options.
How to Start a Web Hosting Business.
A Complete Walkthrough of Creating and Growing a Web Hosting Business.
Kaumil: Originally starting out as a web developer and running several successful web projects, I decided to get involved in the web hosting industry in 2001 at the young age of 16. It’s safe to say that I have grown up with the web hosting industry. I have held positions in sales, billing, technical support, abuse, system administrator, network administrator and even data center technician. I’ve also been involved in acquisitions, mergers and have extensive experience with account migrations.
I would like to talk with you about marketing and sales acquisition strategies for those of you who are running digital agencies or those who are looking to sell web hosting. I have been around the block a few times and I have helped grow a company from 1,000 customers to over 250,000 customers in just a few years. I have also seen how poor decision making at the senior level has stymied growth in some of the other companies I have worked for. Before I continue I’d like to introduce my business partner and COO of GreenGeeks, Kaumil Patel. He’s the one that makes sure that everything works right for our customers once they get here.
Trey: I have been in the web hosting business since 1999. I have worked for or have helped to build 8 web hosting companies including; iPowerweb, iPage, StartLogic, Dot5Hosting, Globat, Lunarpages, Hostpapa and GreenGeeks. My primary role in most of these companies has been in the sales and marketing of the hosting services we have provided, which includes the reseller program manager for several of these companies. I have also held executive positions in Quality Assurance and Operations.
Company Goals & Market Share
Trey: So the first thing I would ask anyone who is looking to start a web hosting business would be; what is the goal of starting this company? Are you a web developer or digital agency who wants to make some extra money and retain your clients by offering them hosting with your web design service? Are you looking to have thousands of clients and have this be your sole source of income, or something in between. Knowing the answer to this question will help you study the next important question: Is there a share of the market you believe you can acquire?
Knowing if there is market share and how you will develop customers is vital to how you grow your web hosting business. You may already have many potential clients lined up, say for instance if you are a web developer, and the clients you’ve built sites for come to you for updates. You bill them for the updates, why not bundle that service with web hosting that you provide, make more money from your existing clients and keep the business closer to you. This would be my example of a smaller hosting company.
Kaumil: And for smaller hosting company goals our agency hosting is a great option. It’s easy to use and easy to setup and if you need help migrating hosting clients over we can help you do so for free. You will get access to web host manager (WHM) which is a very popular control panel where you’ll be able to create and manage your clients web hosting accounts. Your web hosting clients will have their own cPanel control panel, which is the most widely used and most stable control panel in the hosting industry.
You’ll be able to set packages and limit features and sell your own unique web hosting packages. The best thing about our reseller hosting is that you do not have to worry about the technical stuff such as how to setup and manage a server, or dealing with system administrative responsibilities. GreenGeeks takes care of that for you. You will get 50GB of disk space and 500GB of transfer to use to offer your clients and grow from there with our scalable, easy to upgrade reseller hosting plans.
When you have time you can see our web hosting plans for agencies.
Trey: Now if you’re not a web developer and say you want to own a particular part of the market, what part of the market will you go after? After all, there are many types of ways to go to market to acquire new customers. So, let’s take customers that use WordPress as a type of market to go after and let’s take a geographic location like Dayton OH. (for the sake of argument Dayton is where you live and work and you are also a WordPress aficionado).
Say you know a lot about WordPress and you want to build a web hosting company catered just to those customers. You’ll be competing with a ton of competitors, including GreenGeeks as we offer WordPress as one of our scripts, as well as many hosting companies which are solely geared toward WordPress sites. You are going to run into some headwinds in terms of growth due to competition. Going after strictly WordPress sites is not an impossible goal for gaining success but you’ll need to be strategic in how you go after these clients.
Now say you want to build a web hosting service that offers all the main features as other shared web hosting companies, not just WordPress, and you want to keep your focus on Dayton because you know the local market and you believe you can drive local businesses to your service. The population of Dayton is around 140,000 people and if we say conservatively 5% of businesses and individuals have websites there are 7,000 potential customers. You may have local competition and you most certainly will have global competitors but you could carve out a good piece of the market for yourself by promoting your hosting company in the local market.
Now, let’s think outside the box, you live in Dayton but you’re also a WordPress expert and you think you can offer exceptional WordPress Hosting to people and businesses in Dayton. WordPress is a widely used content management system, so we’ll say 20% of customers need WordPress hosting and in Dayton that means there are potentially 1,400 customers. You’ve reduced the potential customer base from 7,000 to 1,400, BUT, if you are the expert in the area you could grab a larger percentage of the 1,400 customers than you would of the 7,000 all around web hosting customers.
By focusing on not just the WordPress or Dayton market, but by combining the two you have a higher potential to acquire customers from an albeit smaller but more focused market share. This allows you to concentrate on the features which your potential customers will be looking for and it allows you to focus your marketing budget towards acquiring those customers saving you money and increasing your ROI.
If you acquire say half of the 1,400 WordPress customers in Dayton you’ll have 700 clients which if you bill them at $10 a month, you’ll have $7,000 a month coming in. To make more money you can have a higher monthly cost (I’ve seen $30+/mo in some cases) or you can expand. Let’s say the WordPress + Dayton offer worked, what about WordPress + Ohio. You are still local because you are in Dayton but with Ohio’s 11 million plus residents and using the same metrics of 5% have websites and 20% of those use and need WordPress hosting then you could have upwards of 110,000 potential clients.
Quick Note: The web hosting business is seasonal. After you read the rest of this page I would encourage you to go to my KB article on how the seasons affect new customer acquisition in the web hosting marketplace.
Learning about the market you want to go after is essential, but you dont have to know from head to toe every marketing niche you want to go after from the start. I have found success and hard work breeds potential including things you had never thought of before. When I started GreenGeeks we offered shared and reseller hosting. We found out early that some clients outgrew their CPU usage, their sites were just too strong to be hosted with other shared clients because they ate up the resources that all our shared clients use. We needed a higher level plan to accommodate these stronger websites and decided upon VPS hosting services.
I was nervous about VPS hosting services because I had marketed for a couple companies who didn’t know what they were doing with VPS. Kaumil convinced me that not only could we do it properly but also that there was a strong market for those services and it would allow our customers with high usage sites to stay with us. We started offering it, worked through the kinks everyone experiences at the start of a new venture/offering and today it is one of our strongest service lines.
What Server Types You May Need
Kaumil: As Trey mentioned in his example of Dayton, the growth potential is high, but is not going to happen overnight, so how do you set up your infrastructure to support growth without breaking the bank? You have several options:
Reseller Hosting: This would be your starting point and would support you up to approximately 250 customers through a very seamless upgrade process. While you would be in control with what kind of resources and features to offer your customers, you would be ultimately be limited by what comes standard on most shared or reseller hosting services. For example, we do not offer Ruby on Rails on our reseller hosting platform and therefore you would not be able to offer this as it is not available. Reseller hosting with GreenGeeks starts from $19.95 per month allowing you to host up to approximately 10 customers and goes up to $99.95 allowing you to host up to approximately 250 customers. While we offer you the ability to create unlimited cPanel accounts with our reseller plans, the numbers used in this example are an estimate based on real-life user accounts we see here at GreenGeeks. Depending on your customer type, the total number of accounts on a reseller account can be more or less.
VPS Hosting or Dedicated Servers: After surpassing 250 customers, you will need to upgrade to a virtual private server or dedicated server which will be your first real step into the wonderful world of web hosting. You will be able to have full control over your environment and so if you wished to offer Ruby on Rails, you could. You also would not be limited to the number of accounts that you could create as you would have dedicated resources available to your customers. GreenGeeks virtual private servers start from $39.95 and can go up to several hundred dollars for our high end dedicated servers. We could also build custom configurations to meet your requirements.
A common question after upgrading from our standard reseller platform to VPS/dedicated is how many customers per plan can I host. Our reseller hosting gives you a limit of accounts that you can create, so that’s a no brainer but when you.ve outgrown the reseller platform, it’s no longer that clean cut, but i still easy to manage. The truth is, there is no set number. It doesn’t work like that. It depends on the type of customers that you acquire, what kind of websites they are running, etc. You have to manage your computing resources, I.m talking about CPU, memory, disk space and bandwidth. When you reach a certain threshold, let’s say 70-80% utilization of your resources, you simply purchase another VPS or dedicated server and begin to provision new accounts on that server, you keep repeating this as you grow. So when you have 1000 customers, you may end up looking like this:
server1.yourhost.com – 250 accounts
server2.yourhost.com – 200 accounts
server3.yourhost.com – 300 accounts
server4.yourhost.com – 125 accounts
server5.yourhost.com – 125 accounts
Placing more or less customers per server depends on the computing resources that you have and the utilization threshold that you set. After a few servers, you will have a better understanding of your averages which can be used to optimize your servers even further. Setting up your customers split across many different servers versus on one large server also ensures that your customers are spread across different hardware. If there is ever a server interruption or peak period, not all your customers are affected. With this being said, the best way to get started is to start with a reseller hosting plan, focus on growing your customer base and then start to branch out with a virtual private server or dedicated server. The beauty of our system is that we allow seamless upgrades, so as you grow your business we will be able to assist you with migrations and upgrades to ensure that you have the capacity to keep growing.
End Client Communications
Trey: Ok, you have found your ideal customer base and let’s say that is WordPress + Dayton, you’ll want to build your web hosting business presence around that so you buy a domain name related like: DaytonWordPressHosting.com or something to that effect which tells people right away what your business does. You start to market your services and you begin to acquire customers.
The essential part now is making sure that the clients remain with you for many years to come and that means you need to have comprehensive messaging to the client about how they get started, where they go to login to their accounts and how they build new sites using WordPress or upload their existing sites to you. Without a strong, comprehensive, instructional welcome email these new clients can get lost, frustrated and leave. Kaumil and our support team have drafted and redrafted our welcome and client information emails to make sure that they cover everything these new clients will need.
Kaumil: You’ve got to realize that not every customer is going to be technically inclined and that this is going to be their first time even attempting to have a website so clear and easy to follow welcome instructions are integral to the long-term success of your web hosting business. When constructing our welcome emails at GreenGeeks, we have 4 main sections that we focus on which make it easy for customers to get done what they need without the intervention of support.
Introduction – This is where you’ll thank them for their business and re-introduce your company and the product that they have purchased.
Account Information & How to Login – This is where you’ll list the login credentials and how they are able to log into their account and begin using it.
Supplemental Information – This is where you’ll provide any service specific information. It can be anything, such as how to setup e-mails, how to take advantage of the special offer that you included or in the case of our WordPress + Dayton example, you could include specific information relating to WordPress.
Support / How to Get Help – Customers will get frustrated and lost. Don’t make it frustrating for them to find out how to get help. Let them know how they can contact you, where their can obtain self-help articles, etc.
This e-mail is never set in stone. It is an evolving piece of literature based on the feedback that we see from our customers. We are always on the look out for issues that can be addressed in the welcome e-mail.
Client Feedback & Customer Retention
Trey: I think it should be a no brainer to anyone when I say; gaining clients is far more fun than losing clients. You might think, “well ya duh Trey” but I have got to tell you losing clients can be catastrophic to a web hosting business.
I remember back in 2002 I was transferred a call from someone looking to sell his web hosting business. This was not a small business that he wanted to sell, they had over 30,000 clients and they were losing those clients in droves, the person on the other line was completely distraught.
He was having major server issues (which happened more frequently in the early 2000’s) and could not stop the flow of customers leaving him, primarily I found out later from some of those same clients, because none of them knew what was happening. Their sites were down, there was no update on the hosting company website, the phones were jammed so no one could get through, no one was giving them a straight answer by email and no time of resolution and so they left. To them this was a nameless and faceless company that did not care about them when those clients. were having issues.
So we learn from this, at least I did. One of the first things I did at GreenGeeks was to make sure that my personal business email was on our site so that if someone needed to go beyond customer support to vent or praise they could do so directly to me. Over the years I have found this extremely useful to know my clients. mindset and to have a more personalized company. My clients appreciate it and it helps to make sure that they know that we care about our clients.
I would recommend this approach to anyone starting out your web hosting business to either have the top person or the top manager in the company offer the ability for your clients to get to you if they need to. In addition to this we take periodic surveys of our clients, asking how we.re doing and if there is anything that we can do better, which again helps keep our finger on the pulse of those clients and what their needs are.
Kaumil: A good way to keep in touch with customers is via Social Media. Having a Social Media presence such as a Facebook page or a Twitter account will allow you to interact with your customers directly where you’ll receive both positive and negative feedback.
While we as a company and practically every other business in existence strives to ensure that every customer is satisfied, it is not always possible. Negative feedback can be devastating to your business especially via social media, but only if you allow it to. Negative feedback can be actually be positive. How you ask? Simple, you are gaining insight into potential issues that exist in your company that you will now know about and can fix. You’ll also be able to communicate to the customer and resolve the issue publicly which shows potential customers that you actually care about your customers and business.
Social Media can also be used to announce new features, upcoming maintenance and service announcements. It keeps your customers in the loop. Everyone knows word of mouth is the most powerful advertising method around, well social media is word of mouth on steroids.
Trey: I love the web hosting business. It is a growth industry, tens of thousands of business and personal websites go online each week and if you can gain part of the market share you are going after you should have a profitable business. Remember to have good communication with your clients and good messaging on your website about what services you offer. If you work hard at starting your web hosting service and follow these guidelines you should do well. Good Luck!
Kaumil: For me, web hosting has been a great business to be in and it will continue to be. Like Trey, I love it and am very passionate about helping developers, individuals and small businesses realize their dreams online. Provided that you take the time to properly implement a strong foundation that is built for growth like we have mentioned, it can be a great business for you as well. We work with thousands of resellers every day to help them achieve success with their web hosting businesses and we can help you do the same. GreenGeeks can be your partner to success in the web hosting business.