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Starting a Web Hosting Business 101

By Mitty Chang

I. Is the hosting industry profitable?

The hosting industry at the status quo is oversaturated with small to large hosts. You`ll find that if you`re joining in the hosting industry that it`ll take you some time before you make much of a profit or even cover your expenses. Starting a web hosting business is an investment which will take time, energy, patience, and money to do. I believe though that it is by all means possible to make a profit by starting off with a reseller account, targetinglocally, and sticking to quality deals rather than the overselling @ $1 for half your server method, which we`ll talk about later in this post.

II. Reseller Accounts

The best method to get your feet wet in the hosting industry and not have to worry about heavy costs would be to acquire a reseller account from a hosting provider. A reseller account is basically where you`re given a chunk of the space and an admin/reseller panel to create accounts with. With your plan you can split that into how many little plans as your heart desires. For example, let`s assume that your plan was 5 GB of storage space and 50 GB of bandwidth. With that plan, you can offer packages such as 500 mb storage space and 5 GB bandwidth, and you`ll be able to offer at least 10 of those (500x10 = 5000 mb ~ 5gb)-- more if overselling is switched on. What overselling means is that you`re able to create as many accounts as possible, and that you`re only limited by the whole of bandwidth and storage space all your accounts use -- not by their preset quota. IE: With overselling on in our example, we can create more than the 10 accounts as long as the total used does not exceed your plan`s limits.

Pros of a Reseller Account:

1 - you don`t have to worry about the technical aspects of hosting, such as maintaining the server, as that`s done for by your provider.
2 - you can set your own plans with your space.
3 - affordable - reseller accounts generally range from $15 to $60, depending on the space and bandwidth you want. Compared to dedicated servers, these are just a fraction of the costs.

Cons of a Reseller Account:

1 - little flexibility in server settings -- sometimes your request to change a setting may be approved by your host, but in most situations you`ll have to live with the settings your host has set. Problems occur in some situations when some scripts require safemode to be off and hosts enforce a safemode on policy.
2 - can`t create reseller accounts - unless your host has a separate panel in which you can create separate reseller accounts, chances are you won`t be able to do this.

III. Semi-Dedicated Servers

Semi-dedicated servers are much like large reseller accounts in which a server is partially devoted to you. With a semi-dedicated server, there are generally only 2-4 other users or resellers on the server with you. This generally lowers the cpu load time and makes sure that the server doesn`t crash from overloads. In situations where you`re hosting a site that requires a decent portion of the cpu at high hit times, you`ll want to at least get a semi-dedicated server. Situations could be such as running a semi-large forum community to moderately large mailing lists.

1) larger chunks of space
2) lower cpu loads; freedom to run extensive scripts or semi-large communities.

1) more expensive than a reseller account
2) limited control on server settings -- in most situations you won`t be provided with root shell to edit the server settings.

IV. Dedicated Servers

A dedicated server is where you`re essentially renting out a server at a datacenter. This server is completely dedicated to you. I would not recommend that beginners dive for a dedicated server at first. It`s better start off with a reseller account to get your feet wet and see if the hosting industry is right for you. Also, you shouldn`t obtain a dedicated server unless you know you can cover the budget for it. One thing you don`t want to happen is to get into debt because you decided to go with a dedicated server when you could have just gone with a cheap reseller account.

There are several reasons why you would want to get a dedicated server. One of them could simply be because you`re hosting one or a few large [forum or portal] communities which take up a lot of CPU at peak times and you need a server dedicated to those communities. Another reason might just be because you`re somewhat of a control freak and need the added control, plus the ability to create reseller accounts and larger packages. Whatever the case might be, we`re going to be talking about the two main types of dedicated servers: unmanaged and managed.

An Unmanaged Dedicated Server is pretty much what it sounds like. This is where there`s no management provided for your dedicated server. This means you`ll be fully responsible for upgrades and updates to your server software, as well as for maintaining the server. But have no fear, most major companies who offer unmanaged dedicated servers at least provide the most basic of functions with their support -- including server reboots and recoveries, etc. Depending on your provider, you may or may not have to pay an additional fee for these functions. I wouldn`t recommend an unmanaged server to anyone who isn`t extensively familiar with how to run a dedicated server and the operating system their server is using. Alternatively, you can hire your own system admin to maintain the server for you. Good sys admins can be expensive though -- $20 to $50/hour is around the usual pay rate.

Pros of an Unmanaged Dedicated Server:

1 - more affordable than managed servers
2 - you`ll have a full server dedicated to you and your needs
3 - a whole server to set your plans for
4 - you can alter and edit the server settings

Cons of an Unmanaged Dedicated Server:

1 - more costly than a reseller account or semi-dedicated
2 - no management; you`ll need to know the technical aspects and will be responsible for maintaining the server

A Managed Dedicated Server is the opposite of an unmanaged server. While you do pay more than an unmanaged server for the added management, you`ll have an extra pair of eyes and hands to rely back at the datacenter to rely on. While there are several degrees and levels of management, most users will be given the basic functions of reboots and recoveries for free. In some situations your provider will practically run the server for you so that you only have to worry about creating the accounts and setting your packages. As with the rest of the world, you`ll have to pay for better quality.

Pros of a Managed Dedicated Server:

1 - you`ll have a full server dedicated to you and your needs
2 - a whole server to set your plans for
3 - you can alter and edit the server settings
4 - you can alter and edit the server settings

Cons of a Managed Dedicated Server:

1 - most expensive out of all of these options
2 - unless you purchase high management packages, you`ll generally be responsible for some technical aspects.
3 - responsible for security and backing up your clients` files.

V. Co-location

For users who want to have a custom box (server) built or have one already, and want to use that to host their websites, but simply don`t have the cash for a nice T1 line, the option of co-location is usually right for them. Co-location (colo) is where you have a datacenter host your box. How it works is that you send them your box, and they hook it up to their connection and power line. Co-location costs are around the same as an unmanaged dedicated server and range depending on whether or not you get any type of management service for your colo.

Pros of Co-location:

1 - you can build your custom box and config it to your specs
2 - you`ll have a full server dedicated to you and your needs
3 - a whole server to set your plans for
4 - you can alter and edit the server settings via SSH or if you live close enough, you can generally go directly to your box to maintain it.

Cons of Co-location:

1 - more costly than a reseller account or semi-dedicated
2 - you`ll need to know the technical aspects and will be responsible for maintaining the server, unless you purchase an additional management cost which many providers don`t offer as it is a foreign system.

VI. Picking your operating system and control panel

When you`re picking a hosting account you have to take into account who your target audience is. If you`re targeting locally, you should ask around and see whether or not your potential clients need windows or a unix based server. In most cases, you`ll want to purchase a unix server such as one running linux. Linux is at the moment, the most affordable option and also the most convenient as you won`t have to worry about virus problems as you would with Windows.

Whereas control panels are concerned, you should check with your provider regarding that. With reseller accounts you won`t have to worry about extra fees for control panels, as that should already be added into your plan`s charge. As for dedicated servers, you`ll want to check with your provider to see if they offer rental licenses. Most providers offer control panel licenses at around an extra $20/mo. Some popular control panels for linux would include: CPanel, Plesk, Ensim, and DirectAdmin. A popular windows control panel would be Helm.

In addition, there are specific and powerful reseller control panels out there such as HSphere.

VII. Registering your business with your government.

There are several pros about registering your business with the government. One of which would be additional legal insurance. In short, if you register as a LLC (limited liability corporation) for example, if someone files a law suit against you, your personal assets won`t be at jeopardy.

VIII. Offering Support

Web hosting isn`t complete without the provider offering support. With each package, you`ll have to realize that you`re slightly limited in control. You`ll understand what I mean if you`ve been with a provider who took 4 days just to answer a simple question or to set up your account. Customers require attention, and that requires time. As a small business, you can strategize yourself by providing one on one support for your clients and guiding them through their own business or websites. The advantage of small businesses is that they can work one on one with clients and create a relationship. If the relationship is positive, your client will stick with you and probably refer to you more clients. In short, please your clients! And there are several was to provide support to do so.

Ticket method - by using a ticket method your clients can submit a ticket on your website, and you can handle support that way. Some good ticket systems would be: Clientexec, Modernbill, Perlbill, Perldesk. *Please note that the first three are full client management scripts and include aspects such as billing management.

Email method - all hosts should also provide this method, as it is one of the most rudimentary ways to provide support.

Phone support - services such as will provide you with 1800 numbers for clients to contact you. However, this can be costly for those who are just starting off and don`t yet need the phone support, so keep in mind that this option isn`t necessary to be a good host. Alternatively, you can also provide clients with your cell phone # for emergencies, if you`re willing to receive calls on it.

Chat support - from IRC to AIM messenger, hosts are known to provide support through these mediums. Keep in mind that although these methods are definitely more direct and faster, it also provides a medium in which could simply lead to too much of a headache. When providing chat support, I would recommend that you keep logging on and log all your chats for future reference.

XIIII. Research

Before picking any host, you should ALWAYS do research on your host. A great way would be to just use the search tool on WHT (popular hosting forums), or by testing their response time by sending them emails. Customer testimonials and opinions are always good.

Author: Mitty Chang has been in the web industry for over 6 years, first as a client, choosing who to host with solely by price. After trying 11 hosts at once and realizing how poor some of the support was, Mitty decided to open his own hosting company, . Mitty started with a reseller account but grew into a private server as he persued his goal of providing quality web hosting, and making sure that the customer is first priority.

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