https://mobirise.com/

DOMAIN NAME AND PRIVATE SERVER CONFIGURATIONS

Lesson 9.
Start a Web Hosting Company
Learn how to start your own hosting business and make money online 

Quick Start: The backend of any hosting server has immense amounts of programming and time involved. For the less experienced reader, we recommend starting your business as a hosting reseller – where you pay a small fee (around $30/month or less) to use someone else’s server and then re-sell the service. Focus on fantastic customer service and customer acquisition, and familiarize yourself with the facets of the business.

Introduction
The evolving web hosting market is churning up new opportunities for entrepreneurs interested in starting their own hosting businesses. But there are no get-rich-quick opportunities. It takes planning and hard work to make web hosting lucrative.

Are you ready to jump start your own hosting company? This step-by-step guide will help you navigate the ins and outs of the field and avoid the pitfalls that can hamper your success.

First, a definition:
Web hosting is the business of providing storage space and easy access for websites. It’s a fiercely competitive field, yet it can be a profitable business—when done right. A hosting business will rent to customers a certain amount of bandwidth and storage space, for a set amount of time. The money you as a business owner make comes from the difference between the costs of operating your servers and customer service (or reseller costs), and the amount you charge your customers.

Ultimately, your decision to start your own hosting business should depend on your motivations, technical know-how and the workload you can handle.

For example, people have many motivations for starting a business. Some want financial freedom, others want a source of passive income and others do it for the challenge of meeting a problem head-on. Your motivations for starting a hosting business must be focused and clear. And you should bear in mind that it’s very difficult to operate a hosting business as a source of passive income, due to the large workload involved in running a service-based business online.

At the bare minimum, extensive knowledge of web design is required to operate a hosting business. You should have working knowledge of HTML, CSS, and PHP – enough to build a visually stunning, SEO-optimized website to take payments and allow for customer logins. For the more ambitious reader looking to operate their own servers, you’ll need sufficient object-oriented programming experience. 

Starting a hosting business also requires a significant time commitment. Initially, you will spend many hours designing, testing and marketing your website. You will also spend time on a daily basis maintaining your website, providing customer support and processing payments. You should be willing to spend a couple hours a day working on your business at first. Eventually, if everything goes right, your business will grow to become a full-time job with great pay.

Knowing the market
Examples of niches
Examples of niches you could target:
•Geographic areas
•Small-businesses
•Music content
•Photography
•Weddings
•Non-profit organizations
•Restaurants

Top 10 Largest Most Popular Web Hosting Companies in the World

 Hosting Company Country Total Websites use this company IPs, sites 
1 GoDaddy.com USA 339,797 
2 Amazon USA 223,324 
3 HostGator USA 206,031 
4 CloudFlare USA 201,316 
5 Hetzner Germany 152,380 
6 BlueHost USA 149,882 
7 OVH France 143,698 
8 RackSpace USA 74,930 
9 Confluence Networks Virgin Islands, British 70,118 
10 RookMedia.net Switzerland 66,544 

Web hosting has traditionally been a wide-ranging and very competitive industry. Niche markets in the industry are few and widespread, and we have found that the vast majority of companies compete on price and customer service.

Some of the largest web hosting companies have revenues in the millions of dollars. You might be familiar with a few of them, such as HostGator, Bluehost, InMotion. All of these companies have tens of thousands of servers (GoDaddy alone has more than 40,000 servers), dedicated 24/7 support staff and years of business experience. A small startup like your future business will find it extremely difficult to compete with these goliaths.

Next are the huge set of small- to medium-size hosting companies. Here the word small is used with caution, because the average company in this category may have hundreds of servers and dedicated support staff. It is more difficult for these companies to stand out, mainly because of the number of competitors in this category. To stand out as a small-to-medium sized webhost, you usually need something unique, whether it be a name (like “A Small Orange”), cheap prices or over-the-top customer service.

The last category will inevitably be the category you find your future business in. This is the micro/startup hosting company category. As a generalization, companies in this category are usually reseller hosting companies trying to make a small dent in the $16 billion USD domestic web hosting market. Many of these businesses will fail to attract any customers at all and even more will stagnate after a few customers try their services.

Number of companies each country hosts 
The rule of thumb is to have a business that offers something unique to your customers, coupled with extensive marketing, so that potential customers know about your name. The perfect example is the niche market. By positioning yourself as being directly associated with a niche, you are able to present yourself as an expert in that field in a way no mass market company ever could. This is incredibly appealing to customers within that niche. You are also able to focus your customer service on that niche’s needs, cutting support costs but increasing quality at the same time.

There are many benefits to choosing a niche market:  
1. You can cut costs in things not related to the niche. 
2. You can focus your marketing efforts only on customers within the niche. 
3. You can sell affiliate products, such as Wordpress plugins and website themes in your niche. 
4. You’ll realize benefits not found in a mature market. For example, niche sales grow faster than general hosting sales and there is no need for constant investments in branding and extra features. 
5. You have a greater chance of success when competing with relatively few competitors in a niche market.

There are also a few downsides to the niche market, such as a naturally smaller revenue pool and limited room for growth. In general however, in a large and mature industry like web hosting, it’s better to start off in a niche market and focus on providing quality service.

Take a few days to think about your ideal hosting niche and be thorough in your research. Once you’re ready, let’s start!

Steps you need to take to get started

Step 1: Pre-startup research

Pre-startup research
Once you’ve identified your intended niche, it’s time to do some additional research. You’ll need to know the top 5 competitors in your hosting niche, the services they offer and their fee structures. A spreadsheet is recommended for this purpose—you can use the one below as a quick guide.

CompetitorABC Inc. StatsARPU (Average Revenue per unit) ~$100

% customer lost after the money back guarantee ~25% Services Offered- Green Hosting
- Shared hosting
- Dedicated servers
- VPS
 Cost for the customer$15/month 
Shared 
Unlimited bandwidth, 
3 domains Marketing Methods Facebook, Twitter, has their own blog, advertises on Google, affiliate marketing Estimated cost per acquisition Up to $350/customer, from Google AdWords estimator 

Step 2: Deciding the core of your business

Deciding the core of your business
There are three types of web hosting businesses: 
1. Reseller hosting 
2. At-home server 
3. Datacenter colocation

If you’re a new web hosting entrepreneur, we recommend that you begin with a reseller hosting system. There are many benefits to starting a reseller business, including simplicity and low cost of operation. The technical know-how is basic with a reseller business and becomes significantly more complex with an in-home server or renting a datacenter.

Reseller Hosting

Average price 
$19.95/month 

Cheapest price 
$9.87/month 

Most Expensive price 
$23.95/month 

Average Bandwidth 
500 GB/month 

Average Storage 
50 GB 

Most common features 
- Unlimited domains
 - Free CPanel
 - Free Domain Reseller Account
 - Free Billing System
 - White Label client panel  

Reseller hosting is a type of web hosting business in which you buy wholesale hosting services from a larger company and “resell” the services to consumers at a higher cost. In this case, the money you make will come from the difference between the two prices.

Reseller hosting can take many forms. For example, you can rent a dedicated server from the hosting company as a reseller or you can re-sell the shared hosting services the company offers by signing up for a reseller account. 

Pros and cons of reseller hosting

There are 28 million small businesses in US, how about the rest of world....Germany, China, India, Nigeria, Brazil, etc.

Pros
+Easy setup
+Need little technical knowledge
+Lots of support given by the company that provides reseller services
+Not very time consuming, the time saved can be put into marketing your business
+Technical support handled by the reseller company instead of you

Cons
-Limited options you can offer to your customers
-Uncompetitive pricing. You cannot offer very low prices and unlimited everything like the big guys, and stay profitable at the same time
-No control over the back-end. For example, you can’t guarantee there’s going to be no down-time unless the reseller company does so

How to set up a reseller hosting business


Over 1, 000,000 new businesses started each month 48% of small businesses does not have a website 48% of small businesses does not have a website 


1. Choose a reseller service that meets the needs and norms of your niche. For example, if your niche is WordPress, then your reseller service should have extensive support and software for WordPress installation and maintenance.


2. Buy a reseller hosting package. The package you choose can be as large or small as you like, but keep in mind that you can always expand once you get actual customers.


3. Build your website around the API of the reseller company and integrate either the provided billing system or your own billing system; determine what services you can offer and what services you should offer.

a. For example, many hosts offer shared hosting, VPS hosting and dedicated servers.

b. If you have three different options for one type of service, customers are more likely to choose the middle ground between the low end and the high end–plan to make the most profit from the middle-ground option. 


4. Promote your business with Google ads and social media.


5. Expand your servers whenever necessary. You may never need to handle your own servers for your business, often you can upgrade to a dedicated server reseller package to handle the influx of customers.


Home server

Cost of entry: A or B are both viable options, depending on need.


A) Around $1000 for a used blade server and chassis, $100/month for maintenance, power and freelance customer support staff, and $100/month for bandwidth. Plus a lot of time and expertise.


B) Around $800 in total for a PC server setup with a 2.5GHz+ dual-core CPU, 1TB hard drive and 4GB RAM.


The second option that a startup hosting business has is the at-home server. This option is for the more technologically savvy business owners who want the freedom of managing their own server(s). Let’s look at the basics of setting up and operating a server at home.


Hardware (Option A):


Hardware

Your home server can take many forms. The simplest setup can be any machine with a 2.5GHz+ dual-core CPU (Intel i3), 1TB hard drive and 4GB RAM–this is to ensure smooth operation of a hundred or so customer websites during peak hours. You can even use your own computer for this purpose! However, depending on the type and age of computer you use, this guide recommends buying or building a new machine. Old computers are unreliable, slower and can get extremely loud during peak CPU load.


Your setup would also need a stable and high-speed Internet connection, power supply and cooling. This guide recommends putting your server in a discreet location with a wired connection (such as a basement), so that the day-to-day operation of your server isn’t disrupted by foot traffic in your home.


Hardware (Option B):


Hardware

Alternatively, if you believe you have a greater need for computational power density in a smaller space, you can set up a blade server. Blades are modular servers stripped down to the basics, ensuring higher density computing with lower power input. Blade servers are assembled with a chassis that can hold anywhere between two to 14 blades. The blades themselves are found inside the chassis, which contains a management unit that allows access to each blade, and network storage connections for each blade.


Each blade is its own server with multiple cores and hard drives, but the setup can have a shared storage system. Unlike a regular computer, the entire chassis needs only one mouse, keyboard, video display and network connection.


There are 3.26 billion

 internet users 40% of the world populationthat's over 40%

 of the world population 

The average shared-hosting blade server hosts approximately 2,500 customers. Your at-home server is likely to host fewer customers to begin with. The more you can put on one server, the lower your per-customer cost will be. Naturally, if the server is full, your cost per customer is only around $40/month for the first year. This means, if you charge $3.99/month, you can make an $8 profit per customer for the first year. Your initial costs also will include validating the customer’s credit card and making sure they are guided to the right resources for support when installing WordPress and custom development of a drag-and-drop web builder. Beyond that, you’ll have electricity, HVAC, bandwidth and hardware costs. 


The software:


You have a choice between a Unix/Linux-based system and a Windows-based system. Each has its own pros and cons; the differences are mostly technical. However, a Unix/Linux based system does use significantly fewer resources.


It’s worth practicing setting up servers before you launch your business. If you’re confident in your technical knowledge, and want to practice setting up and running a server of your own, try following this guide personal server set-up guide: http://arstechnica.com/gadgets/2012/11/how-to-set-up-a-safe-and-secure-web-server/ 


The Internet Connection


Asia, as a continent, has the most internet users. It accounts for 48.4% of global internet users 


At-home servers present a unique challenge for the web hosting business owner: the Internet connection. For one, the majority of ISPs or broadband providers do not allow their users to host public websites on their network. We recommend that you do extensive research on your own Internet provider’s terms of service, and only proceed with setting up a server at home if your ISP explicitly allows for the hosting of websites. If they do not, you have the choice of contacting your ISP to work out a special service package for your business’s needs, or to find another ISP that does allow hosting.


In-store sales In 2015, 64% of all in-store sales, or sales to the tune of $ 2.2 trillion, were influenced by the internet. 

Your business will be very dependent on the stability, latency and speed of both the upload and download connections provided by the ISP. ADSL (asymmetric digital subscriber line), cable, or fiber services are mostly asymmetric, meaning that the upload speed will be significantly slower than the download speed for most providers. In order to be competitive, your business will need fast upload speeds in order to provide customers with the fastest possible loading speeds.


Another problem with Internet connections is that most services use a dynamic IP addresses, where the IP address changes every time you connect to the network. As a web host, you need one or a set of static IP addresses.


Pros and cons of home server hosting


Pros

+Absolute control over your setup, hardware and software

+Freedom in what you can offer

+Long-term savings compared to being a reseller host

+Helps you build practical knowledge of the hosting industry and how it works

+Freedom to expand as much as you want, whenever you want


Cons

-High upfront cost for hardware

-Need special package from most ISPs to allow for hosting from your IP address, (dealing with ISPs is a level of pain all on its own)

-Requires a lot of technical knowledge just to get started

-High miscellaneous costs of startup compared to reseller hosting

-Need to provide your own support, Cpanel, and billing system


Steps to setting up an home server


1. Contact your ISP and negotiate a package where they agree to unblock the ports required for hosting, and ask for a static IP address instead of the dynamic one they usually provide


2. Research and purchase a server setup, either blade or a simple PC depending on your needs


3. Set it up in your home, making sure that the server is accessible with a steady wired Internet connection. (refer to the installations section of this guide)


4. Research and set up the operating system and required server software


5. Link your server to your already designed website and decide what services you will offer


6. Promote your hosting business with online marketing


Installations


Operating system


The operating system is the backbone of your server and there are only two main choices: Windows or Linux.


The biggest benefit of Linux is its freedom and versatility. Linux OSes are free and most of the software you need for hosting is open source. The administration is definitely more difficult for anyone accustomed to Windows, but it’s not that big a leap. Linux servers are much more popular than Windows. 


Windows, on the other hand, offers familiarity and ease of use in exchange for the high startup cost associated with software licensing.


Installing operating systems is a relatively straightforward process. Countless guides and examples are available on the Internet. cPanel will provide instructions for installing CentOS, based on Red Hat Enterprise Linux. As an added bonus, installing the cPanel-provided version will also install cPanel and WHM automatically.


Installing Windows is also extremely straightforward, and more information can be found on this Microsoft article: http://windows.microsoft.com/en-ca/windows/installing-reinstalling-windows#1TC=windows-7.


Hosting control panel and automation software


While there are many different types of software for web hosting control panels, this guide will focus on cPanel for Linux and Plesk for Windows. Both software suites are subscription based, payable either monthly or annually. 


The Plesk demo can be found here: http://www.plesk.com/#demo


And the cPanel demo can be found here: http://cpanel.com/demo/


cPanel also contains WHM (Web Host Manager), their own integrated software to run and maintain your servers. Each service has a detailed installation guide on their websites.


Billing software


Billing software


A good, fluid and easy to use billing system is absolutely crucial for the beginning web host. An automated billing system like WHMCS (http://www.whmcs.com) will include account management, domain management and support ticketing features crucial for the success of your hosting business. 


WHMCS has support for both Windows and Linux operating systems; the detailed instructions for installation can be found at their product support pages: http://docs.whmcs.com/Getting_Started


What products and services will you offer?


Now that you have determined the nuts and bolts of setting up and operating your new hosting company, it’s time to explore the wide variety of services you can offer. We’ll look at four different service options:


1 Shared hosting

2 Cloud hosting

3 Virtual private server (VPS)

4 Dedicated server 


Shared hosting


Resources 


Price 


Simplicity 


Scalability 

Affordable; Easy to Start


Lack of Server Control & Performance


Shared hosting is the idea of putting many websites onto one server. This remains the most cost efficient and popular hosting option. By putting up to 2,500 websites onto one blade server, the web host is able to distribute the costs of operating that server across all the users. This allows the web host to charge very little, sometimes as low as $0.99/month and still remain profitable. The shared-hosting service will have system administration to distribute the storage space and bandwidth among all the users on one server. Upkeep and daily maintenance are shared, as well. 


Shared hosting is the most basic form of hosting, where you, as the webhost, provide and install all the server and end-user software. All the user has to do is to pay a monthly fee and access their cPanel (or Plesk for a Windows server) to upload their website. Often, the shared service will have numerous benefits with the technologically inept user in mind, like auto installers for WordPress, drag-and-drop website builders and basic tech support.


Cloud hosting


Cloud hosting


Server Scalability; Cost Efficient


Advance IT Knowledge; Insecure (arguable)


Shared hosting is the idea of putting many websites onto one server. This remains the most cost efficient and popular hosting option. By putting up to 2,500 websites onto one blade server, the web host is able to distribute the costs of operating that server across all the users. This allows the web host to charge very little, sometimes as low as $0.99/month and still remain profitable. The shared-hosting service will have system administration to distribute the storage space and bandwidth among all the users on one server. Upkeep and daily maintenance are shared, as well. 


Shared hosting is the most basic form of hosting, where you, as the webhost, provide and install all the server and end-user software. All the user has to do is to pay a monthly fee and access their cPanel (or Plesk for a Windows server) to upload their website. Often, the shared service will have numerous benefits with the technologically inept user in mind, like auto installers for WordPress, drag-and-drop website builders and basic tech support.


VPS hosting


Root Server Access; Secured Environment


More Expensive Than Shared Hosting


A virtual private server is a virtual machine with its own OS installation. This allows the user to control every aspect of the hosting, aside from the hardware itself–much more freedom than shared hosting. For example, your customer can install any software he wants with a VPS hosting package. A VPS is functionally equivalent to a dedicated server, and it’s much easier to create and configure because it’s software based. A VPS is created by partitioning a single server into multiple virtual servers. This makes a VPS significantly cheaper to operate than a dedicated server, and you can pass the savings on to the customer. 


VPS can be offered as a managed or unmanaged service. In unmanaged VPS, the customer is given access to the system and then left to their own devices, while a managed VPS will be accessed very much the same way as a shared hosting package–through the control panel.


Dedicated Server


Maximum Control; Great Server Performance


Expensive; Skilled IT Staffs Needed


A dedicated server is an entire server rented to one client, for purposes of web hosting. Users and organizations that use dedicated servers have full control over the servers, including choice of operating system, hardware and software.


Much like a VPS, the web host has the option of managing the server instead of allowing the customer to do so. A dedicated server benefits from increased freedom and stability, and is usually used for websites with high volumes of traffic.


Pros and cons comparison:


Service


Pros


Cons


Target audience



Shared


+inexpensive to operate for host

+inexpensive to buy for user

+very easy to use for user, no technical knowledge needed


-very limited control for customer


•bloggers

•SMBs, brick and mortar stores

•small ecommerce stores



Cloud


+not affected by hardware outages as much

+greater degree of control and freedom for user

+better scaling for customer


-difficult for the startup web host to set up and run


•larger ecommerce stores

•webmasters and bloggers who want greater protection and control



VPS


+cheaper than dedicated server, but runs very much like it

+can fit multiple users on one server


-no control over hardware

-more expensive than shared or cloud hosting


•medium- to high-volume websites

•large e-commerce stores and forums



Dedicated


+full control over every aspect of the hosting process

+very stable


-very expensive for the user

-technical knowledge required

-usually managed by the user


•high-traffic websites

•data or processing power-intensive websites


A quick look at customer support and service customer supporthosting types

Perhaps one of the most important aspects of hosting are the benefits you’ll gain by providing excellent support and service. In a saturated market, it can be difficult to distinguish your business from the thousands of others on the Internet. Often, the best marketing is word-of-mouth advertising, and that can only come from hundreds of beyond satisfied customers. If your customer service is exceptional, that information will spread. Of course, a history of poor service spreads, too.


Customer service begins the moment the potential customer arrives at your website. Support should be available in the form of a free call or live chat with the click of a button. You should be prepared to spend many hours modifying your website to be user friendly. Your checkout process should be streamlined and secure. Once the customer registers for a hosting package, it’s good to send an email with registration details, payment and setup information, and the setup support email and phone number.


A customer may call two or three times in the first few months of service, and your support staff should be prepared to answer any question they may have. 


On the assurance side, most hosting companies offer a 30- to 90-day money-back guarantee–and your business should as well. Be prepared to lose a chunk of customers after the first 30 days; it is common even for the best web host. With both luck and effort on your part, the remaining customers will be loyal to your business for many years to come.



Conclusion

We hope you enjoyed reading this guide and find that it inspires your business ideas. As mentioned at the beginning of the guide, starting a hosting business requires a significant time commitment. But if you are motivated and have the right skills, you can build a successful web hosting business that will be an ongoing source of revenue. Best of luck! 

Ask your questions and comments below

Your questions and comments should be based on the lesson.