starting a webhost - What do you need and how much would this cost?

This is a perfect topic for this forum! Starting a Web Hosting company is no minor task! If you do everything yourself (not becoming a reseller), you would need: staff (sys-admins, tech staff, accounting staff, sales staff, etc.), server(s), connections, OS and software, and much more.

Most hosts have there servers located in a large facility called a NOC (Network Operations Center). There isn't to many hosts that own their own NOC or even their own lines yet. It is cheaper to place your servers in one of these large facilities that has 24 hour monitoring, many more connections and usually faster connections than you could ever afford, and a whole lot more.

To start a hosting company, you are going to have to have a fairly large amount of money. It all depends on the equipment you purchase and the software. If you plan on being an NT host, expect to pay more than if you were a UNIX host as NT machines and software cost more than the UNIX machines and software. To start you may or may not decide to purchase one server... You could purchase multiple servers. You should expect to pay $10,000+ per server if you want a server that can handle what you are looking for. Overall, you shouldn't expect to pay less than $10,000 startup but it is usually double that for the basics and the price only goes up from there.

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Chad Simper
Dynamic Internet Solutions

Hi!

There are two other options.

1. You can buy the web hosting from another company and resell.

2. You can join a referral program and lead visitors to the companies site or the site they give you and let them take care of the customer while you get a monthly commission.

I'm doing #2 and is the best way to go. You don't have all the HARD and expensive work that is involved with #1 or owning the whole works. I'm making a big monthly commission without doing anything. This is by far the best money I have made. When you sell a product, you only get that money once. With web hosting, you get it EACH month. There are only two programs that I know of on the net that are like VenerNets.

VenerNet and Virtulsis. I think VenerNet is better. VenerNet pays more, better service, and they don't have their own site up competeting against you, and much more.

HTH

Curtis

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Web Hosting - 50 MB only $24.95 per month!
Visit us: http://www.1simple.com

Yes, Curtis has brought up the other two ways to get into the hosting business. They are both a little less work than owning all of the equipment and connections (although they can be just as much if you are really dedicated to customer service and support). The best way to get a taste of the hosting industry without doing much until you learn more is to do what Curtis is doing. But if you have the money and knowledge to purchase and run your own connections and servers, you are probably better of going that way. It all depends on what you are willing to do, what you are willing to pay, and how hard you are willing to work.

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Chad Simper
Dynamic Internet Solutions

Hi Guys!

What keeps me motivated at this is VenerNet's #1 seller. VenerNet said he has over 2200 clients, well VenerNet's clients, but people that have bought through him. That was last year. I have figured it up and the range he could be making is $16,500 - $77,000 per month, and that is not including setup fees, range from $50 - $75. He also had sold more since then, but who knows how many(hundreds).

I also figured that he is making $198,000 - $924,000 a year! Not including setup fees.

I know, that is a LOT. That is VenerNet's #1 seller and has been doing it for 3 years now, I think this is his 3rd year and he does it by telemarketing.

I hope I get close to that one day, because If I do, I can go on a vacation everyday! He doesn't do anything! I also know that this is hard to believe, but it's true and I'm very jealous!

HTH

Curtis

This is going to be a long post, but I think it offers very valuable information.

One thing I would definitely tell anyone thinking of starting a hosting company: do *not* underestimate the sheer cost of doing business, in this or in any other industry.

It's amazing the number of people I've talked to who think they can get into the hosting business with a low initial investment and then make a fortune in a short amount of time.

For those people, I have news for you - it doesn't work that way.

Hosting is an expensive business. There's no if's, and's, or but's about it.

The first thing you have to decide is whether you host NT or Unix. NT is enticing, because it's easy to find people who know how to administer the software. But Unix is also really enticing because you can get the Linux versions for free, and most other software that runs on Linux is also open-source and thus costs nothing.

We don't do Unix hosting, so I can only talk about NT. So I will. To set up an NT server, count on at minimum $5000 in software alone, *per server*. This is if you count NT Server ($700ish), a decent mail server (running from IMail at $1575 per server up to NTMail at $2800ish per server), statistics software (From MediaHouse at $350 on up to WebTrends at $1000+), SQL server ($1300), remote admin software (pcAnywhere, at $150), an FTP server (ranging from MS or WarFTP, which are free, up to Serv-U, which is in the $500 range). All of these have to be licensed per server, remember. Plus, if you want to offer RealAudio, Visual InterDev, Drumbeat, Cold Fusion, or any of 100 other programs customers want, that's got to be purchased, too.

So, $5000 per server for software. And the hardware for that server is going to run from about $4500 (if you build it yourself from top-of-the-line components - and don't get anythng that's not the best, you'll regret it later) on up to $10,000 or even more if you buy a server pre-configured from someone like Dell. Don't even think about using consumer-grade parts, that's a big mistake. Go SCSI hard drives (preferably IBM 10,000rpm), not IDE, and go true Intel all the way. Make sure the power supply is at *minimum* 300 watts (a 230 watt PS that comes in most consumer-grade minitowers will *not* cut it in a server). And *don't* forget that a server needs as many cooling systems as possible - 2 or even more exhaust fans, and a double-high CPU fan are a must.

So now you've spent your $10,000 to $15,000 for your server/software, and you need to put it somewhere. A T1 line will cost you from $900 to $1400, depending on your location and local loop charges. And a T1 line doesn't go very far. You're better of co-locating the server. But co-location will run you anything from $500 per month for the low-end service, on up to $10,000 per month from someone like UUNet.

Then, unless you're a technical wiz-kid, you better plan on hiring a Systems Administrator. Even at half-time for the SysAdmin, you better budget at least $4000 a month for the SysAdmin. You get a full-time SysAdmin, you're talking likely over $8000 per month. The other option is to give your SysAdmin a stake in the company, which keeps your initial cost down, but increases the long-term payouts, and also eats away at the bottom line. That's if you can find a SysAdmin willing to work for so little as you'll probably make in the first few months.

Figure on costs for lawyers and accountants (neither of which any business should be without). Assume about $300 a month to maintain a toll-free telephone line (this includes the phone calls), and assume about $150 a month for local telephone service (3 lines - one voice, one fax, one data).

If you have extra staff working for you, chances are you'll have to rent an office (most town zoning by-laws won't let you put non-resident employees into your homeoffice!). Budget between $500 (for a one-room location) on up to $2000 or more per month for an office - and that's for a fairly small one. Assume considerably more (triple that amount) if your office is in a major city.

You'll need computers for your office, plus printers, and probably an internal network. Don't forget telephones, a fax machine, and photocopier. And furniture is something most people don't think of, either. A 4-drawer file cabinet costs over $100. A comfortable desk chair will be $100 or more, too. And a desk can be $200. I'd recommend buying the furniture used. But to outfit an office for only 3 employees is likely to cost close to $2000 just in furniture by the time you're done.

Don't forget all these things cost money to set up. Plus if you ever plan on having any time off at all, you'll want at least a part-timer to answer the phone once in a while. And someone who handles your billing and bookkeeping doesn't hurt, either.

On the subject of billing, it's best if you get a good ISP billing program (ranging from $2000 to $15,000) right away - it'll cost a lot more to migrate from an inferior billing system later than it'll be to buy a scalable one now.

Let's see... have I forgotten anything? Oh, sure. There's way more things that you have to spend money on.

Granted - not every new ISP is going to need every single item listed above to start out with. But you'll need a lot of them. And at some point, as you grow, you'll discover you'll need them all. Maybe not at first, but eventually.

I would highly recommend that anyone starting a web hosting company walk in with at *least* $50,000 burn-able cash - money you can afford to lose. If you can't afford to lose your initial investment in the business, then *don't* start the business. I have known far too many people who lost their houses, their cars, everything because they started a business with money that they couldn't afford to lose, and that business went under.

Web hosting is a business. Whether you're opening a store at the local mall, buying a local Dunkin Donuts franchise, or just setting up a hot dog stand on the corner, there are a lot of things you have to do in order to run a business. And web hosting is exactly the same way.

Don't underestimate what you're getting yourself into.

Well, now that I've given my full $5 here, I think I'll head off to bed. To anyone considering opening a hosting company, I wish you the absolute best of luck. I think anyone who owns a hosting company is thinking the same thing I am right now.

Take care,

Jason Ellis, CEO
Hosting Solutions, Inc.

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Hosting Solutions, Inc. - www.hostingsolutions.net
Windows NT web hosting specialists.

Curtis, if you don't mind me asking, what's your average commission (just a range is fine) - you don't have to respond if you don't want to.

Thanks

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Rory Smith - Webmaster of XRS.Net
http://www.xrs.net - The Xtreme Resource Services Network

So as reseller (as opposed to a sales rep) take would be the resellers role to support the customer?

If so, how is that done? That is, if you don't own the server and don't have direct access to the operator's control panels, it seems one could do little more than pass on any problems to the parent-hosting company.

Thanks.

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Original Artwork, Hand Tied Flies, Unique Books and More!
http://ArtsNFlies.com

Jason,
WOW! I am so glad you did make that a lengthy post! I think it has some very useful information for anyone starting a hosting business (or a business for that matter). Thank you again for the very detailed and accurate post!

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Chad Simper
Dynamic Internet Solutions

Hi Rory!

This check that is coming this month is around $300.

June - Around $400
July - Around $450 - $500 Still working on this month.

I get paid one month after the sale. If someone order today, I will get it July. This keeps their hide safe with chargebacks, refunds, etc. That is why I'm still working on July because this month isn't over.

Thanks
Curtis

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Web Hosting - 50 MB only $24.95 per month!
Visit us: http://www.1simple.com

If you buy their additional servers for $15 and $30, you have to support the person. You will get free support from VenerNet, but you will have to support your customers and not VenerNet if you decide to go this way.

Curtis

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Web Hosting - 50 MB only $24.95 per month!
Visit us: http://www.1simple.com

For you to sell their service through your own domain name, did you have to buy a server to do that or do they do that for free?

I'm not sure what you mean. You don't have to buy one of their servers to sell them. If you want to sell them, you have to buy each server for each customer. YOu can only host one virtual domain name on each server, but you can host sub domain names.

I bought 1simple.com because they don't give away free accounts. I then set it up so the order form is sent to them like they have on the web pages they gave me that are on their web site. Everybody gets one that joins.

HTH
Curtis

Curtis, as a reseller, how much marketing activity do you do?

That is, how do you get most of your customers? Net references (like HostSearch)? Mass mailings (either email or snail-mail)? Association with web developers? etc.

(I'm not asking for specifics, just curious how most of your business comes your way).

Thanks.

This has been a very interesting post, I just want to remind you guys though, I am not starting a webhosting company because I no I can not afford it, I was just wondering what you need and the cost, because maybe in the far future I will, but then everything will probably cost a lot more. Anyways thanks.

Hi Jaiem!

I get traffic from the search engines, web hosting directories, my email newsletter, and word of mouth.

Also I'm not a reseller but a sales rep. You bought VenerNet's service from them but through me. I didn't buy the service and resell it, but I'm selling it for them.

Hi Tony97,

You can do what I'm doing. The only thing I would suggest is make yourself a whole site like I have done, and sell the service for VenerNet. All you have to do is get the customer to buy it from you, and that's it. You don't have to do anything else.

Thanks
Curtis

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Web Hosting - 50 MB only $24.95 per month!
Visit us: http://www.1simple.com

BRAVO! Jason... I think that gives the perfect amount of reality in the area

Thanks
Deb

Seems a valueable board here for people who want to start a business. Some people want to start reseller so the customer wouldn't be required to pay extra just basically monthly fees.

But it's hard to success with alot of work unless you know what you are doing !!

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Carolina Web Net
www.carolinaweb.net

I know of a few people, even Deb of FutureQuest, that started as resellers. Then, when they became big enough, they moved their clients to a dedicated server. It actually seems like a pretty good philosophy, to me, provided that the person(s) involved can handle all the clients.

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InfoStar: Web Design - Hosting - Programming
http://www.infostardesign.com

In response to Jasons recent post, I'd like to say that to an extent, I agree with him. Leasing isn't the best idea. But in my experiences, it's a great thing to get you off your feet. In offline terms, it's much better to own your building, that way you know that you have a new roof, and they don't just say you do, but most people still lease office space. Because of price. The idea that you need $50,000 to start a web company is absurd. I agree, those things that Jason first mentioned are very important, and most companies will need them over time, but everyone needs to start somewhere. To illustrate this, I point to a site created by a friend of mine named Jim Reardon. His site is freecenter.com. He started the site out on a freehost, HyperMart, then he moved it to a pay host. Recently he moved the site to a leased server. He's making a good profit from it, around $4000 a month for limited work, but if he didn't work his way up to where he is now, the site would have been closed down long ago because he couldn't afford it.

The internet gives us all amazing opportunities. When I was in business school I was taught things that can never apply on the web. Creating a web company isn't like operating a Dunkin' Donuts franchise at all... and thats why the internet is so great. Anyone can create a sucessful company. It may not be the next powersurge, or yahoo!, but it can still be sucessful.

Going with a high-end setup from day one sounds like a great idea.. but you don't need $50,000.

I had a bad experience once with the company I was leasing office space from.. so I moved my office.. and it was a hassle.. but if I'd have waited to save money to build my own building, someone else would have entered the market, and I wouldn't be in business.

Shane

It doesn't have to be as difficult as Jason made it out to be.

You can cut the cost of Hardware, Software and connection by purchasing a dedicated server through a webhosting company. In my search, e-access.net looked like a winner. They provide you with a PentiumII 450 with 256mb Ram, NT, IIS, Mail, FTP, statistics software, and DNS software for around $650 a month. (in addition to a $125 start up fee)

You'll have to program a back end to handle signup processes, and provide members with easy to use utilities. If you have to hire someone the cost can rise, but not beyond a few thousand dollars.

True, you will want to offer your members support for various technologies, so install PERL, PHP, FP Extensions, and allow ASP to be used. All of those are free.

E-access will assist you in setting up the server, and if you run into any problems that will require a systems administrator, you can have someone there take care of it, at a rate of $50.00/hr. Much cheaper then staffing your own.

In most cases you will not need an office to start out. You can run it from your home, at substantially reduced costs.

True, this setup may not make for a world class hosting service, but it will get you off your feet at a price much lower then $50,000. And, if you play your cards well and balance low-cost and high quality and, above all, you offer consistant, capable and courteous customer service, you've got a good chance at sucess.

Shane Harter
[email protected]

Shane-

Your comparing leasing a server to leasing an office really isn't a good comparison. Leasing an office is a lot like colocating a server, something I highly recommend anyone do. Leasing a server is more like leasing your office completely furnished where your landlord owns the office, the desks, the computers, the telephones, the telephone numbers, the copy machine, the fax machine, etc. If you need to move your office, you walk out the door with whatever files you put in your landlord's filing cabinet and not much else. That's what leasing a dedicated server is best compared to. Not a great scenario, huh?

I stand by my original post. Remember, I've been running a hosting company for 16 months. And I admit I didn't have $50,000 to start. I started with about $20,000. And then I had to get another $10,000 load 6 months later. And to be honest with you, it's been 16 months and I still, personally, make less money than if I were working in the local McDonalds. I have a 15-year-old kid working in my office here answering phones and doing filing that makes more than I do on a per-hour basis (when you take what I pay myself and divide it out over the 70 hours a week I work).

Can you start a web hosting company for less than $50,000? Sure. Can you turn that company into a major success story? Absolutely. But I wouldn't recommend it.

Just to put it into a little perspective, after 16 months, my payroll (what Hosting Solutions pays it's staff, including myself) is well over $10,000 per month.

This is *not* a cheap industry. It costs a lot of money to run a hosting company. You say that running a hosting company isn't anything like running a restaurant. Well, you're right, partly. They're two totally different industries. But a hosting company is a business, and it has to be run like a business. There are far too many hosting companies out there that are run as people's hobbies, from basements or spare bedrooms, in whatever free time the owner has to do it in. And it is, 99% of the time, those hobby companies that end up developing a bad reputation and in the end hurt the reputation of the entire hosting industry.

This is a business. Treat it as such.

Jason

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Hosting Solutions, Inc. - www.hostingsolutions.net
Windows NT web hosting specialists.

In response to Shane's post, I would just like to point out that leasing a server from an ISP to run your hosting company is, in general, a bad idea. Why? Well, what happens if you decide you're not happy with that company's services any longer, or maybe you find a better deal somewhere else, and you decide you want to move to a new NOC?

When that happens, you then have to find another server (either buy or lease at that point, too), transfer all your accounts from one to the other, and then close out your account there. That may not sound too difficult, but it is. You should assume at least 15 minutes per account to move it from one server to another. Meanwhile you're paying for the bandwidth used, you're paying for both the old rental and the new rental, and you're paying the labor for someone to move all of those accounts.

Whereas if you'd owned your own server, you could have unplugged it and moved the thing. Yes, you'd have had some downtime, but if you planned it right it'd only be a couple hours or so and of course you'd do the move in the middle of the night.

The other reason I'd never rent a server from a hosting company is that you're really never sure what you really have. As I noted in my post above, no web server should ever run off of consumer-grade parts. But at $650 a month including bandwidth, I really doubt any company would put expensive parts into their servers.

Let me tell you about our first (and only) dedicated server experience. I won't tell you what company we were leasing from, but we leased what at that time was a state-of-the-art system - an Intel Pentium 266 box. I don't recall the exact specs anymore, but we specifically chose the Pentium 266.

Well, a couple months later my SysAdmin discovered that the server only had a P233 chip in it. When I called the company we were leasing from, the Vice President of Sales told me "no, you didn't buy a Pentium 266 server. You leased our Pentium 266 server package, which includes a Pentium 233 processor."

Needless to say, as soon as our 3 month contract was up we were out of there - we bought our own server and transfered all of our accounts over. And we haven't looked back.

I would never again lease a dedicated server to run our company. It may save you a lot of money short-term, but it'll cost you a lot more in the long run. Remember that when you don't own the server, you also don't own the software. So if a dedicated server you have today includes Cold Fusion installed by the ISP, and you move to your own server later, you're going to have to buy Cold Fusion or else you'll lose all the clients who had been using CF on your dedicated machine.

It's always a much better choice to own your server and software.

Jason

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Hosting Solutions, Inc. - www.hostingsolutions.net
Windows NT web hosting specialists.

Jason, I agree with you. This is a business. Like any other business it should be entered into with serious regard, and should be treated professionally. The reason I'm putting up such an argument is this: I used to work for HyperMart. I know the co founders personally. (Brain Farkas can vouch for that, by the way)

HyperMart was started out of a dorm room at Georgia Tech. With a VERY small cash contribution. That was on October 7, 1997. Ten months later, on August 1, Go2net, Inc. bought HyperMart for $6,000,000.

Could you sell your host for six million?

It depends more on a persons will, and vision, and commitment then the amount of startup capital.

Hosting is a business, and yes, it should be treated as such, but all businesses don't have to cost thousands of dollars to start up. And HyperMart isn't the only example of a company that had limited capital. Someone could start a great host right now for under $10,000 with the right people and talent. I guarantee it.

Shane.

Yep, I'll vouch for you Shane. And I do agree with you on most points also. If you have people who are dedicated and have good skills, you can start up a host for a minimum amount of money. Of course, it is much better to have more money to buy top-of-the-line equipment, pay for advertising, etc. But I'm sure it could be done with enough devotion and effort.

Brian

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InfoStar: Web Design - Hosting - Programming
http://www.infostardesign.com

and what about LINUX with APACHE web server? that software is all free

Hi,

yes, jodys.

At my company I set up a small (Debian-)GNU/Linux-Box with Apache.

It's an AMD5x86-133 (~P75) with 48MB-Ram and two HD's (1GB+8GB).
It run's apache+mysql and ProFTP (much more secure than WuFTP).

It's main task is to be a local Debian-Mirror, but there are quite a few (private+project) HomePages on it.

... just took a look on the stats ...
Last month it serverd over 12 GB of Data.
There were about 800MB uploaded (that doesn't include the Debian-Mirroring).
We had 1.5 Million Database-accesses. (Don't ask me what, I don't write that software).

The highest load was 0.7 (That was when some departement-servers replicated the Databases).

The System _never_ swapped ... hmm ...

If you had a dedicated ISDN-line (64K) that server could easyly handle it.

btw: sometimes I run render-jobs on that system. that's the only time the system is fully used

ciao
Anti
btw:
a leased ISDN-Line "just" costs you 10000DM(Setup)+300DM(per Month)+200DM(1GB-Traffic).

A well-founded hosting company is difficult to establish and may take several million dollars for large facilities, bandwidth, support staff, and so on. The better option would be to look at becoming a reseller of anm existing web hosting company or alternatively enrolling in a private-label program offered by some of the larger web hosts.

We have some information posted on our website about this subject, www.hostindex.com
Feel free to take a look.

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http://www.hostindex.com
Need a web host? Search the web's LARGEST hosting directory!

hello, Anti

could you provide me with some more information on setting up a linux server... I have redhat 6...
and will be connected with asdl.

you help would be great

regards

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e n d u r a d e z i n e
endura.co.nz

Hi Jodys,

I assume your hardware is setup !!?
I also assume that with your ADSL you got a box that has an ethernet-connector (at least that's the way I've seen it so far).

Next thing. Yes, RedHat is newbie-friendly.
But you have to consider that security is more important than newbie-friendlieness with a dedicated uplink.

I would go for Debian.
After partitioning you Harddisk (there are many good guides out), just do a base-install of debian and use the Internet Host preselection.

The installation will ask you for a few things ... and if you can't answer them ... hmmm ... maybe you should buy some webspace ... or ask a local Debian/Linux-Expert.

Some month ago I started writting a small guide how to do exactly this, but I never got over the "hardware selection and sizing"-chapter and it's on my home-system (which seems to have gone done last Saturday).
Sorry.

Just check the various linux sites and you'll surely find a good howto.

ciao
Anti