How To Start A Relatively Responsible Hosting Business For $250 Per Year

While discussing how to evaluate webhosts with some friends, we discussed a couple of things that I didn’t mention in that post. One – a subject for another day – is how to analyze pricing information to determine both how badly a host is overselling resources, and how healthy a profit margin (if any!) they’re attempting to maintain.

Another, though, was how to run a hosting business with minimal outlay – which it’s very evident is a prime concern for a lot of wannabe hosts – while still offering a responsible, quality, standards-compliant service.

It turns out you can start a pretty decent sideline in the hosting business for less than 250 USD per year.

The first thing you need is a domain name, which will set you back $10. We actually figure $30, so you can get the .com/.net/.org trifecta all at once. That’s the easiest part; it’s all downhill from there.

Next up, you need some server space. At the beginning, virtual servers are your friend. We hunted around on Lowend Box, trying to find a competent-looking host that offered Xen or VMWare, and eventually settled, for our hypothetical scenario, on This offer from ENSCloud. Cost? $6.95/mo = $83.40 per year, assuming you don’t manage to get a discount for quarterly or annual payment or something like that.

Next up, you’ll want some backup space. The idea here is that you want a lot of space, cheaply; We found this offer from Garman Online reasonably attractive, but it was out of stock, so we picked BuyVM, who offer 50GB of disk space (on an OpenVZ machine) for $59.04 per year.

To be safe, and redundant, we decided to go for a third machine, as well, to be a slave nameserver and to house your hosting website – in this case this Xen offer from HostMist for $42/year.

Cost so far: $214.44, if I’m doing the math right.

Get two SSL certificates at $10/each per year (one for your business website, one for the server you host clients on), and you’re at $234.44. Beautiful.

What does that get you?

A domain, and a cheap ($42/year) server to host it on, and to use as a nameserver.
A nicely-spec’d ($83.40/year) server to host clients on, with 20GB total space.
A third server ($59.04/year) to store backups on, and use as a nameserver.

Of the 20GB space available, you probably have more like 18GB usable, and we’re going to arbitrarily limit you to 15GB of customer space. Why? Running out of disk space is always bad, but you also probably have about 48GB of usable backup space, and 15GB * 3 = 45GB, meaning you can keep three backups without having to worry about disk space.

Now, how do you price this? That’s up to you, and depends to an extent what end of the market you want to target. We’ll assume you’re targeting the mid-level, price-conscious market, and deciding to be ethical and not oversell your resources.

15GB of space / $234.44 = $15.63 per gigabyte per year, which is not particularly bad. Divide that by 12 and you’re looking at $1.30/mo per gigabyte of space in actual cost to you.

Sextuple-keystone that for a healthy profit margin, and you’re looking at $7.80/gigabyte/month, which isn’t unreasonable, honestly. (A hosting plan with 512MB of space would be $3.90/mo, which is quite competitive.)

You aren’t going to get rich off this cluster of servers, obviously. Sell all 15 gigs of space, and you’re only taking in $117 per month; assume you lose about 12% to PayPal or whomever, and… you’re really clearing $100/mo. Considering your monthly costs are $19.54, you’re actually making a profit of about $80/month, or less than three bucks a day.

Ideally you’d re-invest that $80/mo to buy further servers – but if you bought four more such setups with the profit from the first, and filled them all at the same rate, you’d be taking in a profit, before takes, of maybe $350/mo.

Ten bucks a day to administer a dozen servers, and support around a hundred customers?

That’s the harsh reality of the situation, right there. That’s why so many would-be hosts cut corners, oversell their servers horribly, and – all too often – fail within a year – because, basically, they can’t do the math. And that’s also probably why so many hosts these days are run out of the third world – because in some parts of the world $3 a day is a decent middle-class income.

Here in the west, you can start a successful, responsible hosting business with a few small servers, a little bit of capital, and some technical know-how, and provide a quality service. You won’t have any money for advertising, you’ll be living on water and rice under a bridge somewhere, and you’ll be providing support using the library’s free wi-fi, but it can be done.

Published in: Geekiness, General | on November 9th, 2010| Comments Off on How To Start A Relatively Responsible Hosting Business For $250 Per Year

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