Things you must know before starting a new Hosting company


Things you must know before starting a new Hosting companyAlmost each and every webmaster feels at some point of time that he should start his own webhosting service. Even many times shared hosting is good too to start with. Here are some things if you don’t know anything regarding hosting business.


How to get customers?
There are many, ways to get customers. Look all around the Internet and you will notice many advertisements for web hosting. You can try things like:

Adwords (I.e.; Google) this system works decently, but you really need to be able to pour money into it to get any results. Remember, a lot, and I do mean a lot of graphics and Warez sites encourage their members to randomly click the links to make some money. Of course, that is not just limited to those two, but from previous experience from use and friends use, it’s just not worth the money.
Adverts like First off, it costs a fair bit for a new company starting out. Most of the ads are attractive because they tend to offer low pricing and put that in bright blaring colors. It’s a great way to get the name out there, but can you really compete with all the other big names out there right from the get-go?
Local advertising: Check out the local businesses. Do they even have a site, or, if they do, is the site hosted on a quality server, do the page take forever to load. You can attempt to meet the managers or owners of the stores by cold calling (just showing up) or better yet, call a head and make an appointment. It shows them that you are able to manage your time efficiently, and you aren’t simply another solicitor. (Also, some stores ban solicitors and a bad reputation is last thing you need).
Word of Mouth: Now this is my favorite option. You slowly build a customer base and eventually word gets out. You run a tight ship, good page load, under or decently sold servers. This is the most effective method. People are hearing from those who have first hand experience and feel that they can trust the company even more. It generally takes a lot more time than the above mentioned so it’s best to combine them. Personally, I use WoM and a bit of local advertising.

Control Panel:
To set up clients with their web hosting accounts and to keep things easier for you, you will want a control panel. This will basically make things easier for you to perform your administration tasks. There are tons of control panels out there, which one is right for you?

cPanel: Let’s just start with the most obvious one. cPanel has become a major trend in the hosting industry lately. It is probably as popular as it is due to having features like Fantastico and RvSkin and a fairly low entry price. These features allow those who are less acquainted with hosting to easily manage their sites and play around with it. This is a great tool for entering the industry, but personally; I hate it. It breaks too easily, the updates are a pain and generally mess something up, etc. (Full Disclosure: This is a bit of a biased view from an H-Sphere lover).
DirectAdmin: A very simplistic control panel in terms of navigating and fairly powerful. It has an add-on called Installatron which is much like Fantastico. Great for those who do not know how to manually install scripts and the like, or they just want to play around. From my experience DA rarely breaks and uses fewer resources than cPanel.
H-Sphere: is a dual platform, multiple server clustered solution. It incorporates complete automation and integration of all facets of business including server management, billing, helpdesk, and registrar and SSL services. Combining services clustering with High Availability clustering capabilities makes this platform the ultimate solution for web hosting and IT services providers. The benefits of automation and clustering are often not realized until achieving at least 4 or 5 servers, however, once a company reaches that capacity, the benefits are overwhelmingly obvious. The drawback with this platform lies in its complexity – particularly for resellers and system admins. The learning curve is steep and it is highly recommended that you acquire expertise on this platform or outsource expertise before trying to admin this solution. Many startups will report problems, however, often times, the issues they see are a result of their own inexperience with H-sphere, vs. inherent problems with the solutions. It is highly recommended that maintenance packages are purchased from directly, or another management company with extensive experience in this platform.

Plesk: Personally, I’ve never used Plesk, and not all that many web hosts offer it in terms of shared hosting. Plesk does have a Power Pack which is like the Installatron offered for DirectAdmin. From the documentation I’ve read and others who have spoken to me about it, it’s a great panel to manage a server, but not to necessarily offer in terms of shared hosting or reseller. Another reason that it isn’t very easy to find hosts who provide it would be the price, it is fairly expensive to obtain and the company prefers to work with larger license purchases than many start-up hosting companies are going to be able to reasonably afford.

Just to note: Easy installers such as Fantastico and Plesk’s Power Pack are a bit of a pain. The auto script installs can be a security nightmare. For example; someone can auto install an app, not like it, and instead of deleting it … leave it. Leave it around for ages and wait for it to be exploited. Good times there, I assure you. Also, these are just the 4 more popular control panels out there. A quick search at your favorite search engine will find more but these are the most popular and thus more people are accustomed to them so providing them with the familiar is a good way to attract clients.

Windows or Linux:
Well, this section I’m not really going to touch on in regards to stability, which is better, etc. Everyone has their own opinion and it’s really up to the user and what they are more comfortable with.

Linux: Free! Plenty of open source applications, cheaper software (in general), and is quite easy to secure in regards to learning and hiring companies. Many 3rd party companies out there that specialize in Linux security. Personally, I love it; it does what I need and when I need it to do it. Done. For me. The administration is generally more difficult for those people who are more familiar with Windows.
Windows: Licensing fee and most of the software for it also is expensive. It is equally reliable with suitable administration. I have done some experimenting with it and found that it’s OK. As a word of caution DO NOT forsake a qualified management company. You can not install a cheap software firewall and be done with it…
Overall: It seems that most prefer Linux over Windows due to its cheaper acquisition cost, more open applications, and just its general use. The LAMP stack (Linux Apache MySQL and Perl/PHP) is the most common for these very reasons – stability, price, open source nature, and functionality.

What is management? There are a few options here. Do you want end-user support for your customers – meaning that the company that manages your box also takes care of your customers support issues. If you can afford it, it’s better to hire your own staff, but, of course, that’s just not feasible for many.

A good idea is get a managed or semi-managed server from a reputable company with multiple backbones. By multiple backbones we mean multiple bandwidth providers; for example; Savvis, Level3, InterNAP, and MCI. After this, now that the server is taken care of, you will want to find another management company that will keep an eye on the box, install some protection, and provide end-user support. Some of the more popular companies are: TouchSupport, Acunett, Serverwizards and PlatinumServerManagement (cPanel only for PSM).

It really does pay off to get everything professionally done, unless you can afford to pay the fees for in-house staff. It will mostly depend on your budget and how serious you are about this venture.

Price wars:
This is probably the main reason the industry is getting a semi-bad name. With so many new companies (and older ones) that are “overselling” (selling more bandwidth, space, and server compute cycles than they have truly available in hopes that few people actually use their allotted resources) so badly it has become ridiculous. $8 a month for 11 GB of space and half a terabyte of transfer… What? How does this work? Think about it, you have to factor in: Power, the server itself, bandwidth, management, staff, etc. One might ask, “How the heck is all of that being offered at that price?” It’s basically in the hopes that 99% of the customers use just a small percentage of what they are sold. Most of the companies that offer this have Terms of Service that make it nearly impossible for you to actually use that bandwidth or space. Remember, nothing is infinite and certainly not bandwidth.

If you intend on offering a professional service and you have invested into this company, then charge your worth. Sure you won’t get those kids who have mommy and daddy’s PayPal or Credit Card and want to spend $5 a month for more space than they have on their PC. Good riddance in my opinion. Don’t compete by driving your prices lower and offering more. Instead offer a quality service, creating a value to your potential clients is far more important in the long run then offering less expensive prices. – This is also where Word of Mouth really starts to matter. People will pay more just because they see how happy other folks are to do business with you.

What is bandwidth? :
So many people seem to not know exactly what bandwidth is and what the difference between a 10 and 100mbps port is.
The difference: The ports are how much traffic can go through the server at a time. You only need 100Mbps if you are trying to push more than 10Mbps at any one time. Upgrading will not increase the speed. Only when you transfer more than 10mbps will you notice a difference.
What is “Mbps?” It’s basically a unit used to measure data transfer. You, of course, know what a GB and a megabyte is. Basically, every time someone accesses a site on your server, they are using bandwidth. They are downloading pictures, content, pages etc. A simple way to think about it: The more graphics you have on a page, the more bandwidth is used. It’s that simple. Just like an elevator: The more people in it, the more power it uses, the less, the less required to move it. Just a quick easy way to remember how bandwidth affects you and your server.

What is this un-metered and unlimited thing everyone is talking about? :
Let me start off by saying there is No such thing as ‘unlimited’. Everything is finite, except maybe the universe, but that’s a different topic. You have most likely seen those hosts offering unlimited space for $5 a month. Good for them; so, who’d you kill to steal the unlimited hard drive. There is just no such thing… There certainly isn’t with bandwidth.

Un-metered is simply stating that you have X amount of mbps allowed to you and are capped. Let’s say I bought a server with 10mbps and maxed out the connection day and night for an entire month (easily done). That’s around 3000 GB, or 3 terabytes, worth of transfer right there. That is what un-metered is. If it was truly unlimited then you’d have no value there – that’s the big difference, you’d be able to transfer 100 terabytes, 1000 TB, infinite even!

What is ‘burstable un-metered’? Well, that’s just a bit different. An example might be that you are guaranteed 20mbps but have a 100mbps pipe (port). Now, if you get a major spike in traffic you can then go above the 20mbps to accommodate the traffic without slowing the site down due to too many people (packets) trying to fit into the doorway (port). Quite often it is referred to as something called 95th percentile.

“When ISPs bill as “Burstable” Internet bandwidth, the 95th or 98th percentile usually cuts off the top 5% or 2% of bandwidth peaks in each month, and then bills at the nearest rate. In this way infrequent peaks are ignored, and the customer is charged in a fairer way.” – Source:

If you are still confused, just Google ‘95th percentile billing’ and you will come up with a multitude of sites and at least one should allow you to understand.

Dedicated vs. Reseller:
Everyone has their own opinion here, and I have mine. For those with a lesser budget I suggest just starting with a decently priced reseller with a reputable company. Just find one that offers everything you need. Even those with a large budget might opt to just get a reseller for starters; if that works for you then go for it.

Personally, I feel safer on a dedicated because then everything is run by me and my management company. Then you know there are backups and RAID in place properly, you know how the server is acting and you can find out why its load is spiking. It is better having control over what is going on. Of course this means you need more money to start with, you have the potential to lose more, etc. You have to find the balance somewhere and most importantly you have to do what is best for you and for your clients.

It’s completely up to you, the owner of the hosting company, as to how you want to run the business. This article is not here to give all the answers but rather to provide you with opinions based on personal experiences, reading, helping, and from being in the business.

To co-locate, or not to co-locate:
This is a big one for people. Should they simply rent a server, or should they co-locate one. Co-location (sometimes called colo) does cost more initially but in the long run, if you plan on being in business for awhile, this will actually save you a lot of money.

Of course there are the troubles with building the server, deciding what you want, then shipping, electricity bills, bandwidth. That’s quite a bit of extra work… If you do opt to go this route then know that it’ll be worth it in the end. Do make sure that you buy spare parts and ship them with the server; you will need those on hand for emergencies. Any datacenter worth its salt should be more than willing to hold them (and, if they’re not local, install them) for you.

If you are a feel like you’re not quite ready or fully qualified and you don’t have the money for a support staff then it might be easier to grab a 100% managed server. Then you do not need to worry about hardware swaps, upgrades, updates, etc. It’s all taken care of by them. Of course you learn anything that way and if you have to move things on your own you could be in a bit of trouble. If you know very little about the process (sure hand holding is great) you will still need to learn how things work. Then again, if you know little about the process, business, and applications you might want to re-think the idea of opening a web hosting company.

Presales Questions, what to expect:
Many people believe in the common misconception: Sales work 24/7 and 365 days a year. The reality is that few pay for ‘round the clock’ sales staff when sales won’t even begin to generate anything near the costs (unless you are a huge company, and if you are, why are you reading this?). The common hours are regular business hours, 9-5 Monday to Friday. It might be good to extend it just a bit, maybe along the lines of 9-7 and just have yourself or a partner can also do some work weekends. Don’t guarantee responses, but if you have 5 minutes and notice an e-mail or two, just respond to them.

Expect any question; Train your sales people well, or train yourself well. You need to know what the server is doing, what it can do, and what you should let it do. If someone comes to you and says “Can you host a forum with 400 simultaneous users?” Well, I hope you turn them to a company that offers dedicated boxes, or offer to sell your own. As there are limitations, after all, when it comes to what your box and any system can handle. It is important that you know those limitations and that you don’t try to exceed them.

Two servers, what? :
When you get large enough you have a few options. You can cluster or you can just buy another server and put all new accounts onto it.
Clustering: You can buy another server of the same specs and put MySQL onto it. This frees up a lot of memory and CPU usage and allows you to add quite a few more clients onto the server. If you go this route, H-Sphere is probably what you want. This way, you can even offer Windows hosting as well or vice versa if you are offering Windows.
Adding another server: A much easier route. You get a new server, secure it, etc. Less hassles about communication and the like, but if you have a top-notch management company working for you, you just might want to cluster.

Dual Processors vs. Single:
It’s amazing how far single dual core processors have come. In benchmarks, some dual cores are coming close to their companion dual CPU boxes. Of course, these are benchmarks. Dual cores can handle just that much more information being fed to them and work that much harder. At the moment, Intel’s dual cores are OK, but not great. They share the same FSB (Front Side Bus) which is already low to begin with without adding another core to the mix. The next generation of Intel wares should fix that though and it should no longer be a problem.

You can simply start with a Pentium 3.2 GHz (or less) and move your way up to needing a dual core server. I personally prefer dual Opterons to dual Xeons. Opterons just perform that much better, and if you are co-locating your box, they run so much cooler and use less power. That is a major plus with the rising prices in electricity nowadays. The constantly rising price of utilities is something to keep in mind right from the very beginning.

OK, backup. A preferred setup is 2 hard drives in the server and to use RAID on them. Please note, RAID does not make it invincible in the least. Quite often, when the first drive gets corrupted, so will the second one and you are, ‘screwed’. RAID is a backup measure in the case the first HDD just dies on you.

Even if you have that setup, you want probably want to save all of the data somewhere else for redundancy. This is also called off-site storage. For example; you can use a service such as You buy space there, and set up your server to transfer a copy of your data it over to their servers every night or every week or however you want it to work. Now it’s quite hard to lose much data other than the changes since the last backup was made.

Another good idea, in addition to the above, is to download a master copy and then changed files to a dedicated computer in my house that has a firewall that only allows it to access the internet during the backup procedure. At all other times that computer has no access to the net and only that IP is able to send anything to and from. Yes, this is extremely paranoid but it works and triple redundancy is a good feature. It is in your best interest to let your clients know that you do this and to allow them to opt out of it as they may not want you to have a copy of their private data located at your house.

Initial Monetary Funds:
Alright, where are you going to get your money? Are you simply going to hope for the best with a $10 reseller account and just hope to make enough to grow to a dedicated, then a rack, then a cage, and hopefully a shiny datacenter all your own? This is what really separates the true hosting companies. Assuming you have thousands to put into this, let’s continue. Expect around 6-12 months of absolutely no profit unless you are marketing heavily. It takes time to build up a decent client base at which point it may still not be profitable but hopefully will be a sustainable business meaning that it pays for itself. In the mean time you need to be able to afford to keep your company out there until reach that plateau. This is where a lot of kiddie hosts end up going out of business. They don’t want to wait 6 months, they want to wait 6 days and they hope making tons of money. Some of them do but they do so at the expense of their clients and they are nothing more than scam artist.

You must always keep a positive mind and keep marketing. Don’t give up, it just takes time. How much should you have to start? That really and truly does vary. Some people say you can start with as little as $2,000 however anything under $10,000 is too little to be able to last any amount of time. You need the licenses, server, billing/helpdesk software, marketing, support, etc. You really need to be able to invest if you want this to go off smoothly. – Don’t get me wrong, there have been companies that have started with barely anything and managed to grow it is just so unlikely that the risk isn’t worth it.

Finding Your Niche:
What’s a ‘niche’ one might ask? A niche is a little corner in the industry you have carved out for yourself and cater especially to that little area. I.E: E-commerce solutions. You promise the most secure servers, etc. and mainly deal with those types of sites.

How do you find your niche? Well, what are you interested in, in the online world? Do you love anime, E-commerce, dynamic sites, forums? It’s better to find a niche that you enjoy and actually want to learn about or already know about. This way you can provide a better service to those out there.

Your Site:
This really is the main part to a company. A visitor comes to your site… what do you want them to see? Another template from a company like Template Monster that so many other companies use…Or something professional looking? Custom designed sites with no glitz and ease of use are probably best. Make them easy to navigate and easy on the eyes, with relaxing colors. A site says a lot to a visitor and a well-done one will say ‘Professional’. Remember that your site defines you and is exactly how people will know you best online. Just as you would in the business world – dress for success. You would not go to a business lunch in either a gaudy flashing neon suit or ripped jeans, use that same approach for your business website.

Legality Issues:
Oh boy, not enough people pay attention here. As many people do not know, it is illegal in most countries for anyone under the age of 18 to enter into a contract with said person. Pretty much, nothing happens after, no guarantees, etc. If you are under the age 18 wait until you are older, or co-sign with your legal parents/guardians. Wait, even if the only reason you opt to wait is because you’re young and should be enjoying life as opposed to trying to run a business. You should be out on dates, having fun, and spending time with friends and family.

To those who are older and are serious please read on. Spend some time with a lawyer, it really is worth it. Get a customized Terms of service and Acceptable Usage policy drawn up the way you want and without loopholes. This is especially important for niche hosting companies that have specific requirements. For those who really just want a template, a site like does wonders. I still highly recommend seeing a lawyer though, you won’t regret it. Consider it a start-up fee and provide them with a retainer so that they will be in your service whenever you have need of legal advice or defense.

If you get H-Sphere, it has its own billing system integrated and you can just use that. For everyone else there is and in tandem. Those are two great pieces of software to use. There are plenty others and a bit of research will show you the various options that you have for billing or helpdesk software.

How much can my server hold?:
This is an extremely common question, and it generally starts with, “I know that there is no solid answer but…”

It depends on what you are hosting; dynamic or static, or a combination of both. Let’s assume your hosting dynamic since that’s where most websites are or are heading to. On a single processor you want to worry when the load is goes above 1% utilization of CPU compute cycles or when there is a noticeable sluggishness in the response of your customer’s websites. You can setup things like to boost your PHP performance and increase the overall page load speed. If you plan on running a really professional business then you should actually undersell. Don’t ever let it even get to the point where you have to worry about it. Your customers will love you for it, and you won’t have to deal with the hassle. This ties in exactly with the word of mouth that has been mentioned previously in this article.


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