Please note, this post is being updated in Q1 of 2020 so please check back later as I add more info.
Why start a hosting company
Running your own hosting company is, in the long run, a relatively easy way to earn money. There are millions of web sites around the world, all of which require hosting so there is a large market to get customers from. The business can be run from anywhere you only need a few basic bits of equipment i.e. a server somewhere to store of your customers' sites, a laptop and an internet connection.
It can be scaled up to be the ideal four hour work week business so that you have the rest of your week to spend on other things. Initially it is worth doing everything yourself but you can outsource support at a later date where you play a flat fee for 24/7 support so that you can focus on finding new customers or spending time outside of your business.
I run a mixture of companies but in a profit to workload calculation, hosting provides me with the most income for the least amount of work. It is also a recurring income where customers are charged monthly or yearly so the money keeps coming in. Hosting customers are also notoriously sticky - even if a hosting company isn't great, a lot of customers will stick with them for 5+ years, meaning that once you get a customer, they are likely to keep providing you with an income for quite some time.
It's not all plain sailing. There are reasons why a lot of people start a hosting business only to give up or sell up soon after getting going. Firstly, because it is so easy to start - you just need some basic equipment and you're off - almost anyone can do it. This means that the market is saturated by literally thousands of hosting companies, each trying to sign up and poach customers from others. This has led to a 'race to the bottom' where some hosts offer ridiculously attractive packages to customers for minimal cost.
All of these issues mean that finding customers for yourself is very difficult and is the hardest thing to do to a level where you can make a decent income from the business.
Finding your own hosting
When starting your own hosting business, you will need to obtain hosting yourself so that you have somewhere to host your web site and those of your customers.
When I first started, I started with a 'reseller' hosting package which was around £20 a month. This allowed me to host my web site along with around 10 of my customers. As the business grew and I took on more customers, I stayed with the same company but moved to a VPS (virtual private server). This gave me a lot more space and bandwidth, meaning that I could host even more. As things continued to grow, I then moved to dedicated servers.
The key is to find a hosting company that you can rely on. Here are a few things that are essential:
- Outstanding support - no matter how technically minded you are, there will always be times when something goes wrong and you need help. Make sure that the hosting company that you chose offers fast support. I've tried many different companies over the years that let themselves down by not responding fast enough, sometimes leaving it hours or days before I could get a response to a query. If one of your customers' sites are down, they will want it fixed. Even if you react immediately and contact your host, if you are left waiting, and waiting and waiting... your customer will eventually get annoyed with you and at some point, move to a different host
- Comprehensive support - again, I have seen this too many times before as well. The last thing a customer wants to hear when they get in touch with a support team is 'the server is fine, it must be the web site'. In other words 'our system is fine, it's your problem'. Yes, sometimes servers are running fine and it is a problem with the actual customer's web site but being shut down with a 'it's not our problem' type e-mail is infuriating and not helpful at all. Make sure your host's support goes 'above and beyond' so that if you are stuck, you know that there is someone you can rely on to help you get things working again
- Maintenance and monitoring - Ensure that your host has comprehensive maintenance procedures in place so that your server is kept- up-to-date with software updates and that the team are monitoring it constantly for any issues. Hosting platforms are open to all types of malicious attacks from hackers, spammers and people generally up to no good so it's crucial that if something does go wrong, the team will realise this and resolve it quickly, hopefully without you or your customers even realising
- Out of hours support - When I have bought other hosting businesses in the past, I've had my hosting company migrate their accounts over for me at 2a.m. This means that my customers aren't affected by any downtime and I don't lose hours of sleep migrating accounts over myself. Worth considering this as you do not want to be working 24/7!
There will be other factors to consider depending on what you want your business to do, how many customers you have / hope to have and what you can afford. I have always paid quite hefty fees for my hosting because I wanted to make sure I was offering my customers a solid base to put their accounts on which was supported by a great team.
One thing to mention here is that it is not worth setting up your own server in your back bedroom. I understand the benefits and the lure of it. Hosting your own server provides you with a huge amount of disk space, meaning you could host hundreds, probably thousands of accounts without having to pay vast hosting fees. Having the server in front of you means that you could perform some tasks much quicker, as you could use the GUI of the operating system, rather than doing a lot of the work through a terminal window. I understand the attraction and whilst I have toyed with the idea myself, I have talked myself out of it every time.
Running your own server means that you do not have the support of a specialist hosting team if you need it. Yes it's great setting up your own server and keeping it running but over time, things get complicated and you will quickly find yourself out of your depth with no one to look when you need it. There are also redundancy considerations to factor in; what if your internet connection goes down? You will need at least one other, independent connection, to ensure your server stays online all of the time. The same is true for power. UPS batteries are fine but only last a few hours at max. If your house gets plunged into darkness because of a power cut, your customers will all lose access to their sites and e-mails, potentially for days. This is where paying for hosting comes into its own because a decent host will have redundant power supplies and internet connectivity. Your systems will be housed in a large, secure data centre and not sitting on a shelf in your back room.
When I started, a ran a piece of free help desk software on a spare PC which sat under my desk. This was good to start with as it allowed me to easily manage the support tickets that I received from customers. I was also able to set it up so that the help desk could be accessed remotely, meaning that I could continue to work even when I was working outside of the house. The problem came a little while later when I was staying at my girlfriend's house, an hour away from my place, and the help desk system crashed. Immediately I was stuck. I couldn't do any work because my list of jobs was no longer accessible. The only option was to do a two-hour round trip to reboot the PC and head back. Whilst a pain, it didn't really affect my customers. However, if this was the server used to host my customers' sites, it would have been a major issue not just for me but for them as well. My phone would have been ringing off the hook whilst I desperately tried to drive home, reboot the server and get things working again. Even worse had I gone on holiday and the server had failed.
My point is, invest in good, managed hosting and don't be tempted with creating your own set up.
Other hosting considerations
You should also ensure that your customers are not able to tell which host you are using. To them, they think that you set up and manage the servers yourself so you need to find a host that offers custom nameservers. There's no point selling hosting and then telling your customers to point their domain name to the 123-Reg servers - they will realise that you are just reselling them the 123-Reg hosting packages but charging them more for it.
Also, make sure you host your web site and e-mails on the same platform. This has a number of advantages. Firstly, it ensures that you see things from the customer's point-of-view - you will have set up your web site and e-mail accounts using the same system that they will be using. You will therefore be more familiar with it and be able to give them better support because of it. Unlike most of your customers, at first at least, you will likely be sat in front of your computer most of the day, building your business. If there is a problem with the hosting for any reason, for example the e-mails stop working, you will be immediately aware of it and will be able to fix it hopefully before anyone else notices it.
The downside to hosting your own site / e-mails on the same system as your customers is that if there is an issue with the server, your customers won't be able to get in touch with your because your site / e-mails will have gone offline too. That's why it is important to have a telephone number (more on this later) that your customers can call, if all else fails.
cPanel, Plesk or others - which hosting platform to use
A lot of the big hosting companies (GoDaddy, 123-Reg, Ionos etc.) use their own, custom control panels. This is something that they have invested heavily in over the years to create a custom solution that is suitable for them. There is no point in investing in something similar for yourself, especially at this early stage. The two most common control panels used by most hosting companies are cPanel and Plesk. Each has its advantages over the other but if this is your first toe dip into the world of hosting, I would suggest building your hosting platform on the cPanel system.
I have always found cPanel easy to use and easy to migrate customers over to. Over the years I have bought a few smaller hosting companies and integrated them into my existing systems. Each time they were cPanel or Plesk based. cPanel provides easy-to-use tools to transfer sites from other hosting provides, on to your own server and with practically zero downtime for the customer. Because cPanel is so widely used, chances are that if you get a new customer who already has hosting, they will already have a cPanel or Plesk-based hosting account so you will be able to easy migrate their web site and e-mails over to your system, without too much trouble. Good for you and good for your customers.
Get your systems in place - web site, e-mails, phone number and help desk software
I understand that you may have imposter syndrome when you first start out because I did too. Why would anyone trust me to host their web site and e-mails? I'm just a guy with a laptop. Despite how you are feeling on the inside, you need to promote a professional, trustworthy appearance to your customers. This means setting up an attractive, easy-to-use web site so that customers immediately feel confident that you can offer what they need.
There's no point asking a develop to build you a custom site. Just hop on to Themeforest, find a template you like and start setting up your site. I would suggest either a WordPress or Joomla site as they are my personal preferences.
As the business grows, you could move over to using a WHMCS theme. WHMCS is a popular account management portal that allows customers to buy your hosting packages online, raise support tickets, manage their domains etc. It is used by a wide variety of hosts but it does come at a cost of around £10 a month. That's not a huge amount but the key at this stage of the business is to keep your outgoings as low as possible - more on this later. I have never used WHMCS to start my hosting companies. I have bought a couple of companies that used it but I have phased it out over time. Whilst I appreciate it does make life much easier as customers are provided with a self-service portal so that recurring invoices and payments are handled by the system, automatic reminders are sent to customers, domains can be renewed automatically... all of this means you do not need to get involved and the business can partly run on auto-pilot, I've just always prefered to keep my costs down as low as possible.
Create the content
Now that you have decided what your unique selling points (USPs) are, you can start writing content for your web site. Ensure you write the content with these in mind so that customers understand why they should choose you.
Also make sure that you have an easy to find and detailed 'contact' page. Customers want to know that they can get in touch with you if needed so add as much information here as possible - e-mail contact, telephone, contact form and even your postal address.
Sign up forms
Now you have your web site in place, you need to create methods for customers to sign up. As mentioned earlier, there are pieces of software like WHMCS that you can plugin into your web site which will take care of billing, invoice reminders and customer account creation but these take time to learn and cost money. It's far better to use free alternatives at this stage and upgrade later on once you have established that the business can work.
I use PayPal subscription buttons because:
- You can set up a business PayPal account for free
- They are a trusted and well recognised brand
- There are no monthly charges, you only pay when you get a customer (they take a small percentage of each payment that they process)
- They have inbuilt tools to allow you to create sign-up buttons
- The subscription buttons will automatically take your customers' payment each month and credit your account
- If a payment is unsuccessful because, for example, the customers' account has no credit, PayPal will e-mail you to let you know so that you can inform the customer and you're not running accounts without getting paid for it
- PayPal have a great guide on their web site which explains how to create a subscription button. Once done, you can then just copy / paste the code into your web site and all customers have to do is click on the button, enter their
- PayPal details and you will get paid automatically every month.
As with the billing software, you can also add other payment methods into your site but these usually cost money. Credit card processors are fine but there's usually a month charge whether you make a sale or not. Start off with PayPal and if the business takes off, you can add in other payment providers later.
Test, test, test!
You have invested a lot of time and effort into starting this business. Before you release it into the wild, make sure your web site works. Test the functionality, make sure there are no broken links. Read and reread all of your pages to make sure there are no spelling or grammatical errors. Make sure your sign up forms work.
I hate doing this part because it's time consuming and boring BUT I would far rather check everything twice than lose customers at the crucial sign-up stage because I'd made a stupid mistake.
I have only ever used two e-mail accounts for my businesses. support@ for customer support requests (help desk system) and info@ for everything else. There's no point having sales@, admin@, james@,complaints@ etc. etc. to try and make your company look bigger than it is. Just use two so customers know how to get in contact with you easily and you are not trying to juggle e-mails from 15 different accounts.
To be honest, it is rare that I receive phone calls to my hosting business number. The vast majority of support requests and first contacts from new customers are made via e-mail. That said, having a telephone number is important. Firstly, it shows customers that you can be contacted immediately if needed. Many smaller hosting companies don't have a support number and this puts a lot of people off from using them.
Some companies have a phone number but only staff it with sales people, meaning if you need support, you have to use their online support system or e-mail in. It tends to be only the larger companies that offer telephone support so make use of this and offer it yourself. It gives you an edge over your competitors.
I had a new customer call the other day, simply to check to see that we answered the phone. He was having problems with his current host. They were not responding to e-mails and they didn't have a number to call on their site so he was desperate to move to a new host and one where telephone support was guaranteed. It's a quick, cheap and easy way to get an advantage over your customers.
I have set up a 'local' telephone number with Voipfone. Their system is extremely comprehensive so allows you to do lots of clever things. I have my number set up so that when I'm at my desk, calls are directed to my landline. When I leave the house, Voipfone's system knows that I have moved, because of the GPS app on my phone and automatically redirects calls to their virtual receptionist service. This means that whilst I'm out, calls are picked up by their team and then they e-mail the details to me. My calls are always picked up regardless of where I am or what I'm doing. Use this link and try their service for free with a 30-day trial.
Help desk software
Regular readers of my blog will know that I am a massive fan of help desk software. I used it for years whilst managing various departments in my 'real' jobs and when I started my own business, it was one of the first things that I spent time on getting right.
Help desk software allows you to communicate with customers via e-mail but because messages are in the software, it stops your inbox from getting clogged up. Jobs can be scheduled for specific dates and times, reminders can be sent to you if a job has not been completed in time or reminders can be sent to customers if you haven't received a reply from them. If you only used standard e-mails to manage jobs, you would quickly end up with a mess of an inbox, unsure of what job needed doing next or which needed doing at particular times. Help desk systems convert these e-mails into tickets which can then be listed in order of importance or the time that they need to be done by.
I even use my help desk for managing sales enquiries. If a new customer gets in touch, I immediately forward the e-mail to my help desk software, convert it into a ticket and reply to them from there. Once I have replied, I set the 'due date' to a week's time so that I can send a friendly follow-up e-mail if they haven't got back to me already.
As ever, it is vital to keep costs down at this stage so search for a free system to begin with. You can always invest in something better later on. I now use Zoho Desk which is extremely powerful yet relatively cheap and very easy to use.
Keep your outgoings to a minimum
Starting a hosting company is relatively quick and easy. If done properly, you can also do it for not a lot of money however as we'll get to a bit later on, finding your first customers is difficult. That's why I strongly suggest you keep your outgoings to an absolute minimum because you need to give yourself a long runway to be able to get the business going. The last thing you need is large, monthly bills for huge servers that you have no chance of filling in the first months. Start off small and build up your outgoings only as needed.
USP and pricing
As we have mentioned already, the market is saturated with hosting companies already. This makes it difficult to stand out from the crowd and offer something different so that people chose to host their sites with you, rather than a competitor. This is something that you will need to consider thoroughly because the outcome of this will determine whether your business will be successful and whether it can be sustainable.
One thing which you will never be able to compete on is price. There are plenty of big hosting companies offering ridiculous packages with 'unlimited' disk space, massive e-mail accounts, free SSL certificates... all at stupidly low prices. The only way this is sustainable is my having such a huge number of customers that even though each one may only shake out to a few pence in profit, overall they are able to make a decent profit. You may get to hundreds of thousands of customers one day but right now, you need to earn enough to make a living so price your services fairly, not stupidly.
What I did create a hosting company that offered a fair price for standard hosting but combined it with excellent customer service. Like many sectors, hosting has driven itself into the ground by cutting prices and cutting corners. With most hosting companies now, if you get in touch with them for support, you have to wait 'in line' on the phone for ages before you are able to speak to a real person. When you get through, you'll be taken through the security checks, then finally you will be able to explain your problem. Once you've done that, they will probably just put it into their system and someone will get back to you within '2-3 working days'. Agggrrrhhh!
People like people to help them so what we try to do is get to know our customers properly, fix any issues that they have straight away and generally be good to them. They are after all paying our bills for us!
I'm not saying this has to be your USP, although certainly good customer service is essential. You may prefer to focus on offering hosting for a particular group of people e.g. WordPress site owners, schools, charities... but whatever it is, make sure that the market isn't already saturated with someone else doing the same thing. It's called a Unique Selling Point for a reason.
Getting your first customer
Now, here comes the tricky bit. Finding your first customers. There are several ways to do this and here's what has worked for me:
Local business meetings
When I first started as self-employed, I was contacted by another local company, asking me to attend a business breakfast meeting. At first I was hesitant (imposter syndrome again!) but I eventually took up the offer and managed to get six customers from that group.
There are lots of organisations that offer business breakfast meetings so do your research. Some are pay-as-you-go which means you generally pay around £15 to go along, have breakfast, introduce yourself and then have a few one-to-one meetings so that you can share what you do with others and learn a bit about their business. These are pretty useful for building connections in the local community and will hopefully allow you to find a few customers to get you going, with minimal expenditure.
As already discussed, there are literally thousands of hosting companies around, some of whom have been running for 20+ years. You're never going to beat the big players in the national Google searches so don't even bother trying to optimise your site for major keywords such as ‘Wordpress hosting' or 'best uk web host'. What you can do though is optimise it for your local area so that you come up top for 'web host in Canterbury' or wherever you're based. A lot of companies have found me over the years because I employed a similar tactic. A lot of businesses like dealing with other local businesses. Don't worry though, this doesn't mean that you will ever have to meet them (you are a web host, not a local techie). I've got a few customers that are local to me but I've never met them and there's no reason why you should either.
By far the best and most successful ways that I have marketed my hosting business. I haven't checked but I would say around 80% of my hosting customers have come to me via e-mail marketing. It's free, can reach thousands of businesses and very easy from a technical point-of-view. It is not easy however from a marketing perspective so you need to ensure your outreach e-mail stands out (for a good reason i.e. well written) and isn't pushy. You won't get anywhere by pumping out 10,000 poorly written messages a day. What you need is an honestly written message that is pushed out slowly and steadily.
How not to advertise
See 'local SEO' above.
I did dabble with this a couple of times but it is a complete waste of money. There are so many people involved, the average bid for a major keyword like 'web hosting' can easily cost you £20 a click. The big companies do it because they can afford to make a lose like that and 'up sell' products to their customers later on. When starting out though, £20 a click is a lot of money and remember, that's not £20 for a guaranteed sale. That's £20 to get someone to your web site and likely 90%+ of those people will leave without buying a thing.
Growing the business
The whole point of setting up your hosting business is to create a sustainable, passive income which enables you to do what you want with your free time. Starting the business is hard work and because we are determined to keep costs to a bare minimum, you will be doing a lot more work yourself instead of using paid for software and scripts which will do most of the routine work for you.
As the business grows, so will the income and so you can start using some of that extra money to invest in software and services which will give you even more free time.
Here are some which I've used and can recommend:
- WHMCS - not the most intuitive piece of software around but completely web based and will take care of automated routines for you such as account creation, customer invoicing, payments and automatic domain name registration. Other systems are available but WHMCS is the only one I have hands on experience with but it's worth doing your research
- outsourcehostingsupport.com - you can outsource a lot of your technical support to these guys for a fixed fee each month. They will log into your support system and answer customer questions and resolve technical issues for them. They will refer any billing related queries for you to manage. They have a range of packages depending on the hours you want them to provide support and the number of customer queries you expect each month.
Adding more customers
Buy customers - acquisitions
One way to start making money quickly and without the effort of advertising is to buy customers from an existing web host. There are almost daily posts added to sites like webhostingtalk.com where people list their hosting companies that are up for sale or just their customers. A lot of people start a hosting business focusing on smaller customers and just offer reseller hosting plans. They then move on to VPS or dedicated server hosting which offers higher profits and generally less work so they sell their 'standard' customers.
That's what I did, I bought a large number of customers from another web host who was moving on to focus on VPS and dedicated server hosting. Of course you need to do your due diligence and there are plenty of people willing to screw you over and run away with your cash. Make sure you do lots of work establishing the number of customers that they are selling, what their profits are like and what hosting plans they are on. There's no point buying a thousand customers who are paying £1 a year for hosting and get 20GB of disk space allowance - that is not a profitable business model.
You will need to consider if you are going to take on the existing web hosts server or migrate the customers over to your existing server. Keeping them where they are is easier but you will then be paying for another server each month - can you afford it and technically, can you manage it.
Some hosting businesses are easier than others to take over and turn a profit. The person that I bought the customers from had more outgoings. They had a monthly support package with an outsourcing firm to manage customer queries. I immediately cancelled that, took on the support myself and saved the money. The also used WHMCS and other pieces of software which had a monthly licence fee. I moved all of the customers over to my existing server set up and cancelled these licences.
These changes did create extra work for me and I had to set up each customer's billing and migrate their web sites from the existing server over to my own but it was worth it to reduce costs. It also made life easier because once all of the customer accounts were migrated, I cancelled the second server that I had inherited which immediately reduced outgoings even further but it meant that all of my customers were on the same server set up, meaning I only had one system to manage instead of two.