# Starting a hosting company



## netnub (May 17, 2013)

I'm looking to start a hosting / vps company. I have worked with servers for multiple years, I'm seeking advice on how I should go out and proceed with this.


I have a plan, I have the funds, just I'm not good at advertising/marketing.


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## Noerman (May 17, 2013)

I wonder the same. I have been in hosting biz but on closed network only (all my design clients).


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## BK_ (May 17, 2013)

A few pieces of general advice from me would be:


Learn from your mistakes.
Have very clear policies (TOS/AUP) from the start.
Don't launch until you're completely ready - this includes the full website, billing system, etc.
Don't plan on being profitable immediately. Have adequate funds ready.
If you're only in it 100% to make money, it's the wrong industry for you.


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## netnub (May 17, 2013)

BK_ - I have thought about those, I have roughly $400, I'm sure it won't make profit fast, but $400 should give me enough for about 3 months with 0 profit.


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## Noerman (May 17, 2013)

Please define costs that may arise, such as Solus , WHM, WHMCS etc.


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## Mun (May 17, 2013)

SUMMER HOST!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

See this is LET, just new forum style.


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## BK_ (May 17, 2013)

netnub said:


> BK_ - I have thought about those, I have roughly $400, I'm sure it won't make profit fast, but $400 should give me enough for about 3 months with 0 profit.


 

Make sure you have a solid plan in place, and as much as I don't like to say it: have an exit strategy. There's nothing worse than having a few dozen paying customers that aren't cutting it and shutting your doors while leaving them in the dark. I've seen it happen in the past, and I'm sure you can agree that there's nothing worse than completely abandoning your clients.

Also, one more piece of advice: the market is quite populated. Find a location or a niche product you can offer that other providers cannot.


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## coreyman (May 17, 2013)

netnub said:


> BK_ - I have thought about those, I have roughly $400, I'm sure it won't make profit fast, but $400 should give me enough for about 3 months with 0 profit.


$400 won't even get you a decent website. How is that going to last you three months? You going to get a cheapo dedi from OVH and make really low margin? What about your licensing costs? What billing system will you use etc. Sounds like a summer host.


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## netnub (May 17, 2013)

Noerman said:


> Please define costs that may arise, such as Solus , WHM, WHMCS etc.


What I'm thinking here is:


VPS w/ cPanel and WHMCS (Might use eleven2 reseller with free whmcs to save money for now - if eleven2: $19.99, if vps with cpanel and whmcs, rougly $30)


Dedicated Server(e3-1270v2, 32gb ram, /26, 4x 500gb ssd OR 4x 2tb (same price), 1gbit port) : $120 (+ a discount I've been offered if I sign a 3 month contract it brings it down to $89/mo)


Domain: Already have one thats been idling and expires in 2015


Solus: Don't intend to use. I created my own panel.


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## netnub (May 17, 2013)

coreyman said:


> $400 won't even get you a decent website. How is that going to last you three months? You going to get a cheapo dedi from OVH and make really low margin? What about your licensing costs? What billing system will you use etc. Sounds like a summer host.


First, I started planning this 6 months ago. 4 months ago I paid $800 for a custom website design. I also built my own VPS management software for this about 3 1/2 months ago.


I can assure you it won't be from OVH.


I can assure you it won't be a summer host.


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## Noerman (May 17, 2013)

Dont use eleven2: $19.99, try skynethosting.net just $9.95

You even get FREE Premium Help Desk (whatever it is).


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## GVH-Jon (May 17, 2013)

coreyman said:


> $400 won't even get you a decent website. How is that going to last you three months? You going to get a cheapo dedi from OVH and make really low margin? What about your licensing costs? What billing system will you use etc. Sounds like a summer host.


We started our hosting company with less than $400. More than $300 of it went to incorporation. $20 went to an EZPZ Master Reseller Account. We have NEVER had to put in ANY personal funds since.

We now have 2 shared hosting/reseller hosting servers and 1 openvz node and 1 xen ssd accelerated node.

Don't doubt progression  You just need to play your cards right.


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## Zach (May 17, 2013)

$400 isn't enough to cover 3 months. You're going to need WHMCS, SolusVM/Other, Colocation/Dedicated Server with additional IP addresses (plus if you go dedicated you'll most likely have to buy upgrades/the actual server if you colo), you'll need to keep money set aside for hardware replacement if you colocate, and you'll need to keep money set aside for chargebacks/disputes.


Some other costs would be renting a VPS to host your website/billing panel and another for a solusVM master, registering as a sole proprietorship or LLC, getting a PO Box.


So in total, much more than $133/month.


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## GVH-Jon (May 17, 2013)

Zach said:


> $400 isn't enough to cover 3 months. You're going to need WHMCS, SolusVM/Other, Colocation/Dedicated Server with additional IP addresses (plus if you go dedicated you'll most likely have to buy upgrades/the actual server if you colo), you'll need to keep money set aside for hardware replacement if you colocate, and you'll need to keep money set aside for chargebacks/disputes.
> 
> 
> Some other costs would be renting a VPS to host your website/billing panel and another for a solusVM master, registering as a sole proprietorship or LLC, getting a PO Box.
> ...


Read my reply above


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## Zach (May 17, 2013)

GVH-Jon said:


> Read my reply above


You're a rare case then, because honestly, it truly does require more than $400 if you want to jump in the VPS business.


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## mikho (May 17, 2013)

Most important thing is to have the business plan.


Who will you target, who will you sell to and so on...


First edition should be a draft with what you want to do and general ideas on how to succeed, it can be changed/updated when completing the later steps.


You should start by calculating the costs for things like:


* dedicated if going for the vps market


* billing system, be it WHMCS or Hostbill or something else.


* cPanel/WHM + fantastico/installatron if you are going for shared/reseller hosting


* solus or virtpanel or something if you are going down the vps track.


With that, estimate the cost would be double that the first year (maybe two). Things will cost extra when starting up. Things lime hiring a system admin to fix something that you cant do yourself, monitoring system, things that were overlooked at the start.


When the cost have been estimated, it's time to look at the more fun part.. The income.


Setup the packages as you seem fit and put a price tag on it. Calculate on how many you need to sell to break even. Calculate on what prices you need to have to make some money on it. Is it worth it?


If it is, congratulations. You might make it in the hosting business. 


On a bigger picture you do the basics calculations no matter what market you are entering. The only difference are the tools to make you rich. 


Sorry for any typos, wrote this on an ipad mini and the screen isn't that responsive.


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## MannDude (May 17, 2013)

Honestly, I would target local businesses in your community first. You'll be surprised by how many local businesses do not have any sort of online presence. These are businesses, even small ones, that can afford to pay you a good amount for your services.

You should offer them shared hosting with a domain name for $10/mo, or even better, $100+ for a year. You could even double that if they have no idea what they're doing and need to you to make basic edits every now and then (updating their menu, adding featured items, or other random news for them). A VPS for a 'busier' site with management for $50+/mo, that could be a 128MB RAM container. Even with a small startup cost, with a few customers you can break even.

If I were starting a new hosting company, I most certainly would avoid the low end market like a plague. It's much easier to support a fewer number of higher paying clients than it is a larger number of low paying clients.


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## SPINIKR-RO (May 18, 2013)

netnub said:


> I'm seeking advice on how I should go out and proceed with this.



Dont start something based off a single community like LET/WHT. While everyone needs to be serviced (thats what she said) 99% of these communities have unreasonable prices to maintain a business. They are not unreasonable customers, prospects however startups hammer down prices, larger ones compete and the community gets the low end.

Offer sustainable prices and give discounts to the communities, dont rely on it. Dont hammer yourself to far under a break even point but if you have the extra capital then there is nothing wrong with a loss leader.

A few things here before I get negative comments:

Referencing cost should not be taken personally. There is a VERY big pool of customers where a monthly commitment of $5 is a lot, in a relative economic sense. Respect.


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## 365Networks (May 18, 2013)

You have to note that Jon did not jump into the VPS business right away, he started himself up with reseller hosting and then building to what GVH is today. I commend him for doing such.

What I would also like to say is you should definitely start with the local market first if you are really wanting to get started, or perhaps work with a company to get a feel of the industry.


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## GVH-Jon (May 18, 2013)

365Networks said:


> You have to note that Jon did not jump into the VPS business right away, he started himself up with reseller hosting and then building to what GVH is today. I commend him for doing such.
> 
> What I would also like to say is you should definitely start with the local market first if you are really wanting to get started, or perhaps work with a company to get a feel of the industry.


Thanks 

If you really want to get into the VPS business right away you could resell other provider's virtual servers, that way it's a pay-as-you-go and you don't have to put in any investment.



SPINIKR-RO said:


> startups hammer down prices, larger ones compete and the community gets the low end.


Or maybe it's just the larger ones overcharging?  Honestly, if you're charging around the $200/mo range for a Xeon E3 series server when low end startups can charge $90/mo for the same configuration, then there's obviously something wrong.


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## shovenose (May 18, 2013)

GVH-Jon said:


> Thanks
> 
> If you really want to get into the VPS business right away you could resell other provider's virtual servers, that way it's a pay-as-you-go and you don't have to put in any investment.
> 
> Or maybe it's just the larger ones overcharging?  Honestly, if you're charging around the $200/mo range for a Xeon E3 series server when low end startups can charge $90/mo for the same configuration, then there's obviously something wrong.


This isn't directly relevant, however I rented a SingleHop server with an E3, 32GB RAM, it ended up being like $600/month. And their network was bad, and while the support was good and the sales guy I talked to was absolutely awesome, it wasn't worth the price. So I got a refund and cancelled it.

CaliHop is much cheaper and better. 1/3-1/2 the price.


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## GVH-Jon (May 18, 2013)

shovenose said:


> This isn't directly relevant, however I rented a SingleHop server with an E3, 32GB RAM, it ended up being like $600/month. And their network was bad, and while the support was good and the sales guy I talked to was absolutely awesome, it wasn't worth the price. So I got a refund and cancelled it.
> 
> CaliHop is much cheaper and better. 1/3-1/2 the price.


If you have the money to pay those prices then you're better off buying a server and colocating.

I've never heard of CaliHop but they look promising.. If we eventually expand to the west coast though I'd be looking to purchase dedicated servers only in ColoCrossing owned datacenters, nowhere else


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## SPINIKR-RO (May 18, 2013)

Leasing has much more benefits if your talking about a low amount of servers or no large starting capital.

Would you rather spend $6-7k on 3 servers and pay a higher colo rate plus have spare parts and a reserve for remote hands.. or pay a fair leasing cost. Your going to be in the same position if you buy & colo a few servers because you just cut a huge chunk out of the bank and are selling $3 gig ram deals to try and not go bankrupt, at which point you are again at a break even and no room for expansion.

Hostgator leased until they sold for over 100mil. 

You can play it out in different ways and make it work, but dont go around saying that one is better off buying hardware + colo just because they are looking at $x for a server lease.

If the money is available and you think you can ROI after 3 months then colo is optional.


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## GVH-Jon (May 18, 2013)

SPINIKR-RO said:


> Leasing has much more benefits if your talking about a low amount of servers or no large starting capital.
> 
> Would you rather spend $6-7k on 3 servers and pay a higher colo rate plus have spare parts and a reserve for remote hands.. or pay a fair leasing cost. Your going to be in the same position if you buy & colo a few servers because you just cut a huge chunk out of the bank and are selling $3 gig ram deals to try and not go bankrupt, at which point you are again at a break even and no room for expansion.


I don't think 3 servers would be anywhere close to $6-7k, and you could always go refurbished (not that I recommend doing that.. but if you're selling $3 gig ram deals then why not since clients won't expect much) ...


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## Tyler Salwierz (May 18, 2013)

GVH-Jon said:


> I don't think 3 servers would be anywhere close to $6-7k, and you could always go refurbished (not that I recommend doing that.. but if you're selling $3 gig ram deals then why not since clients won't expect much) ...


3 1U servers can cost 6-7k easily.


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## GVH-Jon (May 18, 2013)

Tyler Salwierz said:


> 3 1U servers can cost 6-7k easily.


More likely if we're talking about the setups that you use.


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## Tyler Salwierz (May 18, 2013)

GVH-Jon said:


> More likely if we're talking about the setups that you use.


Keep in mind that even a E3 with 32GB ram and a good raid card with standard drives will still cost a pretty penny.


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## drmike (May 18, 2013)

@GVN-Jon, kudos mate.

Reseller option is a fair one so long as your provider is legit and responsive.  

As far as the server cost $90 vs. $200.  Let's say some companies are giving stuff away to lure companies they might think are non-viable. 

You flop on the invoices, these mob types will offer you a deal and move in, take your customers and screw you wife.   Don't get cozy with cheap, because most of them are cheap for reason.

Low prices are what destroyed LET/LEB.  From the provider level.


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## netnub (May 18, 2013)

I've rangled up $600, should have about $1000 within a week.


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## BlackoutIsHere (May 18, 2013)

Tyler Salwierz said:


> Keep in mind that even a E3 with 32GB ram and a good raid card with standard drives will still cost a pretty penny.


This is true, serious gear isn't cheap. If you cheap out at the beginning you will pay for it later one way or another.


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## drmike (May 18, 2013)

Lots of folks are talking about rentals to get started or RTOs.  That can work, but you are stuck with that provider for maybe multiple years.  If anything happens, your business is going to take a beating.

RTO/lease/low end model is all about giving away the bait and beating you with the hands on you probably will use like a crack addict.  This pans out for experienced folks who don't need hand holding, but newbies get crushed with costs, delays and things out of their control or above their knowledge base.

If you are a newb, the reselling model is much better idea.  Still very risky though.

Best to first get real admin time in on all details of platform you are using, with billing and other systems too.


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## GVH-Jon (May 18, 2013)

buffalooed said:


> @GVN-Jon, kudos mate.
> 
> Reseller option is a fair one so long as your provider is legit and responsive.
> 
> ...



You can't always judge a provider by it's pricing. For example, RamNode is able to offer cheap pricing because of their monster E7 server configurations and servermania is able to offer cheap pricing because they colocate a large amount of servers and probably have their own racks.


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## Tyler Salwierz (May 18, 2013)

GVH-Jon said:


> You can't always judge a provider by it's pricing. For example, RamNode is able to offer cheap pricing because of their monster E7 server configurations and servermania is able to offer cheap pricing because they colocate a large amount of servers and probably have their own racks.


E7?

We can offer cheap pricing because we own all of our hardware and network.


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## Nick_A (May 18, 2013)

Our *E5*s are monsters, but I think it's more that we own our hardware/network etc that keeps our costs and prices down.


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## drmike (May 18, 2013)

GVH-Jon said:


> You can't always judge a provider by it's pricing. For example, RamNode is able to offer cheap pricing because of their monster E7 server configurations and servermania is able to offer cheap pricing because they colocate a large amount of servers and probably have their own racks.


Well in your example you are talking about the VPS seller.  I agree with you on that.

Exactly what I was saying really.  Beware of dedicated RTO companies and long term lease/rentals if you want to be a provider.

Preferred to own your gear when and where you can.  

When I think about the top companies in the low end segment I think of:

BuyVM

RamNode

Hostigation

Prometeus

Almost certain every one of those companies owns their gear.


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## drmike (May 18, 2013)

GVH-Jon said:


> I don't think 3 servers would be anywhere close to $6-7k, and you could always go refurbished (not that I recommend doing that.. but if you're selling $3 gig ram deals then why not since clients won't expect much) ...


Depends on size of server + RAM + drives + controller.  One server could cost that much.

Most people aren't renting servers that pricey though.

Refurbs are totally fine.   Snobbery to ignore them.     Mind you, new drives are recommended.  A good cleaning of internals and bench testing everything first for a burn in.


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## Fritz (May 19, 2013)

What do you think about branding, is it necessary?

I think most do that.

And also sending newsletter periodically regarding discount / promotion will that also help?


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## blergh (May 19, 2013)

This market is oversaturated and filled with crap, unless you can scrape up a quiet hefty sum of money for the initial buy-in investments i would say that you should stay out of it.


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## prometeus (May 19, 2013)

I think that you need to start with some valued service such as specialized/managed hosting. Focus on some software / platform and offer services and help on those.

With vps unmanaged prices going low and low you need thousands of sales, which in turn require investments.

Take your time


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## Hassan (May 19, 2013)

shovenose said:


> This isn't directly relevant, however I rented a SingleHop server with an E3, 32GB RAM, it ended up being like $600/month. And their network was bad, and while the support was good and the sales guy I talked to was absolutely awesome, it wasn't worth the price. So I got a refund and cancelled it.
> 
> CaliHop is much cheaper and better. 1/3-1/2 the price.


+1 for Calihop, we currently host OVZ out of there, support is awesome and the network is great.


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## jarland (May 20, 2013)

My advice, to someone who truly has the necessary skills to pull it off:


1. Register as sole proprietor (get an LLC when you know you can sell, until then that's capital better spent elsewhere)


2. Rent smart. No one cares about hardware if the network is terrible, and this is too often the corner people cut. No one wants 900mb/s IO if they can't even host a website. Take your time, do not rush this. If everyone you ask tells you that your choice is terrible and you're going to regret it, don't be like me and do it anyway....FDC Denver.


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## Shados (May 20, 2013)

netnub said:


> What I'm thinking here is:
> 
> 
> VPS w/ cPanel and WHMCS (Might use eleven2 reseller with free whmcs to save money for now - if eleven2: $19.99, if vps with cpanel and whmcs, rougly $30)
> ...


Who quoted you that?


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## Coastercraze (May 24, 2013)

Here's a quick guide which may help:

- Research

- Identify

- Plan

- Build

- Finesse

- Launch

Research - Take a look at everything from potential market(s), software, providers, etc. Make a list of potential places / markets / and providers you'd like to be in / target. Also keep track of any desired software (ex: SolusVM, cPanel, WHMCS, etc)

Identify - Pick where you want to start from your list. It's best to select only one location at the start and a handful of niches to target. Also, make note of the provider you've picked and any software which you

Plan - Yes, you really need to write it all down! Start with a simple business plan (some templates online if you need help, there's a handy "Idiots guide to writing a Business Plan" which is awesome too. Prepare a budget as well for the next few months. My guideline would be to have at least 6 months worth of expenses saved up / set aside for use. Plan out your site's layout as well.

Build - Assemble your company! Prepare your servers / install software, configure as needed, create plans / packages, integrate as needed and build / add content to your new site.

Finesse - Fine tune everything by doing double checks to ensure nothing was missed. This includes proofreading, grammar, mistakes in configurations, etc.

Launch - When ready, open up to the public! Advertise your services to the rest of the world.


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## drmike (May 24, 2013)

Shados said:


> Dedicated Server(e3-1270v2, 32gb ram, /26, 4x 500gb ssd OR 4x 2tb (same price), 1gbit port) : $120 (+ a discount I've been offered if I sign a 3 month contract it brings it down to $89/mo)


 

Ahhh, which shade tree operation is offering 4x 500GB SSD's + 32GB of RAM server for $89/moth?  That has to be with both a contract (annual or longer and cash money up front buy down).


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## 365Networks (May 24, 2013)

Considert taking a Business or Entrepreneurship class at your local school or college, that will greatly assist you with managing money and the hustle and bustle of running a business.


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## NodeDeals (May 24, 2013)

With just $400, you need a seriously awesome business plan. Figure out how you can attract customers away from already established VPS providers and what you can do different! Trying the same old model won't work and you won't get sufficient return in 3 months, if ever you get any...


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## NodeDeals (May 24, 2013)

buffalooed said:


> offering 4x 500GB SSD's + 32GB of RAM server for $89/moth


 :blink:  :blink:  SERIOUSLY?!?!


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## concerto49 (May 25, 2013)

buffalooed said:


> Ahhh, which shade tree operation is offering 4x 500GB SSD's + 32GB of RAM server for $89/moth?  That has to be with both a contract (annual or longer and cash money up front buy down).


Maybe basement DC? I wouldn't buy it. Maybe uptime 0.1%.

500GB SSD. Sounds like Samsung 840.


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## netnub (May 25, 2013)

concerto49 said:


> Maybe basement DC? I wouldn't buy it. Maybe uptime 0.1%.
> 
> 500GB SSD. Sounds like Samsung 840.


99.9% uptime **

No basement DC, its called I sign a contract + pay a setup fee ($600 setup fee).


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## AnthonySmith (May 25, 2013)

I will give you the same advice I give everyone that asks this, and this is from experience.

1) Don't do it part time.

2) Make sure you have 18 months costs minimum in advance.


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## RootNerds (May 25, 2013)

AnthonySmith said:


> 2) Make sure you have 18 months costs minimum in advance.


This. And also , you should know how to calculate cost and income realistically in advance. It's an stupid idea to start with 5 dedicated servers when you can't even fill one.


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## Zen (May 25, 2013)

jarland said:


> My advice, to someone who truly has the necessary skills to pull it off:
> 
> 
> 1. Register as sole proprietor (get an LLC when you know you can sell, until then that's capital better spent elsewhere)
> ...


I might ask, who was one of those people?

WINK WINK


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## jarland (May 25, 2013)

Zen said:


> I might ask, who was one of those people?
> 
> 
> WINK WINK


Yep! Haha


I hope like hell that in the end people can at least say of me "Well, the guy was honest, even when he was stupid."


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## Zen (May 25, 2013)

Oh yeah, some people would have decided to stay. I'm glad to see you realised  At least when it was 'happening' (the decision that is) I could tell you were making an honest mistake, if you were indeed making a mistake (it was 80/20, since FDC can pull through sometimes..)


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## VPSDATABASE (May 26, 2013)

From personal experience I went from saving up on selling only Shared hosting until I had around $150 or so buy a dedicated server and sell vps and still do shared hosting.

From there I expanded into more dedicated servers and locations.

The main problem now is that I only profit $300 each month from this. 

Not very great profit, it takes couple of years until you see a 3,000 profit of net income. 

The main reason you don't make much is because ;

- Paying for SolusVM License

- Paying for dedicated servers

-Paying for the IP's

and so on.

Little history of my business ;


Started shared hosting, for a forum
Got into Reseller hosting so I could explore more and maybe make few bucks here and there.
Bought license for lifetime, like WHMCS
Used Reseller for 3 months
Got my first VPS and installed cpanel.
During my VPS era I started to buy lifetime license I needed "plugins" and all that good stuff.
I started to see a net income of only $30 each month
I then waited until I could have some money saved up and feel proud
During November I got a job and then decided, if my hosting doesn't make enough money to pay the fees ill just use my working money to pay for them.
Got first dedicated and didn't put any of my own money because I sold VPS and made good profit and the netincome was only $50
I then started getting more orders and had to upgrade.
And this has been going on since November.
I am now having a net income of $300
I have been getting a lot more knowledge each other day from running a online hosting business.


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## concerto49 (May 26, 2013)

netnub said:


> 99.9% uptime **
> 
> No basement DC, its called I sign a contract + pay a setup fee ($600 setup fee).


Well that's a whole new game. That's not the price quoted. You have to add setup fees to the cost and try to work out how much that adds to the monthly cost for cashflow purposes etc.


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