Starting a VPS business with $10,000. How would you spend it?

[Hxxx]

Well, if you start a new company and think all you need to do is post offers on WHT/vpsB/LE* then you're already going at it wrong.

Since I never responded, let me introduce my plan.

• Acquire server hardware, collocate.
• Take care of licensing. Buy owned licenses where econimcal.
• Then, target my LOCAL MARKET heavily. That is where the money is. Small local businesses who, for some reason, have no online presence. They're everywhere. Don't believe me? Walk down Main Street in your town and write down the name of all the little shops and stores you pass. Go home and Google them. Many may have a Facebook page now but that's it, and even then, many do not. So, offer them a service at a rate of mid to high $xxx/yr or $50+/mo for items such as fully managed shared hosting. If they email changes to their restrauant menu, you publish these changes to their site. If they have a new lunch special, you add it to their site and Facebook page. Things like that.

The money is in the local market. If I were to start something new, I'd not sit around and try to look attractive in a sea of hosts who are virtually no different than the others. $10,000 is too small of a budget to really 'stand out' unless you're buying a reseller account and spending the rest on marketing. But it's plenty to begin to attract local and regional businesses who can be sold on the idea they're losing business by not having a website. They can be easily sold on the idea, "Well, the restaurant next door shows up in Google when you search for "[town name] restaurants" however you have no website or online presence so people coming from out of town do not know about your store."

Anyhow, that's what I'd do. Local business sites are often low traffic, low load, business owners are those who typically have the money and can afford to pay like $50/mo for a relatively 'hands free' service that they do not need to maintain. You can easily set up their site with a number of pre-made templates and input data and photos of their store in an afternoon. The update maintenance should be easy as well. Just have a very clear pricing structure tier that indicates what you will and will not do for the price they pay, and if they want extra, can upgrade them to the next tier. Additional services such as office visits can be packaged in or added as an extra cost for setting up their webmail accounts in cPanel and configuring whatever desktop client they're using on their PC at home or in their office to receive such email as well. Lots of things that we all know how to do is a foreign concept to most.

You won't ever have to login to WHT and try to have your offer seen by people who will probably abuse it or turn out to be fraudulent anyway.

Good luck with that. People often confuse web pages with facebook pages. People often mistake hosting for godaddy. Go and try to make actual sales from those small shops, I guaranteed is not as easy as is written here, much less stable to depend on small shops who in reality dont give a .. about websites. 

Even if you walk out with a sale, you will see lot of late payments or none. 

My recommendation is to focus with real established companies whose product depend or can "REALLY" get benefit of eCommerce.

And to finalize , Web Design is Dead. If you want a secure business shift into mobile app development and web applications. That's where the future is. 

 

[WWW Hosting Services]

With only 10K USD, I'd spend it very wisely. Leasing of course. 1K at minimum would be initially spent on advertising and marketing after the launch of the company. First of all, the site design. Some would be spent on licensing and of course a server. The rest would be saved to pay for the server fees and any other costs in the future, before the company is making profits, I.E: the first few months usually.

 

[sleddog]

Well, if you start a new company and think all you need to do is post offers on WHT/vpsB/LE* then you're already going at it wrong.

That is not what I meant. The quantity of new offers posted on a daily basis on WHT gives evidence of how crowded the VPS hosting field already is. And undoubtably there are many, many more hosts that do not use WHT.

Anyone starting a new business is advised to do market research regarding the potential demand for their product, and research of the existing competition. Examining WHT is one means of market research.

Anyhow, that's what I'd do. Local business sites are often low traffic, low load, business owners are those who typically have the money and can afford to pay like $50/mo for a relatively 'hands free' service that they do not need to maintain.

You've come very close to describing what I do. Some points...

The market is not only small business, there's great potential in the non-profit sector also. Non-profits (working in fields such economic development, tourism, etc.) often embark on funded projects, and often there is a communications/technology side to those projects.

Some clients want to maintain what you've developed for them. So you need to provide an appropriate platform, and train them to use it. You've evolved from a creator of templated websites to a technology enabler. You need to plan what your platform is going to be (standardized for all clients, and probably not Wordpress or Drupal) and how you're going to deliver training.

Tiers and pricing structures look great in business plans, but sometimes don't fit the real world. You've got to be flexible. At the end of the day you've got to make the client happy. Happy clients are long-term clients. And those happy clients communicate and socialize with other potential clients in your local market....

 

[Tyler]

With only 10K USD, I'd spend it very wisely. Leasing of course. 

You consider leasing to be spending money very wisely?  :unsure:

Leasing you get no equity on your servers. It's a bill you have to pay each and every month with nothing to show for it, except for being able to access the server for another month. The guarantees of replaceable hardware are really not worth the premium you pay when choosing to lease a server. There are about a thousand other reasons that leasing a server is a bad idea, but I'm not going to go into it as it could easily merit its own thread.

 

[Aldryic C'boas]

With only 10K USD, I'd spend it very wisely. Leasing of course.

...you contradict yourself.

 

[KuJoe]

I agree with what others are saying. Leasing is the WORST thing you can do if you only have $10k to your name and are starting a VPS company in 2015, unless you like to see what bankruptcy looks like and you're on a "race to the bottom" in terms of credit score.

 

[pcan]

With only 10K USD, I'd spend it very wisely. Leasing of course. 

The lease/own choice isn't so obvious. It relates to fiscal policies and to cost of capital acquisition. As general rule, leased equipment is more expensive.

Leasing is like a credit card: easy to get, convenient to use, but hardly the cheapest way to borrow money.

 

[Bruce]

The lease/own choice isn't so obvious. It relates to fiscal policies and to cost of capital acquisition. As general rule, leased equipment is more expensive.

Leasing is like a credit card: easy to get, convenient to use, but hardly the cheapest way to borrow money.

more important to focus on business creation rather than cost differences between leased / owned / rented.

at the low end of the market the big differences in margin come from stuff like IP costs. focussing purely on cost per GB of RAM isn't the solution.

 

[Tyler]

more important to focus on business creation rather than cost differences between leased / owned / rented.

at the low end of the market the big differences in margin come from stuff like IP costs. focussing purely on cost per GB of RAM isn't the solution.

While the truth is that there are matters more important than the cost differences between leased, rented, and owned (especially in the beginning stages of a business), we should not diminish the significance of such costs.

Hardware costs continue to be significant for hosting firms of all sizes, due to the fact that they are a renewed service (i.e. a bad choice will continue to follow you) and the fact that hardware depreciates each year.

This choice becomes even more important when there is a significant amount of hardware at play, say 15 nodes or more. 

Regarding other costs, IP costs should be some of the lowest costs. A provider paying anywhere close to 10% of the retail ~$1/IP/mo is outrageous. Also, isn't the retail price for IPs continuing to go north anyway?

Let's also look at some of the matters more important than the pure cost differences. Most of these are human matters.

• What datacenter will you use?
• How will you find a location that will help you set yourself apart?
• What is the contingency plan?
• Who handles finances?
• Who handles support?
• Who handles marketing?
• Who handles legal matters?

 

[Hermes Hosting]

Buy a permanent WHMCS license

Rent 2 a dedicated server for 2 years

Stickies on forums for as long as possible.

save the rest.

 

[VisionGroup]

dont do it!

in a industry like web hosting and vps hosting you need a major point of difference, otherwise your just another provider... trust me i face it everyday running an IT business....

 

[Premiumn]

I built a web hosting company from just with less than $20 first time investment and it grew quiet successfully. After about 18 months, i had over 150 customers/services.

I do not own it anymore, but you dont really need a lot of money to start an online business as long as you have a good plan and a way to differentiate yourself from the others.

If you do not run the company with 100% honesty, then you are essentially doomed.

Thats my 2 cents.

 

[VATruica]

Honestly I wouldn't even touch the VPS side of things. As I've told others, if they want to get their feet wet in hosting that they should start with a reseller account and make that profitable. Most resellers are pretty affordable so the amount of time/effort required to break even is low.

Shared already had its floor fall out so prices are pretty well settled. For instance, a user could take one of our $2/month plans, sell 20 x 1GB space shared plans for $5/year - $10/year and make $100/year - $200/year return on $20/year of investment. With VPS you have licensing costs, high server costs, IP costs, etc, all affecting your potential pricing.

Agreed. Using a reseller will eliminate the headaches associated with what you enumerated there, of course including technical work around setting up and maintaining a VPS, especially if there is not prior experience with that. It also makes it easy to form a customer base. 

 

[HN-Matt]

If you don't mind wading through all the classist shit talk re: not owning your own hardware or ARIN database Real Estate (the horror!) and think you can somehow 'add value' by way of monthly rental payments, then a reseller account is for you!

 

[FlokiNET]

More than money you will need patience and time! You can have the best hardware, but if no one knows. Invest in some time to post some of your offers and prices ( they need to be great for the start), in forums, Web-hosting directories.. it might take a while for the flow to start, so patience!

About investment, definitely, get a WHMCS (or blesta..) and a re-seller package from another company. You can get a great server for 100 usd/mo and install 20-60 VPS on it, depending on the specs of the the virtual machines, great for starts.. Get one of those machines ( or even lower-end, since you can transfer the VPS'es after to another machine) for like 2-3 great locations around the world ( cheap traffic, low energy cost ) with a re-seller package and start it!

I would also advise to enter in contact with a lawyer to create solid grounds

good luck!

 

[MannDude]

Good answers and input everyone. Anyone else have anything else to add?

 

[sterile]

Take $1500 and buy a server, set aside $2500 for 12 months colocation, $316 for 12 months licenses, ~$500 for web design/branding/plugins, $### for registering an LLC. (cost depends on location), put the rest away for a rainy day and unexpected costs.


Ta da! A VPS-Provider-In-A-Box! Just don't expect to be the next Linode or anything.

This guys plan is spot on.

 

[BalkanVPS]

First of all renting servers if all goes well buying a server and later collocating.and saving 50% for Advertising

 

[raindog308]

Don't even need full 10k:


Buy a storage box at 5k


WHMCS etc. at let's say 500$ (purchased license + updates for a year)


Colo at 100$/month (1,2k/yr) with IPs


LLC/LTD at 250$ setup and 100$/yr


Sell storage VPS at 7EUR/TB and bam, business.

This sparked an idea in my head, and so I ran some numbers.


7EUR a TB would be great, but let's say you wanted to sell storage for $10/TB.  Is that profitable?  Maybe if you build the box yourself.


Here is what I came up with if you don't:


OVH E5, 64GB RAM (overkill), 12x6TB drives, I subtracted 2 for redundancy (didn't get that deep into config, just guessing) and ended up with 60TB capacity for $439/mo.  Just pulling it off their site.


You'll lose some in filesystem formatting, etc but let's say you get 58 accounts on that box at $10/mo, so your revenue is $580/mo.


Oh wait, you need IPs...well, let's say this is ipv6 only.  It's 2016 and it's just for backups, so maybe that's OK.


Subtract some cash for WHMCS or whatever, a control panel, etc.  Maybe you clear $100/mo.


Unfortunately, it doesn't scale because you're full and if you add another, you need to fill it up to make $100/mo.  You wouldn't need WHMCS again but you get my point.  And when it's not full, you're losing, so the margin just isn't there.


Then again, OVH does support up to 36 drives in one box...


The real problems with this are


- OVH support sucks.  Ran some website numbers with QPS and others and it just does not work.  Keep in mind someone like BuyVM is charging $30/mo/TB, Backupsy is $40/mo/TB, @KuJoe is also at $40/mo/TB, etc.  


- Although I figured SAS drives, IOPS might still kill you.  I trust @Francisco to put a good box together, but even with a pro like that, sometimes I've had awful performance on his storage boxes, and at Hostigation's old backup plans, too.  Just way too many people running rysnc nonstop I guess.


- You need to be 90% full to break even.


$20/TB/mo might be more reasonable, but would lack the "wow" factor that offering $10/TB/mo would.  You'd break even at 80% full.  Even the cheapest Azure pricing, for example, is .024/GB/mo, or $24/mo.


And if you set it at $20/TB, you may well find there aren't 60 people in the world who want that storage.

 

[drmike]

$7/TB won't work in legitimate shop.


Will have to be a bunch of servers in a cluster with a distributed set up.  So things are going to either cost dearly or perform like crap.


Fails will be spectacular also.


Can probably do something with crap archive large TB drives and refurb white labels to lower build cost.. Good luck when shit breaks... rm -rf won't be any faster on loss.


There is a demand for storage and there are big arse plans out there, but they aren't VPS in nature.  They are backup in nature with proprietary clients.. Or you have utter garbage like OVH's Hubic which is just slow to unusable from my testing.  10TB for 5 euros a month.. sounds nice.... try it and go meh.


Yeah if anything, oddly storage VPS stuff is level or increasing in price.  I remember when Backupsy was discounting.  That sure died didn't it?  Still there and all, but now pay for storage isn't cheap like it was.