Profit and Expenses

[Harry]

I'm just wondering about hosting companies total expenses. I know some people may not want to share how much they earn, but do you actually make profit these days?

I mean with so many companies overselling and giving out hosting packages for less than $2. Is anyone making much profit? and how are the expenses going, since many bigger businesses have more than 1 hosting server.

 

[SageStone]

It all depends on how much the server they are leasing costs, or if they own their own datacenter. Some hosting providers can loose money in the beginning of their business when they do not have as many clients as they will in a year or so.

 

[inlethost]

Start with a reseller plan, try to find one that will also support your clients. RZ & Innohosting are two.

 

[Artashes]

I mean with so many companies overselling and giving out hosting packages for less than $2. Is anyone making much profit?

As much as I can agree that 2-dollar overselling-designed packages, its hard to believe one would make a profit. I believe most companies hope to grow fast and win by economies of scale - serve thousands of clients who do not use all the resources offered.

Best,

 

[ldcdc]

As much as I can agree that 2-dollar overselling-designed packages, its hard to believe one would make a profit.

The main problem I see with these packages, is in the support department. Manhours, if you hire well trained staff, are expensive.

 

[ANMMark]

It all depends on how much the server they are leasing costs, or if they own their own datacenter. Some hosting providers can loose money in the beginning of their business when they do not have as many clients as they will in a year or so.

Okay okay, I don't want to cause waves here, but this is exactly what is wrong with the hosting industry today, and in fact the very thing that allows "kiddies" to take advantage of the industry with such low prices. Which ultimately causes one to ask "Does anyone actually make a profit anymore?"

The expense of running a business does not all depend on how much the server fees are. There are bigger expenses such as keeping the electric on, renting an office space, phone bill, water bill, sewage bill, garbage bill, business insurance, business licenses, advertising, paying employees, and the list goes on and on.

Perhaps if more kiddie hosts had these real business expenses, they wouldn't be selling hosting for so cheap. Instead, they setup shop in their house, rent a server from the cheapest provider they can find (or just settle for a reseller account), and start a "business".

money can be made, but don't make the mistake of not counting the above expenses, especially if you plan to grow your business at all.

 

[hostingpuppy]

It took us the better part of a year, but we've found a way to not only make our price point profitable, but to do so while offering a real feature set.

It boiled down to the fact that we're all experienced Linux sys admins and have been around this stuff forever. Most of the magic that keeps the thing running and provides our extras is done by handbombed code that we wrote. I agree that most of the people at our pricepoint aren't really delivering anything above what they have to and quite likely have to oversell to make a profit.

It does all depend on scale, though. Our entire model depends on massive amounts of users and the ability to provision servers with huge RAIDed drives in a few hours. That's why we personally administer our own servers (no managed or reseller stuff, thank you very much) and write most of our own glue code.

 

[Harry]

I've noticed many younger "kiddies" as we call them, leave the hosting biz quite early. They just either have to sell out to another bigger company, or just shut down and take what ever money they can get. I've also seen other companies, which hardly ever get support issues, so they don't really hire any tech support staff. Then again, usually the bigger you get, the more tech staff you need.

 

[bobchrist]

If you are considering the expenses on advertisement side you should speculate through ROI, that the expenses must turn out more sales and profit than it costs and your advertisement must be an investment not expenses.

 

[Keithb]

Get you a spreadsheet setup with all your expected expenses, and a projected client base/revenue and compare numbers. Many, and I say many, over-sell their products. Almost everybody does it. Some people over-sell to the point where there is no humanly possible way to profit off of a server if all users used what they were allotted. I would not do that, although you need to be competitive. Find an edge to be competitive, but don't cut yourself short, or your clients as they will ultimately decide if you stay in business.