What does it take to enter the hosting industry today?

Artashes

Artashes

Administrator
Staff member
We all understand what it takes to stand out as an existing business today (customer support, speed, etc).

But before you even start a company, with competition at an all time high and capital required to start a company at an all time low, what does it actually take to enter the hosting industry in 2021? Starting from scratch is cheap, but it is a very long road to meaningful initial revenue. Could an acquisition be an acceptable, and perhaps even more attractive, way to enter the hosting business today? Surely a more expensive option, but at least one that will guarantee revenue from day 1.

Thoughts?
 
Acquisitions are awesome - usually! Selling them can be painful however :)

Aside from the normals that you have listed, I think a key item is going to be passion and vision from the upper-level management, whatever that looks like.

Saying that you want to be better than "X" company, or you want to run things similar to "X" is a great starting point, but then what? What's next? What moves the needle?

Acquisitions are fairly cheap in the web hosting world these days, but usually, you're just buying the customer base, maybe some hardware, maybe some staff (if you're lucky) but not any hardware. Before the acquisition, due diligence should be performed to see where you can make additional revenue without having to carve everything up. Maybe it means moving to different hardware, different data centers, or using different software. There will be churn, but hopefully not enough to hut the overall plan.

Starting a hosting company from scratch can be a daunting task - especially trying to show progress within the first year to investors etc. I hadn't really looked at it from an acquisition angle, this would definitely help offset costs and give a reason for having the 24x7 staff on "day 1" rather than having people sit around with nothing to do.
 
bigredseo said:
Acquisitions are fairly cheap in the web hosting world these days, but usually, you're just buying the customer base, maybe some hardware, maybe some staff (if you're lucky) but not any hardware. Before the acquisition, due diligence should be performed to see where you can make additional revenue without having to carve everything up. Maybe it means moving to different hardware, different data centers, or using different software. There will be churn, but hopefully not enough to hut the overall plan.

Starting a hosting company from scratch can be a daunting task - especially trying to show progress within the first year to investors etc. I hadn't really looked at it from an acquisition angle, this would definitely help offset costs and give a reason for having the 24x7 staff on "day 1" rather than having people sit around with nothing to do.
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I'd sure hope that the bigger the purchase, the tougher the due diligence. I think all sellers are accustomed to that.

That angle of having 24/7 staff, perhaps even being at breakeven point right away, was exactly the angle I was looking at. Existing revenue definitely means less stress, less burnout during those daunting first year or two.

It may, however, be more expensive to come in through an acquisition than starting from nothing and investing those money in marketing/SEO instead. To me, you can burn $50,000 on doing something from scratch and still risking not being close to where you can be by buying a company for the same amount. I may be wrong of course.
 
Patience, care, and understanding are vital in any service industry.

I have seen many start-up web hosting businesses thinking it's a get rich quick business and when they find it not they just jump ship and leave clients stranded without their websites as they don't understand the business
 
easyhostmedia said:
Patience, care, and understanding are vital in any service industry.

I have seen many start-up web hosting businesses thinking it's a get rich quick business and when they find it not they just jump ship and leave clients stranded without their websites as they don't understand the business
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Assuming you'd have $25,000-$50,000 to "burn", would you start a company from scratch or enter the industry through an acquisition of a company with existing revenue?
 
Artashes said:
Assuming you'd have $25,000-$50,000 to "burn", would you start a company from scratch or enter the industry through an acquisition of a company with existing revenue?
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If I had that much money to "burn" I'd start up my own company without blinking.
 
Artashes said:
Assuming you'd have $25,000-$50,000 to "burn", would you start a company from scratch or enter the industry through an acquisition of a company with existing revenue?
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With that money, I would start my own business, but most likely won't be hosting. I can pick up a brand new fully fitted coffee van for about £15,000.
 
easyhostmedia said:
With that money, I would start my own business, but most likely won't be hosting. I can pick up a brand new fully fitted coffee van for about £15,000.
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The question was only in relation to the web hosting industry. I guess the answer is you won't start a hosting business at all with that capital, whether from scratch or through an acquisition.
 
SenseiSteve said:
If I had that much money to "burn" I'd start up my own company without blinking.
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Would you hire help from the get go or grow it by yourself?

I am just curious, because when you start something from scratch, there is an unknown period of time before you start generating any meaningful revenue. It's also rather stressful to keep spending the money without desirable return.
 
Artashes said:
The question was only in relation to the web hosting industry. I guess the answer is you won't start a hosting business at all with that capital, whether from scratch or through an acquisition.
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18 years as a 1 man operation doing an average of 20 hr days behind a computer was enough for me. my current hosting business is only part-time. As a qualified barista if I have that sort of money I would set up a mobile coffee business
 
Artashes said:
Would you hire help from the get go or grow it by yourself?

I am just curious, because when you start something from scratch, there is an unknown period of time before you start generating any meaningful revenue. It's also rather stressful to keep spending the money without desirable return.
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The key word is "burn." I would absolutely grow that by myself with a reseller solution upstream.

Desirable is another key word in that scenario, as you absolutely need to be passionate about your new business, from accounting to marketing. You need to get yourself and your business out there. You can't just put up a website and wait on orders to start rolling in. That involves massive networking, social marketing and advertising. You have to build your brand as a provider that clients can know, like and trust.

Stress is a non-factor. If you can't take the heat, then it's best to stay out of the frying pan.

Time management is huge too because there are only so many hours in a day. You can't be so consumed with work that it destroys your personal life. There's definitely a balance that you need to achieve if you want to be successful. If you're putting in 16 to 20 hours a day on the job, then you're not doing it right and will be prone to burn out over time.

A business plan is essential, regardless of what some may say. Winging it all too often results in failure. In your plan, some self evaluation is necessary. Are you competent at sales, marketing, social interaction, networking, accounting, customer support and so on?

Saying that, some people are born to be entrepreneurs and others, well, just aren't, and there's nothing wrong with that. Hosting has a low cost of entry, but isn't for everyone.
 
SenseiSteve said:
If you're putting in 16 to 20 hours a day on the job, then you're not doing it right and will be prone to burn out over time.
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If you are a one-man band then you have to put in the hrs, I always advertised my online available time as 9 am until 11 pm, but I have seen me being online just after 7 am and well past midnight, depending on my workload.
If a client asked for support at 10:55 pm then I won't shut them down and 11pm, I would remain with them and help them for as long as it takes to satisfy them.

Sleep does not bother me as since a child I have only needed 3 to 4 hrs sleep a night.
 
I guess one big entry barrier to the starting or acquiring a hosting company is the age old questions; "What is your unique proposition?"

Why you? Why should I leave my comfy host and go with you? What's unique (other than support)? Are there optimized servers for a specific task, or optimized infrastructure somehow?

This is going to be the key question, beyond the money, what can be offered that others are not doing - or not doing as well?
 
I would say to any entrepreneur looking to launch a webhosting business from scratch, expect to put in some long hours upfront if you have any expectations of succeeding. Most people cannot survive on 3 to 4 hours of sleep for a prolonged period of time though, so structure your efforts to ensure some balance between business and pleasure.

Of course, there will be occasions that will require increased attention to business, but if those events occur too frequently, then you should re-examine your business plan. Sometimes it will seem like Murphy's Law applies only to you. Stuff happens, and as an entrepreneur, expect to deal and resolve difficulties as they happen. It takes commitment, but again, if this pops up too often, you're not doing something right.

There's nothing wrong with revisiting your business plan and tweaking it. Nothing should be set in stone as there are too many variables. You might ask yourself; "Is this really my passion?, Did I expect this to be easier to execute on?, Is the revenue not what I projected?, Should I consider third party support?, Should I advertise more?, Maybe try retargeting?, Possibly promote and brand my business on relevant hosting forums instead of simply posting advertisements and then waiting for someone (anyone) to sign on?, Maybe admit this is taking too much of your personal time, or really isn't your passion?, Or a myriad of other scenarios."

Final thoughts - Most new businesses succeed when their primary focus is easing the pain of their clients in some fashion. Most sales are emotional propositions. Think, why would a prospect pull out their wallet and purchase anything from you? It's not always about price. More often than not, it's about solutions.
 
bigredseo said:
I guess one big entry barrier to the starting or acquiring a hosting company is the age old questions; "What is your unique proposition?"

Why you? Why should I leave my comfy host and go with you? What's unique (other than support)? Are there optimized servers for a specific task, or optimized infrastructure somehow?

This is going to be the key question, beyond the money, what can be offered that others are not doing - or not doing as well?
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True
but sad as it is, especially this last year money speaks for a lot of people. With many placed on furlough they have less disposable income, so maybe cannot afford current host, so rather than speak to host and see what they can do they will jump ship to a cheaper host
 
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