How To Start A Webhosting Company

Make no mistake about it, starting a webhosting company can be quite a challenge and requires a lot of careful planning to succeed. There are various aspects, details, and decisions that you will need to carefully consider in order to stay on course. Fierce competition and an extremely crowded market are points of consideration that you’ll have to contend with. And that’s not even to mention the rapidly evolving technology linked to the hosting industry – cloud hosting has rapidly gained prominence over the last several years, which has completely changed not only the playing field, but the entire game, for most of the industry.

Carefully Consider Your Start-up Costs

supermicroOne of the first decisions you will have to make also happens to be one of the most important ones, and it involves your hardware. Are you planning to lease the hardware, purchase the servers outright, or rent the servers from a dedicated server company, like QuadraNet? You can lease excellent equipment from leading server hardware companies like Supermicro or Dell (though you’ll likely need to go through a leasing partner, like Tuangru, especially if you’re only leasing a few servers at a time). Alternately, you can opt to purchase something that is custom-built with the exact specifications you require for your setup from a server building company, such as ABMX. A third option would be to sign up as a reseller of hosting packages from hosting companies that specialize in reseller hosting.

This last option (reselling hosting packages) would, at first glance, seem to be the most economical, since it doesn’t require a huge capital outlay. This would go a long way in freeing up your funds for other key tasks that should be on on your to-do list, like advertising and promoting your new webhosting company. However, there is a downside — being a reseller gives you very limited control and leaves you vulnerable and at the mercy of the companies you choose to represent or work with. Another way of approaching this would be to rent a cloud server (a virtual machine) – the cost is slightly higher, since you’ll need to get your own licenses, such as cPanel/WHM, but it’ll afford you almost complete control over the entire server, since you have root access to it. Unfortunately the server is still virtual, so if your hosting provider needs to shut it down for maintenance/upgrades, you’ll still be at their mercy in that regard, but maintaining root permissions to it will give you an edge over your competitors that are using actual reseller hosting.

The other option in purchasing the entire servers that you plan to use would be building your own servers. Like purchasing from a server building company, this requires a substantial amount of money upfront, and may be a smarter move to reserve for later on when your firm is fully established with a plethora of clients. The benefit is that you save money on a monthly basis, since you’re not paying leasing fees (either to a hardware leasing company or to rent servers from your provider). You will, however, be paying for colocation, which, in some cases, can be more expensive than renting dedicated servers, but making the most of your colocation services is a completely different topic and an article for another time!

In the vast majority of cases, new webhosting providers are best off leasing the equipment in the beginning as dedicated servers. This drastically reduces start-up costs and, since the provider is responsible for the hardware, provides you a certain degree of peace-of-mind, freeing you up to run other aspects of the business.

There is another key aspect of the industry that you’ll want to consider as well, which has been brought about by the fierce competition in the web hosting industry and rapidly evolving technology. That consideration is that cloud hosting continues to quickly push its way into the web hosting and server hosting industry. In fact, many industry experts argue that cloud hosting is slowly making conventional hosting completely obsolete, which is certainly a very alarming development for a new web hosting firm to consider. Cloud hosting is an extremely expensive endeavor to offer, and while you probably can’t afford to completely ignore it, it’s best to start off smaller and not bite off more than you can chew. Once you have a steady stream webhosting customers, you can start tackling services that require larger investments/start-up costs.

Ideas To Promote Your New Business

One of the biggest problems almost every new web hosting company faces is having plenty of free resources (disk space, memory, etc.) and capacity that is not utilized in the first few months, as the new venture aggressively seek out its first clients.

Instead of allowing your server space to sit idle, it would be a great idea to use it to help attract and sign up new clients. One very effective way of doing this is by offering free trials for a limited period. You can use PayPal to create custom subscriptions that will begin charging the clients when their initial trial period ends. Naturally, this gives prospects a lot more confidence in your webhosting establishment because they can use and fully test your services before committing to it. The truth is that most of those who sign up for free trial will find it much more convenient to stay on and pay for the services rather than to take their business elsewhere. In this industry, once a client is set up and has all of their data uploaded to a server, etc., it becomes somewhat difficult to move/switch to another provider, as there is a lot of work involved in it.

wht_logoAnother very effective way of advertising and promoting your new hosting service is to use talk forums like Potential clients with technical queries use such sites to ask questions, get information, look up provider review, etc. You can position yourself as a recognized expert on those forums and help potential clients by answering technical questions, etc. This results in excellent leads for your hosting services.

If your marketing budget allows for it, it’s also possible to run advertisements on sites like WebHostingTalk. It may be better to research other websites that you can run advertising campaigns on in the beginning, however, as competition is very intense on the popular hosting forums and a single advertisement can quickly eat up a month’s advertising budget in a very small amount of time!

Big discounts and combination offers have also been proven to be very effective in promoting hosting services. Those types of offers always tend to attract new clients in large numbers, as have creative referral programs that give your existing clients a strong motive to refer business to you. You can also opt to establish a full-fledged affiliate program; well-managed affiliate programs have been known to grow sales and revenue very fast. While they aren’t too difficult to run and promote properly, you’ll want to keep in mind that this is a very popular technique, so it is important to find a way to differentiate yourself from the sea of competitors.

What Payment Methods Will You Accept?

paypal_logoIt is not a wise move to have only one method of accepting payment for your web hosting services. While PayPal is probably the most widely-used payment processor, it’s important to attract potential clients who either aren’t familiar with PayPal or don’t wish to establish online accounts to issue automated payments. It’s much better to cover all the major methods of payment, including credit cards, bank wire transfers, and even company check. While you’re likely going to be on the cutting edge of technology and the internet in the hosting industry, don’t count out the old-fashioned methods of payment: there are a lot of companies who still use those on a daily basis.

What Operating System to use? What Control Panels to use to manage it?

cpanelwhmThe most popular setup for hosting services is the CentOS operating system (now on version), with cPanel/WHM to manage it (though CentOS 7 support has not been fully released yet, so you will need to use CentOS 6.x if you plan to use cPanel). cPanel is the undisputed leader when it comes to a user-friendly control panels for your clients, and it helps manage everything from systems administration tasks to provisioning and limiting server space and resources for your clients. If you’re going to use something other than the CentOS+cPanel combination, it would be advisable to also tailor your hosting offerings to a more specific crowd – perhaps offering the OS you decide as its own service (for example, “Arch Linux Website Hosting”, which specifically targets the Arch Linux community and those looking to use Arch exclusively).


Despite the numerous challenges that you are bound to face in your efforts to start your own webhosting company, it is also accurate to say that with the right planning, you can overcome most of the obstacles. If you couple your determination in this endeavor with smart and aggressive marketing and promotion, success will almost certainly come, but don’t expect it to happen overnight! Remember – the more you differentiate yourself in this industry, the better off you’ll be!