Why You Shouldn`t Become a Web Host

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So you’re dreaming of quitting your job and starting up your own web hosting business. You figure that it can’t be too hard, especially with reseller web hosting packages. Just lounge your way to easy street, right? Wrong.

Why You Shouldn`t Become a Web Host

Web hosting is a business, like any other, and the vast majority of businesses fail in their first year. It is not a way to fast, easy money. Don’t believe me? Do a little research for yourself. A recent article at Tech News World on choosing a web host pointed out that “many of the biggest [web hosting companies] filed for bankruptcy protection or were saved by being sold to some other company…” So if even the big guys have problems, how can it be easy for a little guy?

You’re probably thinking that little guys can be more agile, and besides, you don’t need to deal with the huge cost of overhead that is part of the burden of a large company. You therefore don’t need to make as much money as, say, GoDaddy. So surely you won’t have the same kinds of issues, right? Well, it’s true that when a problem increases in magnitude to that degree, its nature changes – but just because you’re not paying a salary to thousands of employees and rent on a corporate campus doesn’t mean you don’t need to worry about what you’re paying yourself and one or two employees, to say nothing of the electric bill for your home office.

I don’t expect your dream of entrepreneurship will die an easy death, so I’m going to give you a list of reasons why shouldn’t become a web host, or at least rethink your decision. If you’ve read Matt Inglot’s article on the top five reasons not to become an entrepreneur, you’ll spot some parallels here. But web hosting has some special issues that can’t really be mentioned in a general article about being an entrepreneur, and I’m going to expand on those here.
The Internet is up 24/7. Site owners expect their websites to be up 24/7. And if they aren’t, they’ll call their web hosts to complain; that’s you, and you might find yourself working 24/7 just to keep up with your customers’ needs. But that’s just the most obvious manifestation of the problem with being your own boss. The work never stops.

It isn’t just customers either. If you’re a reseller web host, you’re dealing with the company from whom you’re buying your hosting space. If you aren’t, you’re buying your own equipment and dealing with suppliers, whose workers and products may or may not be reliable. You also have to spend time promoting your business, which involves a lot more than just slapping up a web site.

In fact, the number of skills you need to operate your own company is staggering. You are your own salesman, marketer, bookkeeper, trainer, IT person (particularly important when you’re a web host), website designer, purchaser, quality control person, customer support, and on and on. If you are missing any of these skills, you have to acquire them yourself by taking the time to read books, attend classes, or do whatever it takes. Your other option is to hire someone with these skills, either as a full-time employee or as a contractor.

If not having the right skill set is one reason that many web hosting businesses fail, another reason is time management. Let’s face it, you can’t be available to your customers every single moment; you have to sleep sometime. Don’t assume you won’t get a phone call at three in the morning from one of your customers with an issue. It’s not unusual to put 15 hours a day into your business, and it’s unlikely that you’ll be at the top of your form the entire time. If you’re not naturally well-organized, you can look at time management as another skill you must learn before starting your own business, whether it’s web hosting or another field.

Of course, this feeds right back into the point that there’s so much to do when you’re running your own business. You want to refine your business plan and grow your business, but when you’re caught up in daily activities it’s hard to see the forest for the trees. How can you work on maximizing your growth when five customers are screaming at you because they can’t get to their sites to update them, the new server hasn’t been set up yet, your customer support person is down with the flu, the firm handling your web connection has you on hold, some of your bills are overdue because some of your customers are late with their payments, and your pay-per-click advertising campaign just ran out of money for the month? Sure, that’s overly dramatic, but you probably get my point.
Any business is going to need some start-up capital. That comes out of your pocket and the pockets of those you can convince to invest. You need this before you open your doors (figuratively or literally) to your first customers. You might not need too much at first: a domain name, a website, the cost of a reseller package, and so forth. But costs will mount as you continue, especially as you make the effort to look polished and professional. You may well find that you have to go to a bank to secure a loan, possibly even take out a second mortgage on your house or run up painfully large credit card bills.

That’s just one part of the equation. How are you going to produce income for your business? Do you know how much you need to charge customers and what kind of web hosting packages you need to set up to turn a profit? If you’re offering free web hosting or low-cost web hosting in exchange for advertising, do you know how much money you need to make from advertisers? This is one part of the business you can’t afford to fill with pipe dreams. Do your research!

While we’re on the topic of money, are you certain that putting your money into your own business really is the best investment? In economic circles, this is referred to as “opportunity cost.” What didn’t you spend that money on so that you could spend it on starting a web hosting business? Would you get a better return by putting that money into a retirement account, with compounded interest? That’s just one possible alternative; think about the income you’d be giving up on the money you’re putting into this business.

And speaking of income, how long do you think you’ll be able to last without much of one? If you’ve spent most of your adult life getting a regular paycheck, starting your own business will be an eye-opening experience. You’re not getting that wonderful deposit every other week anymore, but your creditors will still want you to pay them just as regularly. If you can get your business started while you’re still employed, that will help, but the very nature of a web hosting business may cause it to intrude on the work time of your “day job.” It’s not a long term solution if you’re serious about making your business more than just a hobby. You may also find that you actually net less money as a business owner than you did as an employee.

Matt Inglot pointed out that “As human beings we tend to find change uncomfortable, but there isn’t much room to be in a placid comfortable nook when you’re an entrepreneur.” He went on to explain how entrepreneurs must always be willing to try new things. As a web host, you have a huge incentive: the competition. If you’re not prepared to adapt to a changing field, they certainly are. And there are plenty of web hosts out there, because many have been attracted to the industry by the same kinds of dreams that are getting you all fired up.

You have to come up with ways to make yourself different from the rest of the field, and stand out positively in the eyes of prospective customers. Indeed, you must continue to offer advantages over the competition after you win your customers over, because there is nothing to keep them from switching to another web host if they aren’t happy – and there are a ton of web hosts who would be happy to have that business.

And there’s no getting around the fact that starting and operating your own business is a lot more stressful than being an employee. Oh, it’s true that some personality types actually find it less stressful, but most people tense up when they constantly have to make decisions with too little information. When it comes to being an entrepreneur, taking risks is in the nature of the beast. Do you try to attract bloggers? How about podcasters? What about controversial websites (and how do you define “controversial”)? Will customers pay more for that new service you’re offering – and will it cover itself with the money you make from it?

There you have the major reasons that you shouldn’t go into the web hosting business. I hope that I’ve busted some of your illusions so you can examine the idea with clearer eyes now. And if I haven’t completely dissuaded you, at least now you know the pitfalls you’re likely to face along the way, and can prepare for them.