Article by Jerry Low
Geek dad, SEO data junkie, investor, and founder of Web Hosting Secret Revealed. Jerry has been building Internet assets and making money online since 2004. He loves mindless doodling and trying new food.
Web hosting services are perhaps the one aspect of the "dot com" bubble that never popped, never experienced a downturn, and continues to thrive even in a challenging economy around the world. That’s because the internet has yet to reach every single person on the planet and, as it reaches older users and those in more economically-challenged nations, the demand for web hosting, domain name services, and email servers is continually increasing. This presents a pretty sizable business opportunity for the right kind of person. That person typically has extensive technical knowledge and web development experience, combined with an enterprising business attitude.
For these individuals, reseller hosting services are a way to make a significant amount of income every year. The process involves renting space on a remote hosting company’s servers and reselling that hosting, at a significant markup, to customers who need a place to host their blogs, photos, and even cloud storage data. Almost every major web hosting company offers some sort of reseller hosting plan, and the service is perfect for those who would like to profit on this burgeoning business without owning, operating, and maintaining their own, locally-hosted web server hardware.
There are a few basics to reseller hosting that define how it works and who it’s best suited for, ranging from technical support concerns to billing and customer relations.
First and foremost, every aspiring web host does not qualify for a reseller hosting plan. That is, their needs may simply be too great for the slightly more limited resources offered by web hosting companies as part of their reseller options. Instead, a reseller hosting plan is perfect for very small web hosts or those professionals who are just gaining their footing in this profitable industry.
When a customer selects a reseller hosting option at a major web host, they are essentially agreeing to rent space on one of the company’s dedicated server products — or multiple dedicated server products, depending on their needs. Each of these servers can meet the demands of several web hosting clients, perhaps between 50 and 100 people per server, depending on how the resources are allocated. This might sound like a lot, but consider that the major web hosts online typically have hundreds of thousands of users across hundreds or even thousands of servers.
Most companies offer between one and three dedicated servers as part of their reseller plans, though this varies on a per-host basis and some may offer more or less robust reseller options. For that reason, there is certainly a "ceiling" as far as how many people can be hosted by a reseller customer and when they’ll need to consider expanding their business to encompass their own dedicated servers which are hosted locally or collocated at a local facility.
Reseller hosting is perfect for the upstart web host, those considering a career in the industry, or individuals who simply want to run a moderately-sized online business that exempts them from the responsibility of directly maintaining server hardware. Those with bigger plans, who aspire to be the next major hosting company online, would likely be served better by investing the significant time and money resources it takes to self-host server hardware and offer fast and reliable broadband connections to those servers.
One of the first questions most potential hosting resellers have is who becomes responsible for providing technical support to clients who sign up for a hosting back on the resold server. The answer is simple, and yet sort of complicated: Both the reseller and the company providing the server hardware are responsible for meeting the needs and demands of hosting clients who buy a resold hosting package.
Essentially, the individual who offers the actual hosting plan on the reseller hosting server is responsible for providing customer support as it relates to any installed hardware, hosting plan features, or other concerns a customer might have when it comes to the daily operation of the server’s installed features. This means things like the cPanel or Plesk Panel control panel software, MySQL or Microsoft SQL databases, PHP installations, email server settings and operations, data backups, and other essential functions are the responsibility of the person reselling the server’s disk space and bandwidth.
On the other end this issue, any hardware problem that occurs with the server and affects a customer is not the responsibility of the reseller. Instead, the responsibility for diagnosing and fixing these problems lies on the shoulders of the actual web host itself. They’ll need to answer for any downtime directly to a reseller client, and if the outage is large enough they’ll likely provide a refund or some sort of compensation for affecting both the reseller themselves as well as their clients.
Simply put, there are more likely to be questions, concerns, and problems relating to the software than there are for the server’s hardware and daily operations. This means that any potential buyer of a reseller hosting plan must be prepared to offer an appropriately robust and responsive technical support department. Use the larger web hosting companies as a model; be prepared to offer live chat solutions, a toll-free customer support hotline, priority-based support ticketing systems, and an extensive series of helpful articles, frequent questions, and even a discussion forum for customer complaints and technical concerns.
Remember that the key to a successful web host, whether based on a reseller server or operating local hardware, is a great support team that is responsive to customer needs around the clock. This is perhaps the key part of becoming a web hosting reseller. There are dramatically fewer responsibilities when offering hosting in this method, which means that extra time and money should be dedicated to customer satisfaction.
The key to making a profit on a reseller hosting plan is to emulate the business models of established, larger web hosts and offer tiered pricing to consumers. All too often, resellers try to get their foot in the door among the bigger web hosts by offering "unlimited" plans that don’t restrict customer usage or storage. This is a mistake for several reasons. Firstly, there really is no such thing as an "unlimited" reseller hosting plan. Therefore, offering web hosting serves without a corresponding limit is a false promise that will lead to either server downtime or elevated overage charges for the reseller client.
The smart way to offer reseller hosting using one of these plans is to take into account all of the server’s resources. Decide how much bandwidth can smartly be used per customer, and how much storage makes sense for each plan. Remember that people are willing to pay more money for more features, so tiered pricing can be a highly profitable way to compensate for the reseller plan’s monthly cost. Structure plans which encourage upgrading, annual payment over monthly installments, and create plans that can be considered a good value. It’s important to balance the competitive nature of the industry with the drive for profitability overall.
When the time comes to define these plans and limit server resources on a per-customer basis, most reseller clients will find themselves served by an advanced, server-based control panel. This administration software allows them to actually define specific hosting plans and limit the number of gigabytes dedicated to storage and bandwidth, control the number of domains and databases that can be supported with each plan, and control other plan settings such as email inboxes and accounts, which keep prices low and keep the business profitable.
These control panels are often instantly scalable and can even allocate data and bandwidth across multiple servers, if a reseller client chooses to expand their business across many remotely-hosted dedicated servers with their web host. When shopping for a reseller hosting plan at any major web host, be sure to research those control panel options that they offer to their clients. It’s important to be served by a powerful control panel that can manage the many unique aspect of determining hosting plans and storage limits.
One thing that many reseller hosting plan shoppers overlook is the fact that they will actually be responsible for billing their clients on a monthly basis. This process is not the responsibility of the web host which provides the server space for their reseller clients, and they are under no obligation to offer payment processing, shopping carts, or other tools that are essential to online commerce. It can be a significant hurdle for many who are new to the business, as these tools are quite expensive to invest in up-front when beginning a fledgling web hosting company.
During the process of selecting a web host for reseller hosting, pay special attention to the billing and e-commerce tools they offer to their clients. Some web hosts won’t offer a single tool to help their reseller clients, while others will provide a basic merchant account with credit card and online check processing, as well as a basic user control panel where hosting clients can manage their payment information on their own (thus saving your technical support department some phone calls).
Payment processing is an essential aspect to reseller hosting, as it’s the way all profits are driven and delivered. Prospective resellers of hosting space should keep their options in mind, from traditional merchant accounts to services like PayPal. But they should never be without a plan, or without a payment processor, once they’ve started offering their services to the world.
As part of this search for a payment processing method, reseller clients should also investigate options for a user control panel where a user can make payments, adjust the features of their hosting plan, or upgrade to a higher-priced plan offered by the reseller’s company. This, too, will save the technical support department of the fledgling operation some time and money. And it’s a great way to empower customers and communicate a professional ethos to them on a daily basis.
As with any industry which is currently booming, there are plenty of "get rich quick" schemes and "too good to be true" reseller hosting plans that simply should be avoided at any cost. First and foremost, it’s important to understand that no one gets rich quick with a reseller hosting plan. They certainly get profitable very quickly, but it takes time to build a wealth of clients who contribute to exponential profits.
Secondly, there is no such thing as a truly "unlimited" hosting plan anywhere online. Almost every plan has some sort of arbitrary cap on both disk storage space and monthly data transfer. Rather than pursuing plans which offer unlimited service with a few asterisks and ample fine print, pursue instead a plan which clearly delineates its limits to potential reseller clients. It’s true that no one likes limits but, in a web hosting world full of them, it’s better to know how much data transfer a company supports rather than assume there is no limit and have an entire customer base’s hosting plans knocked offline after it has been reached or exceeded.
Typical reseller hosting plans range in price from a low of $5 in certain corners of the web to more than $100 per month for truly advanced and high-data plans. Always keep your budget in mind and remember that the price of a reseller plan is compensated for by the fees charged to reseller clients. If you don’t think you can compensate for the monthly cost of a hosting plan by offering it to others, choose a lower price point and upgrade to a better plan as the need arises.
Few of the hosting companies I reviewed come with a reseller hosting plan; in case you are working on your shopping list, my reviews on Hostgator, GreenGeeks, and CoolHandle are some recommended places to start with.
With these considerations fully kept in mind, it’s time to find a reseller hosting plan that makes fiscal sense and offers a great opportunity for both profits and professional development. The industry is growing quickly and the opportunities for advancement are only increasing. Making a move to serve new hosting customers with affordable plans now, rather than waiting, can only hasten the process of profitable business development in this industry.