The concept behind reseller hosting is simple: A hosting reseller buys a ‘reseller hosting account’ from a service provider (a larger hosting company or a data center owner) and then sells it to others for a profit.
How Reseller Hosting Works?
Its business model is pretty much the same with any offline retailing business – the reseller may purchase the hosting capacities (bandwidth/hard disk space/software/CPU power) themselves at cheaper rates and then sell them at higher "retail" rates. Typically, hosting resellers often operate their business under an independent brand or label. In other words, a hosting reseller will not inform the end users that he/she is selling someone else’s services.
It does not need extensive technical knowledge to be a hosting reseller. In most cases, the data center operator is the responsible party for hardware maintenance and configurations. A hosting reseller is more like an agent where his/her jobs are mainly interfacing with the existing customers and winning more new customers. This is why a hosting reseller firm often spend greatly on advertising campaigns.
The economics of reseller hosting
Let’s do some simple mathematics and see how a reseller host make money.
John purchases Hostgator’s Copper Reseller Package and gets 80GB disk space, 700GB bandwidth at $34.95 per month. He then breaks the package into 10 separate accounts with 8GB storage and 70GB bandwidth each and sells it for $8.99/mo. At the end of the day, John’s profit (assuming that he sold all 10 accounts) will be $89.90 – $34.95 = $54.95/mo. Not much, but it’s still some sweet money considering that there are not much work to be done.
Repeat that for another 9 times and you’ll get a nice $550 passive income per month. In fact, why just stop at doing 10 sales – the Internet is an ever-expanding world, why not buy and resells more? 100 customers earn you $550/mo; why not go 1,000 or 2,000 or even 5,000!
Well, that seems like a sure-fire business model, why not we just start one!
But wait, the question to ask is why: Why should your customers buy your *limited* hosting package when other larger web hosts are selling cheap *unlimited* hosting?
Having a unique selling point is a must for every successful hosting reseller. Some might offer free CMS and blog installation services; some might help in website design and development; but what most successful resellers do is to focus on profitable niche markets (example: Europe/India/Asia markets, gaming community, specific script user community, etc).
How to choose a good reseller hosting provider?
Here are some important consideration factors when you are searching for the right reseller hosting provider.
Reliability Needless to say, your reputation as a hosting reseller depends a lot on the quality of your provider’s servers and network. Make sure that you stick with reseller hosting provider that has strong uptime record or the sky will be falling on your business.
Customer Supports Efficient customer support is another important characteristic you should be looking for. Remember that you will have a lot of different clients to handle thus chances of things get screwed up are very high. A dedicated team of technical support that are able to respond to your requests is extremely important.
Web Hosting Features Basic hosting features like bandwidth, disk space, and addon domain capacity are vital for hosting resellers as these are the ‘products’ that determine how many accounts you can create and sell. More allocated bandwidth or addon domains means more profits.
Scalability If you are just starting out reselling hosting services, you may want to pay for only a few domains at a time, and provide a very basic range of applications. However, as your business grows, the number of sites you service will increase and you may also need to increase the range of applications you can provide your customers. Does your host provide a relatively hassle-free way to upgrade? For instance, could you move easily from a shared server arrangement to a dedicated server without needing to change hosts?
Wrapping Things Up…
You probably ended up in this post because that you are new to all these but interested to get your hand wet soon. If so, all I have to say is ‘Just Do It!’. Web hosting is a huge industry and it is far from being saturated – competition is steep but I am pretty sure there is still money to be made!
And, in case my article does not clear your doubts fully. If that is the case, I would suggest further reading at this valuable section of Web Hosting Talk Forum: Reseller Hosting (WHT).