Greetings,
I'm Jose Castro and I currently work for a very reputable and respected hosting provider. Our company has experienced tremendous growth due to many internal and external factors. Today, we are outgrowing several top 20 hosting providers in the world and are proud of the job done.
I write articles in many forums and this one is primarily geared to business owners (working in the hosting industry). If you are one, or intend to be one, I encourage you to keep on reading.
You see it and hear it everywhere. In University or College, in a bookstore, in a magazine, online or even while watching a movie. Get the sale, "sell sell sell". There are millions of sales gurus who dedicate their life to teaching you how to get a "sale". As a business owner, we spend a great amount of our time on creating and implementing innovative marketing strategies to generate more sales. Marketing your hosting services is pivotal for your success, but on a second thought: Is it really the most important aspect?
Yes, marketing is all about selling your value proposition, whatever that is: Service around the clock, top-notch support, free web tools, 100% up-time, network performance, best-of-breed solutions, to name a few. The name of the game is to sell that idea. However, more often than not, we focus on selling that idea and tend to forget the main reason we are in business: To make a living. Simple as that.
Making a living in the hosting industry is tough, but not impossible. That is why you see thousands of web hosting providers. Type "web hosting" in Google and you will get 261 million results. Furthermore, the number of hosting providers has increased exponentially in the past 15 years. Just to give you an idea of how many hosting providers there are, check this out: Web hosting businesses serving 100 or more sites have been estimated to number 35,000 (Source: HostCount, May 2004) - with thousands more smaller commercial web hosts serving less than 100 sites not included in that figure.
It is a no "brainer", making money is both tough, but possible in the hosting industry. However, you, business owners need to focus your time on generating profits, not revenues.
Let's get right to it. Let's figure out how to make money.
Step 1:
-Figure out your cost: Variable and Fixed
a) How much does it cost you to run your operations?: from running your server, support staff, licenses, etc.
b) How much of your time is spent on your day to day activities?
c) How much do you spend on advertising?
d) How much do you spend on office supplies?
e) How much do you spend on emergency support provided by your Hosting Provider?
Example:
If your cost to run your operations is $500.00 per month and you spend 14 hours working (your wage - minimal - is $10.00 per hour: $10.00 x 14 hours per day), you spend $200.00 on advertising per month, another $50.00 in office supplies and another $100.00 on emergency support. Your total cost would be: $5,050 per month. Are you surprised? That is your cost, period.
While you can avoid paying yourself a $10.00 per hour wage, it is important to recognize that your work has a price.
Step 2:
-Figure out your price
Assuming you provide virtual private hosting:
Server specs: P4, 3.06GHz, 120GB HDD, 1500GB monthly traffic, 2 IPs, 10 mbps port.
Here we can assume you can host up to: 120 web sites (allocating 1GB per site) and 12.5GB of monthly traffic per site. This means, in order to break even, you have to price your web hosting solutions at: $42.00 per month. So, how can most hosting providers afford to offer solutions at $5.00 per month?. Simple, the answer is they cannot. Their strategy is based on volume, which means they are looking to sell over 1200 web hosting plans at $5.00 in order to break even (in theory).
Is that the business you truly want to be in? You just can't sell a loss-leader product.
Your cost does not allow you to charge only $5.00 per month per account (1GB of disk space and 12.5GB of monthly traffic).
So what now?
Step 3:
-Figure out your sales and pricing strategy
While you cannot afford to sell a solution for $5.00 per month, you can sell the same solution, for $10.00 per month and guess what? you can get the money in advanced. This not only helps you cover your basic costs, but it helps you keep your clients (locked in a one or two year contract). Wow, not rocket science. Well, the fact of the matter is once you have the clients playing in your backyard, guess what? You can count on an old business principle: 80% of your business will come from your existing client base (that is huge). Time to cross-sell and up-sell big time, while you continue working on new sales and marketing promotions.
Here is the new example (assuming you charge $10.00 per account: again 1GB of disk space and 12.5GB monthly traffic):
$10.00 x 12: $120 (per account) x 120 (accounts): $14,400 - not bad. This can be accomplished. If that happens, then you can cover your entire operations for at least 3 months. This would enable you to keep on attracting new clients, cross selling the ones you already got and up selling the ones that require a dedicated server. Not to mention that you lock them for one year.
"Marketing is the art of selling solutions, while making a profit."
These are simple steps, you do not have to go to College and spend thousands of dollars in order to figure this out. But, trust me, more often than not, business owners like yourself tend to forget why they are in business: "To make a living".
I hope this article added some value to your day. If it did, I am glad.
If you have any questions about dedicated hosting solutions or how to resell dedicated servers, please don't hesitate to contact me.
Regards,
Jose.
Jose Castro - Channel Manager, Superb Internet Corporation
JCastro@Superb.Net
1-888: 1.888.354.6128 x 208
ICQ: 267648779 - MSN:
perupoint@hotmail.com
Are you selling, while generating profits?
