Why do people give up their web hosting business?? What can be done to prevent this?
1. Infrastructure costs
The web hosting business, like any other, has capital expenditure. You need to put money into the business for it to make money for you. Major costs are that of the servers. You’ll have to pay for the hardware itself, then for it to be set up, and finally, there’s the continuous cost of maintenance of this hardware.
For a lot of small and medium-sized businesses, this price of entry is just too much. So, they start out small. But they’re competing with companies that have data centres full of servers and have been in the business for long. Not having a full-fledged infrastructure makes it difficult for small businesses to compete with industry leaders.
Solution: Reseller Hosting is a great solution to this problem. Instead of investing in servers, you start off by using the servers of full-fledged hosting companies. Instead of spending a ton on hardware, you just have to pay a monthly fee. This way, you’ve negated a major chunk of the capital investment needed.
2. Margins
There are literally hundreds, if not thousands, of web hosting providers. The competition is cutthroat. There are companies that offer basic hosting solutions almost for free. Small and medium-sized businesses find it difficult to compete in that marketplace. They cannot work on the economics of scale. They need to make a profit on each plan, and with the sort of competition that they face, it’s sometimes a bit too uphill.
Another important point to note is that web hosting services need to be reliable. Even temporary downtimes will see customers going away. So, you need to spend generously to set up a reliable hosting environment. Once you’ve spent this much, it doesn’t make any economic sense to offer hosting plans for ridiculously low prices. If you reduce the prices of your hosting plans a lot, you don’t make any profit. Talk about being stuck between the devil and the deep sea.
Solution: Some of the most successful small hosting businesses target a particular niche of customers and curate hosting plans that are perfect for that niche. If you’re offering the perfect solution for a very specific problem, you can increase your margin because there are people willing to pay for it.
3. Customer support
24×7 customer support through multiple communication channels, including phone, chats, and email — that is what customers want. And that is expensive.
Providing 24×7 support through various channels costs a lot. You need to either have a call centre or hire a third party to do it for you. You have to pay people to respond (quickly, too) to emails. All this for a plan that businesses may be selling at dirt cheap rates.
Solution: The way to get ahead with customer support is by being efficient. Businesses that cannot offer phone support (because of the costs), sometimes offer email support and chatbot support only. The reason they succeed is that they ensure that the two methods that they’ve chosen are efficient.
They work on solving problems efficiently. So, even if they don’t offer phone support, they solve problems quickly enough, meaning that their customers are satisfied anyway. Social media, chatbots, emails, automated calls — they’re all relatively cheap, but can be great if your customer support funnel is efficient.
4. Marketing
It’s no secret that marketing costs money, and it’s the sort of expense that you cannot avoid if you want your business to succeed. This is an additional expense for small and medium-sized web hosting companies. You need skilled people for this, and skilled labour isn’t cheap. What’s more, the bigwigs have much larger marketing budgets too. So, you’re not really playing on a level field.
Solution: Social media and niche targeting have come up as great solutions to this problem. Big hosting companies essentially carpet bomb the internet with their ads. Successful small businesses only market to potential customers, bringing the marketing cost down and increasing their rate of conversion.
Social media, if used correctly, can be a great way to market your products or services. While it takes some time to build up a decent following, it can be a marketing gold mine. Good reviews on social media, customer service via social media, and the social media word-of-mouth — they’re all legitimate marketing channels.
5. Handling growth
A lot of web hosting companies begin as one employee companies where you’re the sole owner and the sole employee of the company. You do a bit of marketing, a bit of technical work, and a bit of maintenance — all on your own.
However, as the company grows, you will need more people. Once you add people into the equation, your costs go up too. You need talented people, and talent doesn’t come cheap. You will also have to start thinking of overhead, equipment, and training costs at this point. Finally, when your company grows, you’ll also have to add server capacity.
All this will eat into your profits, further reducing your wafer-thin margin. So, people often get stuck. Businesses don’t grow big enough to not worry about these costs, while it’s not small enough to skip on them.
Solution: Again, Reseller Hosting is a great alternative here. Your parent hosting company owns and maintains the servers. This means that your HR costs can go down significantly and you can deploy the same resources to scaling up your server resources.
So, these are some of the most important reasons why small hosting businesses often shut shop. However, as we’ve seen, these problems aren’t really insurmountable. There are ways in which you can cut your expenses and still run a profitable web hosting business.
Conclusion
Web hosting business isn’t an easy business with little to no competition. It’s a business where a lot of people and large sums of money are involved. It’s difficult for a small business with a tight budget to disrupt the industry and eat into market share.
