[thelist] Reseller Hosts

Jonathan j at firebright.com
Tue Jun 22 09:41:35 CDT 2004

> >Has anyone  tried http://www.hostgator.com They give 
> unlimited domains 
> >hosting & 2000MB spce for just $25 a month.
> >

Wow, with prices like that I'm sure you'll be stoked with their quality and
service. ;-)

Imagine this, you have a reasonable server that has, at most, a 250 GB EIDE
or SATA drive in it.  

Take 40 gigs off for the system, and you have 210 GB left.  Then divide by 2
(2 gb).  Times that number by 1.5 for the number of accounts it can
"support".  So per server that's 157.5 accounts (remember, not every
customer is expected to use the full 2 GB, and 1.5 is a conservative enough
oversell).  Take that number, and multiply it by 25, for the number of
name-based domains each reseller account could support.  Somewhere around
3937.5 per machine, right?   Now, considering most equipment can't handle
more than a few hundred on Ensim Webppliance, double or triple that on
Plesk, and maybe 1000 on cpanel (if you run it lean), that's a tough profit

So, you make $47,250 from this very optimistic model per year.  Take out
management and capital expenses of $2500 for the machine (given, you'll need
4-5 machines, with licenses to run control panels, so 14-16k plus outside
licensing) and management (a good management deal can be had for $100/month
or $4800/yr for 4 machines).  So, you have about $18-20k a year in capital
and management costs.

Plus support, by the time you have support factored in (1 full time person a
year is about 35k min, which costs about 47k after taxes and covering

So, you're after tax income on a loaded set of servers using this model is
what, about $31,185 (34% tax).  You lose 20 to capital expenses in the first
year, and another 10k in mantainance fees over the next two years, and you
have labor costs of about 47k a year, so your outbound total is about $169k,
and your income is about $142k.

Now, this doesn't include marketing, profit for the founders, or anything
else.  Oh, and I forgot about that other little fee paying for bandwidth and
colocation (it's not small, it's going to be thousands a year for a 1/4 rack
somewhere at a minimum).  So, are there hidden strings?  Well, I can bet
that the business isn't very profitable, even if it goes extremely well,
which means that ultimately it won't scale and your experience will suck.
They'll have to oversell the crap out of their equipment, skimp on support,
run it out of a garage, or make it absolutely enormous and ride the

Disclosure: I own a hosting company.  However, I'm sharing all this because
it's important to think about when you're looking for providers.  These
models don't scale.  You're almost guaranteed a bad experience.

My 2c.


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