Start Selling Web Hosting

So, you’ve developed a successful webhosting company and now you want to sell it. How do you do it? What’s the process like? Are there taxes involved? I have the answers for you in this article!

First off, should you even sell your company. If you have less than 50 clients, the most likely answer is no- it’s not worth the time investment if you only have a few clients. If you have more than 50 clients, good! Continue on, because you are prime for selling your company and making a huge profit.

You can list your company for sale on sites like flippa.com or webhostingtalk.com. These sites are frequented by successful webhosting companies and entrepreneurs looking to invest. Simply make a post on these web forums and people will start bidding on your company. You can decide when a reasonable offer comes through. The people on these sites will want to know the following information:

• The packages that you offer- bandwidth, disk space, pricing, etc.
• The amount of accounts you and which plans they are on
• The average age of the webhosting account
• How your accounts pay- PayPal, Credit Card, etc.
• What control panel you are using

If you are using cPanel, you can usually get a bit more for your company as the accounts are very easy for the buyer to move over. Additionally, if you have a dedicated server it is easier for the buyer too- you can just transfer the dedicated server into their name and they won’t even have to worry about moving servers.

Retention is a serious concern for your buyers- they want to make sure that the clients arn’t going to up and leave when they buy your company. They will want to keep your business name, website, and domain name in order to make the transition as seemless as possible. Not having these valuable assets will substantially lower the valuation of your business.

How much is my hosting company worth?

It’s easy to generate a starting number, but the final figure can vary dramatically based on so many different factors- is the company brand included? how many clients? will it be easy to transfer? Anyways, you can start by taking the TOTAL MONTHLY PROFIT and multiplying it by 12 MONTHS. So, if your company brings in $1000 of profit per month, you can look at selling it for $12,000, give or take.

Many newbies to the webhosting business like the idea of offering free webhosting. It’s a very tight niche to get into and it’s very difficult to monetize. In fact, how DO you monetize a free web hosting company? Most people think of Ads, but it’s difficult to attract alot of clients that way- most clients want ad free hosting. Additionally, since you don’t control the content of the accounts webpages, you can get your ad account closed if any of your clients have pornography or illegal content on their page.

So, obviously ad-free is the way to go- You’ll attract alot of clients and won’t have to worry about having your revenue stream cutoff. So, without ads how can make money from free webhosting? Some popular alternatives are post to host. How does post to host (post2host) work? Basically, your users need to make a minimum number of new posts on your forum every month to keep their account active. This is used to create content on the owners forum, which generates traffic, seo ranking, and forum ad views.

Another popular way to monetize free hosting is to offer paid hosting along side your free hosting. The goal is that your users will eventually upgrade to a very cheap paid plan with more and better features. I ran a free webhosting company and I can tell you that this does not happen very often. Out of 2000 accounts, only 3 people upgraded to paid plans. I’m not an accountant but those numbers don’t make sense.

I present to you a very unique and new strategy for monetizing your free host. I think that instead of trying to make money from the hosting company, you use it as a proxy for building an email list. Collect the emails on signup, double opt-in, and start mailing them related offers. You can use Hosting or Technology related CPA (cost per action) advertisements, EBook Offers on Traffic generation or SEO, etc. Since we are talking about free hosting, I recommend going with lower paying free-trial offers that don’t require the users to lay down any cash.

The problem with free hosting

The problem with free hosting is that attracts the 3 worst types of traffic. They are- low-income users without credit cards, illegal sites that host warez, spam, porn, torrents, and copyrighted files, and international users. At best, none of these groups can make you very much money, at worst these users can get you introuble because you are ultimately the one responsible for their content.

Many people what to know what my favorite distribution of linux is for running a webhosting company. It is common for many companies to use an “enterprise” linux, such as RedHat, its open-source brother CentOS or SUSE. I tend to take a complete opposite stance for a couple of reasons (although, in the end it really doesn’t matter that much). I prefer to use a bare-bones pedal-to-the-metal linux distribution like Gentoo or Arch Linux. Many people are scared of using an OS like Gentoo because of its difficulty, but it’s actually very easy and enjoyable to administrate.

Why you shouldn’t use Ubuntu for web hosting

Ubuntu has gotten a ton of hype the past couple of years. Some people think it’s going to eventually bring linux to the masses- and they could be right. However, Ubuntu is a consumer-oriented distribution that really shines on the desktop. I know they make a Ubuntu Server, but it’s not their main focus and I’m hesitant to use it because of that. What if they decide to kill it off so they can focus to on their desktop product? If you are building a test server and need something that’s easy to setup, Ubuntu might be the right choice. For webhosting, I’d choose something better.

Why you absolutely should not use RedHat Linux or CentOS

RPM based operating systems are incredibly clunky. They are well known for causing dependency issues, running outdated software, installing tons of unnecessary dependencies (which introduce security vulnerabilities to your system- do you really want to catch a rootkit?). Additionally, RedHat is not free and CentOS is not as well-developed and popular as it used to be.

Ok, what should I use then?

If you want to use Linux, I highly recommend Gentoo and Debian. These are both solid distributions for webhosting that include great package managers (emerge and apt-get). They have all of the necessary packages that you will need like Apache, mySQL, PHP, Perl, etc. They are also supported by cPanel so you’ll be able to install pretty much any control panel that you’d like on Gentoo or Debian Linux. If you arn’t tied down to linux, I recommend using a BSD release like FreeBSD or NetBSD. These operating systems are very similar to linux, very secure, and very ‘bare-bones’. They only include the essential software by default- no bloat! Additionally, almost every webhosting software package that runs on Linux will also run on FreeBSD.