Are you tech-savvy and a wiz at setting up websites? Then you may want to consider starting a web hosting business, which will generate a passive income for you month after month (and year after year).

What is Web Hosting?

At its core, a web host is simply a place where a website’s data are stationed. In other words, the website’s files, images and code are all stored on a computer that transmits that data whenever a user requests it via direct input (i.e., typing the site’s URL into a browser) or search (e.g., Google).

In theory, your own personal computer could serve as a web host, except that due to its small storage size and slow speed, loading a website from any user request would take at least several minutes. Thus the reason why most web hosting is performed using network servers, or data delivering devices whose sole functions are to process user requests and then deliver the requested data. That’s it.

How to Start a Web Hosting Business

There are several different ways you can start your own web hosting business, but they all begin with one thing: the server. Think of the server as a mega hard drive that’s going to store and file away all the websites you support (and collect money from each month).

Such a mega hard drive won’t come cheap; even the most basic servers costs $500, while some top-of-the-line servers run $100,000+. Aside from purchase costs, you’ll also have to provide a cool and dry storage space for your server and lots of electricity.  There’s also the matter of network outages; being prepared for inevitable downtime due to electrical outages means having a backup generator.

One option to storing your own server is setting up that server at a colocation, or an external site that offers immediate access to your server day or night and supplies the necessary storage environment and electricity. You can think of a colocation as a kind of storage locker for your server.

Reseller vs. Dedicated Server

If you’d rather start small and work your way up to actual server ownership, you can rent your server from website hosting companies like us. This is much cheaper than buying a server outright and also takes care of the storage question.

There are two server renting options, namely getting a reseller or dedicated server. With a reseller account, the management team at the “landlord” hosting company takes care of your server, including software and control panel installation and regular backups. This is a good option if you don’t have a lot of money to spend and/or feel a bit overwhelmed by all the possible issues that a server might encounter. Most hosting companies allow you to upgrade to a dedicated server from a reseller account at any time.

If you choose a dedicated server, you and/or your management team will be in charge of running your server. Having said that, some hosting companies offer you the option of having their own management team still manage your dedicated server.

While having a dedicated server is more expensive compared with a resold one, it does allow you to better control server performance, security and speed. This can be useful if you start hosting websites that require extra bandwidth, for example (e.g., game or image intense websites). Dedicated servers are also far superior to resold ones in terms of their processors, speed, etc.

Don’t Forget the Legalese

Once you have your equipment in place, you can start offering hosting space to friends and (hopefully) clients. Before you do, however, make sure to create and post a Terms of Service statement and an Acceptable Usage policy; customized documents can be created through sites like HostLegal.net.

Keep in mind that most countries do not allow persons under the age of 18 to enter into legal contracts. You can accept a contract if the person has co-signed it with their parents/guardians, however. This is also good to know if you yourself are under 18 and thinking of starting a web hosting business.

Because I’m not a lawyer, you should still contact (and maybe even retain) an attorney prior to accepting any paying clients. Remember that hosted websites, especially if they are business-related, will incur monetary losses anytime your server crashes due to some issue at the landlord hosting company, a wet basement, etc. Your clients could sue you for those monetary losses unless you have some kind of legal knowledge and documents in place to protect you.

How to Advertise your Web Hosting Business

Unless you already have some online or other notoriety, potential clients are not just going to automatically flock to your web hosting business. You’ll need to advertise your business, and you’ll also need to explain why your business is better than that of the bigger hosting companies.

It’s doubtful that, as a small-time web host, you’ll win on price. So, consider what other advantages you might offer your clients. Perhaps your server has a killer processor (e.g., Xeon) that offers load speeds far superior to those noted on the shared servers at X hosting company. Or maybe you can offer round-the-clock technical support because your IT person lives halfway around the globe.

Local advertising might work to your advantage if you live in a smaller town and local business owners are already aware of you. You could go door-to-door and offer your hosting services- and better yet, upsell domain names and website creation if that business is not even online.

Google AdWords advertising is another way to drum up business, whether locally or even globally. It’s easy to get carried away with AdWords, however, so you may want to learn a bit about optimizing your ads and choosing cost-effective keywords that don’t break the bank.

Overall, dedicated servers will beat the shared accounts offered to clients at hosting companies simply because of equipment superiority combined with fewer hosted IP addresses. And if you really play your cards right, your hosting business may eventually attract a buy-out offer from HostGator or some other bigger company.

Why start a web hosting company?

Web hosting does cost some money to start, but if you like working with technology and computers, it is a great way to make a passive income. Also, if you own any websites of your own (and you should, at least least for your web hosting business), having access to your own server means free hosting for you.