Although Web hosting is a rapidly growing marketplace, there are a number of essential elements that resellers must consider if they plan to capitalize on it. Resellers must be fully aware of the challenges involved in running a hosting business.

The drive for economic self-sufficiency has motivated large numbers of persons to market their skills and talents for profit from home. An increasingly service oriented economy offers a widening spectrum of opportunities for customized and personalized small business growth. Many new entrepreneurs thus elect to focus their small business operations on the resale of Web hosting services.

With 62 per cent of all global users with Web sites choosing to outsource their Internet presence, Web hosting has become an extremely lucrative business.* There are however essential elements that resellers must put into place in order to capitalize upon this growing marketplace. These elements are organizational and technical in nature and are required by any Web hosting reseller, or indeed by any small business, wishing to establish a successful operation. These elements must first be identified, and then enacted on, through the use of in-depth business plan.

Running a flourishing hosting operation depends on establishing a practical plan, technical skills and basic knowledge of record keeping, finance, management and market analysis. A practical plan should examine every nuance of a business operation, most importantly, the feasibility of your business model.

A business model must chiefly be profitable, providing enough revenue for a reseller to derive a substantial income (with inflation factored into the equation), and also financial resources to re-invest into the business itself.

A plan should include start-up cost estimates, and include a schedule describing month-to-month expenses. All sources of start-up monies should be identified. A large number of small businesses fail every day because of a lack of funds. Too many entrepreneurs try to start and operate a business without sufficient capital. In order to avoid this situation, a plan must identify how much money is available, how much money will be required to start the business, and how much money will be required to keep the business operating.

A comprehensive business plan will also identify the name and legal structure of your business. Resellers usually determine whether they chose to operate as a sole proprietorship, partnership or corporation, based on tax considerations and the number of persons directly involved in the business operation.

One of the most important choices that resellers should identify in their business plans is the selection of a reliable supplier. Finding a higher-tier hosting company that will offer you, and therefore your customers, reliable service is a must. Further your supplier should provide you with a feasible resale model that provides you a large profit margin. Any host that is selected should specialize in reselling Web hosting, and should assist you in the start-up process with literature and advice.

Resellers should also determine which market niche that they intend to cater to. To ensure that their business model will be feasible, resellers must identify the products and services that they will sell and determine whether they satisfy a specific, unfilled need. They must also determine whether their products or services are competitive based on quality, selection and price.

Resellers should also identify who their potential customers will be, quickly determine what kind of products and services they will buy, and establish a promotional program that will capture these consumers.

Once these issues are addressed, a reseller must then also examine whether he or she possesses the technical skills required to run a Web hosting business. With high-levels of automated services now available to resellers, this issue is quickly becoming moot. However, highly sophisticated Web and e-commerce solutions will still require in-depth knowledge of Internet protocols, standards and concepts. These items must be fully understood if you wish to impart confidence in your clientele.

Once a full market analysis is completed, resellers must ensure that they have a basic working knowledge of finance and record keeping, ensuring the sound management of their business. Resellers should be prepared to maintain complete records of sales, expenses, and accounts payable and receivable. Resellers also need to know what financial reports must be prepared, and should also factor in the cost of obtaining the expertise needed to file and maintain that documentation.

If a reseller is able to identify all of their fundamental requirements, they will have a fighting chance to create, develop and manage a successful Web hosting business.

Source: Forrester Research