A lot of people have considered getting into the reseller web hosting business because they heard it was an easy way to make a lot of money. If you're thinking along these lines yourself, keep reading.

Reseller web hosting is easy. With the various control panels available, even those who are practically phobic about technology can run their own reseller web hosting business. It’s totally automated. It simply comes down to the math; once the monthly fees from your customers cover the monthly fee you pay your hosting company, everything else is profit. So all you have to do is sit back and watch your bank account expand as the money comes rolling in. After all, you’re working for yourself, not somebody else, so you won’t have anyone on your back.

If that is what you think it is like to run a reseller web hosting business, think again. Anyone who owns their own business will tell you that it is a lot of hard work, and that there is no such thing as fast, easy money. Owning a reseller web hosting business is no exception to this rule.

In the article “Becoming a Web Hosting Reseller: is it Right for You?” which you can read here, I discuss some of the things you must consider as you set up your own reseller web hosting business. It is a basic article, but it should get you thinking along the correct lines. If someone you know is planning to go into the web hosting reseller business, and seems to think it will be a lot less work than whatever they’re doing now, you might want to hand them this article in addition to that one.

You see, there are a lot of misconceptions about what is involved in running a reseller web hosting business. In this article, I’m going to tackle the mistaken ideas that many novices have about running such a business. Your fledgling company will have a much better chance to take wing if you wipe these false notions out of your head.

I’m not going to say a word against control panels. Graphical user interfaces have been around for a long time, and they have proven their worth for people who are not quite as technologically inclined as your average ubergeek. Even the geekiest of users must admit that they can sometimes get their job done much more quickly with a GUI than with a command line (depending on the task, of course).

Take cPanel, for instance. The company offers a Web Host Manager control panel from which a user can handle more than fifty separate tasks for his business and his clients. It also offers a control panel for end users (the people whose websites you’re hosting) so that they can make some changes on their own accounts without bothering you, which should make your life a little easier.

Even so, the Web Host Manager isn’t a control panel that your grandma can use unless she’s more tech savvy than mine was. For example, one of the tasks the WHM lets you do is install Perl modules. Unless you know what they are, why you would want to install them, and what effect they will have, to know that you can do it isn’t particularly helpful. What I’m saying is, you need at least some level of technological knowledge, and if you don’t have it, you need to be prepared to spend the hours it will take to acquire it, even if you’re using a control panel. Otherwise, you could end up doing something you really didn’t want to do in the first place.

One problem with GUI interfaces in general is that they can prevent you from doing things that you really do want to do, or make it more difficult than it needs to be. A control panel is simply a tool. It is not a be all and end all. It may be an effective shortcut, but you need to understand what the shortcut does and does not let you do before you use it. You will still need Windows or Linux skills to secure, configure, and troubleshoot your system.

That may be what it looks like on the face of it, but as with many things, there’s more going on than meets the eye. To explain this, let me start with why many people think it really is just a matter of math.

Let us suppose you find a hosting company from which you can get a reseller web hosting package for about $100 a month. This package includes 80 GB of hard disk space, which is not exactly the easiest thing to find, but not impossible (Hostgator has a 20 GB package for $100 per month; on the other end of the spectrum, PowerHost offers 100 GB for the same price, but since the time this article was written, they have proven to be difficult to find). You may decide to resell this space in 25 MB blocks at $5 per month.

Each gigabyte is 1024 MB. To use round numbers, let’s assume you can sell 40 accounts for every gigabyte of space you have. Multiply 40 by 80 and you get 3200. Multiply 3200 by $5 and you get $16,000. Subtract your own $100 per month, and you’re left with much more than $15,000 in sheer profit. At least, that’s how the reasoning goes.

If you think that bit of math covers everything you need to know about turning a profit in reseller web hosting, you’re all but destined to end up bankrupt. It’s not just a matter of the cost of the hardware or the space. You can’t put 3200 accounts on a single 80 GB server, because you will overstress the machine. That will lead to increased downtime and support tickets, not to mention unhappy customers.

Remember, too, that storage space isn’t the only important aspect of online accounts; you must also consider bandwidth. Just as servers come with a limited amount of space, they also have a limited amount of bandwidth, which dictates how much online traffic they can handle. You should explicitly try not to sell all of your machine’s bandwidth, in order to allow some kind of safety margin.

It’s true that many websites won’t use all of the bandwidth you assign them. But some might, and some will even eat bandwidth for breakfast, at least sometimes. This is particularly true if one of the websites you are hosting gets “slashdotted” (mentioned in Slashdot or some other news-related website). Websites with active forums could also be an issue, as well as sites that feature podcasts. Do your homework here; it could save you a lot of headaches later.

There’s an old joke about the man who was getting ready to quit his job and start his own business. Chatting with one of his soon-to-be-former colleagues, he said “The best thing about owning your own business is that you get to work half-days.”

“Really?” his coworker asked, picturing glorious days of working only in the mornings and knocking off around one for lunch, then having the afternoons free.

“Really,” the new business owner assured him. “The first 12 hours you work for your business, then the next 12 are all yours.”

He had the right attitude. The truth is that most people with their own business work twice as hard as they ever worked when they were employed by someone else. On the other hand, if they are successful (a very big “if”) they can make twice as much money (or more). And despite the headaches of owning their own business, they often have twice as much fun.

Those headaches should not be underestimated. There are a lot of negatives to owning your own business, and that’s true whether it’s a restaurant, a shipping company, or a web hosting business. With a web hosting company, for example, you will probably have to consider hiring help so that you have 24/7 customer service and support; you will have to deal with credit card processing fees (not to mention setting yourself up to accept credit cards in the first place); how you will advertise, and with what budget; and so on.

You will also have the headache of dealing with your competition – and trust me, in the web hosting industry, there is a lot, and it is cutthroat. Many of these companies spring up seemingly overnight with offers of incredibly cheap web hosting. As you probably gathered from what I’ve said so far, these companies are heading straight for bankruptcy. But new ones keep popping up to replace them, which makes it hard for a company that wants to be in the business for the long haul to get established. “Why should I buy a web hosting account with you when Crazy Cheap Hosters offers the same thing for half of what you’re charging?”

This is what happens when the barrier to entry for a particular field is very low, or at least perceived to be very low. If you really want to make a go of it in the reseller web hosting business, you need to treat it like a real business. And, as anyone who owns a real business will tell you, there are no free lunches.

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