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Do you want to start web hosting business?
Do you want to start a web hosting business? Web hosting service allows millions of individuals and organizations to post their web pages or websites onto the Internet. Since the website is the most important component of a company’s portfolio that’s why this business has an immense market. The biggest benefit is that you can start it with very low initial investments group in a business plan.
In case, you don’t know how to start a web hosting company, you will have to do some research and prepare a comprehensive business plan. If you are wondering how to write one then here we are providing you the business plan for a web hosting business startup named ‘Stark Hosting’.
Executive Summary
2.1 The Business
Stark Hosting will be a web hosting startup located in Manhattan, New York. The company will be owned by Elia Karen, a passionate web developer. Being associated with IT industry for the last 6 years, Karen knows everything about how to create a web hosting company.
2.2 Management
The success of a startup heavily depends on its staff and management that’s why Karen has obtained the services of experienced industry experts to join her venture. The main management of the company will comprise of sales executives, technicians and customer representatives.
2.3 Customers
Our customers will be the business owners, organizations and celebrities located across the globe. We will provide all essential services needed to power our customers’ websites for hosting website content by using dedicated servers.
2.4 Business Target
Our target is to balance the initial cost of the startup with earned profits by the end of the first year and to achieve the net profit margin of $10k per month by the end of the first year.
Company Summary
3.1 Company Owner
Stark Hosting will be owned by Elia Karen, a software graduate from the University of Illinois. She is an adept web developer and has been associated with IT industry for more than 6 years.
3.2 Why the Business is being started
Karen has always been passionate about starting her own business in an IT-related field. She has been thinking about starting a web hosting business since her graduation but due to her limited experience, she waited for 6 years before starting her own venture.
3.3 How the Business will be started
The business will be located in a small office located in the main commercial market of the Downtown Manhattan. In addition to the usual inventory, the company will procure the best ISP in town along with computers, servers and peripherals. The startup summary is as follows:
The detailed start-up requirements are given below:
| Start-up Expenses | |
| Legal | $75,500 |
| Consultants | $0 |
| Insurance | $62,750 |
| Rent | $22,500 |
| Research and Development | $42,750 |
| Expensed Equipment | $42,750 |
| Signs | $1,250 |
| TOTAL START-UP EXPENSES | $247,500 |
| Start-up Assets | $0 |
| Cash Required | $322,500 |
| Start-up Inventory | $52,625 |
| Other Current Assets | $222,500 |
| Long-term Assets | $125,000 |
| TOTAL ASSETS | $121,875 |
| Total Requirements | $245,000 |
| START-UP FUNDING | $0 |
| START-UP FUNDING | $273,125 |
| Start-up Expenses to Fund | $121,875 |
| Start-up Assets to Fund | $195,000 |
| TOTAL FUNDING REQUIRED | $0 |
| Assets | $203,125 |
| Non-cash Assets from Start-up | $118,750 |
| Cash Requirements from Start-up | $0 |
| Additional Cash Raised | $118,750 |
| Cash Balance on Starting Date | $121,875 |
| TOTAL ASSETS | $0 |
| Liabilities and Capital | $0 |
| Liabilities | $0 |
| Current Borrowing | $0 |
| Long-term Liabilities | $0 |
| Accounts Payable (Outstanding Bills) | $0 |
| Other Current Liabilities (interest-free) | $0 |
| TOTAL LIABILITIES | $0 |
| Capital | $0 |
| Planned Investment | $0 |
| Investor 1 | $312,500 |
| Investor 2 | $0 |
| Other | $0 |
| Additional Investment Requirement | $0 |
| TOTAL PLANNED INVESTMENT | $695,000 |
| Loss at Start-up (Start-up Expenses) | $313,125 |
| TOTAL CAPITAL | $221,875 |
| TOTAL CAPITAL AND LIABILITIES | $221,875 |
| Total Funding | $265,000 |
Services for customers
You must decide what services will you provide to your customers before thinking about how to start your own web hosting company because the planning of many subsequent components depends on your services.
Shark Hosting will provide all essential services needed to power our customers’ websites for hosting website content by using dedicated servers. We will provide following services:
- Web hosting services
- Web building products
- Email & business features
- Web applications
- Security & value-added features
- Advisory & consultancy services
Marketing Analysis of web hosting business
The most important component of an effective webhosting business plan is its accurate marketing analysis that’s why it is advisable to seek the help of marketing experts. If you are starting this venture on small scale, you can take help from this web hosting business plan sample and carry out a marketing analysis yourself.
For marketing analysis, Karen acquired the services of marketing experts to help her through this phase. Marketing analysis is extremely important because it gives you an idea of your position in the market. Therefore, it must be considered before developing the web hosting marketing plan of your web hosting services business plan.
5.1 Market Trends
The Web Hosting Industry is growing at an extremely rapid pace as compared to other industries. The biggest reason behind its expansion is the rapidly growing eCommerce market and the accompanying focus on using websites as marketing tools. Every business needs a website to show its brand or portfolio that’s why it needs the services of web hosting providers to put its website on the internet. That’s why, as the number of a business continuity plan to increase, the number of web hosting providers also increases. It is estimated that web hosting industry’s global market will reach up to $144 billion by 2020.
5.2 Marketing Segmentation
We will target global entrepreneurs market, especially the companies based in New York which are easier to reach and target. Our experts have identified the following type of target audience which can become our future consumers:
The detailed marketing segmentation of our target audience is as follows:
5.2.1 Corporate Sector:
The biggest consumer of our services will be the corporate sector located across the globe. The corporate sector includes product manufacturers and distributors, real estate owners, hotels, restaurants and food companies, IT and software development firms, branding and advertising agencies. These companies and businesses need web hosting services for displaying their websites on the internet. Web sites are the most effective marketing tools for nearly every business out there, that’s why all companies pay significant attention to developing them.
5.2.2 Institutions & Organizations:
Our second target group comprises of institutions and organizations located worldwide including government and public-sector organizations, schools, colleges and universities, political parties, religious and sports organizations, and non-profit organizations. These organizations will also need our services for putting up their websites on the internet.
5.2.3 Celebrities & Individuals:
Our third target group consists of all celebrities including actors, media persons, sportsmen, authors, bloggers and other people who need a website for promoting themselves.
The detailed market analysis of our potential customers is given in the following table:
| Market Analysis | |||||||||
| Potential Customers | Growth | YEAR 1 | YEAR 2 | YEAR 3 | YEAR 4 | YEAR 5 | CAGR | ||
| Corporate Sector | 48% | 22,334 | 32,344 | 43,665 | 52,544 | 66,432 | 10.00% | ||
| Institutions & Organizations | 18% | 11,433 | 13,344 | 16,553 | 18,745 | 20,545 | 13.43% | ||
| Customers & Individuals | 34% | 18,322 | 19,455 | 20,655 | 22,867 | 24,433 | 15.32% | ||
| Total | 100% | 52,089 | 65,143 | 80,873 | 94,156 | 111,410 | 9.54% | ||
5.3 Business Target
- To achieve the net profit margin of $10k/month by first year, $15k by second year, and $25k by third year
- To balance the initial cost of the startup with earned profits by the end of the first year
5.4 Product Pricing
Product pricing is one of the most important factors in deciding the strategy for any business. After considering the market demands, we have priced all our products in the similar ranges as of our competitors. Our hosting packages start at $2.00/ month and prices vary with the type of servers and bandwidth capacity.
Strategy
Like marketing analysis, sales strategy is also an important component of a web hosting business plan as it determines how the business will grow.
6.1 Competitive Analysis
We have a lot of competitors, but none of them provides as high-quality services in the same price as provided by us. Our competitive advantage lies in the power and dedication of our team which comprises of industry experts and experienced individuals.
6.2 Sales Strategy
- We will advertise our business in relevant business magazines, newspapers, TV stations, and social media.
- We will use digital marketing strategies, SEO and SEM practices for promoting our company.
- We will offer a 20% discount on our services for the first three months of our launch.
- We will ensure at least a 20% increase in website traffic each month and will ensure at least an 80% conversion rate, i.e. to turn 80% of our website visitors into our customers.
6.3 Sales Monthly
6.4 Sales Yearly
6.5 Sales Forecast
| Sales Forecast | |||
| Unit Sales | Year 1 | Year 2 | Year 3 |
| Web hosting services | 187,330 | 260,320 | 258,240 |
| Web building products | 802,370 | 815,430 | 823,540 |
| Security, email & business features | 539,320 | 770230 | 1,002,310 |
| Web applications | 265,450 | 322,390 | 393,320 |
| Advisory & consultancy services | 1,435,320 | 1,250,430 | 1,762,450 |
| TOTAL UNIT SALES | 3,229,790 | 3,418,800 | 4,239,860 |
| Unit Prices | Year 1 | Year 2 | Year 3 |
| Web hosting services | $140.00 | $150.00 | $160.00 |
| Web building products | $600.00 | $800.00 | $1,000.00 |
| Security, email & business features | $700.00 | $800.00 | $900.00 |
| Web applications | $650.00 | $750.00 | $850.00 |
| Advisory & consultancy services | $140.00 | $120.00 | $100.00 |
| Sales | |||
| Web hosting services | $214,800 | $274,000 | $333,200 |
| Web building products | $120,050 | $194,500 | $268,500 |
| Security, email & business features | $50,110 | $71,600 | $93,000 |
| Web applications | $139,350 | $194,600 | $249,850 |
| Advisory & consultancy services | $62,350 | $72,300 | $82,250 |
| TOTAL SALES | |||
| Direct Unit Costs | Year 1 | Year 2 | Year 3 |
| Web hosting services | $0.70 | $0.80 | $0.90 |
| Web building products | $0.40 | $0.45 | $0.50 |
| Security, email & business features | $0.30 | $0.35 | $0.40 |
| Web applications | $3.00 | $3.50 | $4.00 |
| Advisory & consultancy services | $0.70 | $0.75 | $0.80 |
| Direct Cost of Sales | |||
| Web hosting services | $98,300 | $183,000 | $267,700 |
| Web building products | $66,600 | $119,900 | $173,200 |
| Security, email & business features | $17,900 | $35,000 | $52,100 |
| Web applications | $19,400 | $67,600 | $115,800 |
| Advisory & consultancy services | $27,700 | $69,200 | $110,700 |
| Subtotal Direct Cost of Sales | $294,100 | $699,400 | $1,104,700 |
Personnel plan
You must also decide what staff will you need to run your company before thinking about how to start a web hosting business because it will allow you to make accurate financial estimations.
7.1 Company Staff
Karen will act as the General Manager of the company and will initially hire following people:
- 1 Accountant to maintain financial and other records
- 2 Sales Executives responsible to market and discover new ventures
- 3 Technicians to operate the servers and other machines
- 2 Managing Assistants to manage the company’s official website and social media pages
- 4 Customer Representatives to interact with customers and record their orders
7.2 Average Salary of Employees
| Personnel Plan | |||
| Year 1 | Year 2 | Year 3 | |
| Accountant | $85,000 | $95,000 | $105,000 |
| Sales Executives | $85,000 | $92,000 | $109,000 |
| Technicians | $35,000 | $42,000 | $59,000 |
| Managing Assistants | $60,000 | $63,300 | $70,000 |
| Customer Representatives | $63,300 | $70,000 | $76,700 |
| Total Salaries | $243,300 | $267,300 | $314,700 |
Financial Plan
The success of a business heavily depends on its accurate financial analysis so make sure to pay special attention to your financial plan while developing the business plan for web hosting company.
8.1 Important Assumptions
| General Assumptions | |||
| Year 1 | Year 2 | Year 3 | |
| Plan Month | 1 | 2 | 3 |
| Current Interest Rate | 10.00% | 11.00% | 12.00% |
| Long-term Interest Rate | 10.00% | 10.00% | 10.00% |
| Tax Rate | 26.42% | 27.76% | 28.12% |
| Other | 0 | 0 | 0 |
8.2 Brake-even Analysis
| Brake-Even Analysis | |
| Monthly Units Break-even | 5530 |
| Monthly Revenue Break-even | $159,740 |
| Assumptions: | |
| Average Per-Unit Revenue | $260.87 |
| Average Per-Unit Variable Cost | $0.89 |
| Estimated Monthly Fixed Cost | $196,410 |
8.3 Projected Profit and Loss
| Pro Forma Profit And Loss | |||
| Year 1 | Year 2 | Year 3 | |
| Sales | $309,069 | $385,934 | $462,799 |
| Direct Cost of Sales | $15,100 | $19,153 | $23,206 |
| Other | $0 | $0 | $0 |
| TOTAL COST OF SALES | $15,100 | $19,153 | $23,206 |
| Gross Margin | $293,969 | $366,781 | $439,593 |
| Gross Margin % | 94.98% | 94.72% | 94.46% |
| Expenses | |||
| Payroll | $138,036 | $162,898 | $187,760 |
| Sales and Marketing and Other Expenses | $1,850 | $2,000 | $2,150 |
| Depreciation | $2,070 | $2,070 | $2,070 |
| Leased Equipment | $0 | $0 | $0 |
| Utilities | $4,000 | $4,250 | $4,500 |
| Insurance | $1,800 | $1,800 | $1,800 |
| Rent | $6,500 | $7,000 | $7,500 |
| Payroll Taxes | $34,510 | $40,726 | $46,942 |
| Other | $0 | $0 | $0 |
| Total Operating Expenses | $188,766 | $220,744 | $252,722 |
| Profit Before Interest and Taxes | $105,205 | $146,040 | $186,875 |
| EBITDA | $107,275 | $148,110 | $188,945 |
| Interest Expense | $0 | $0 | $0 |
| Taxes Incurred | $26,838 | $37,315 | $47,792 |
| Net Profit | $78,367 | $108,725 | $139,083 |
| Net Profit/Sales | 30.00% | 39.32% | 48.64% |
8.3.1 Profit Monthly
8.3.2 Profit Yearly
8.3.3 Gross Margin Monthly
8.3.4 Gross Margin Yearly
8.4 Projected Cash Flow
| Pro Forma Cash Flow | |||
| Cash Received | Year 1 | Year 2 | Year 3 |
| Cash from Operations | |||
| Cash Sales | $40,124 | $45,046 | $50,068 |
| Cash from Receivables | $7,023 | $8,610 | $9,297 |
| SUBTOTAL CASH FROM OPERATIONS | $47,143 | $53,651 | $59,359 |
| Additional Cash Received | |||
| Sales Tax, VAT, HST/GST Received | $0 | $0 | $0 |
| New Current Borrowing | $0 | $0 | $0 |
| New Other Liabilities (interest-free) | $0 | $0 | $0 |
| New Long-term Liabilities | $0 | $0 | $0 |
| Sales of Other Current Assets | $0 | $0 | $0 |
| Sales of Long-term Assets | $0 | $0 | $0 |
| New Investment Received | $0 | $0 | $0 |
| SUBTOTAL CASH RECEIVED | $47,143 | $53,651 | $55,359 |
| Expenditures | Year 1 | Year 2 | Year 3 |
| Expenditures from Operations | |||
| Cash Spending | $21,647 | $24,204 | $26,951 |
| Bill Payments | $13,539 | $15,385 | $170,631 |
| SUBTOTAL SPENT ON OPERATIONS | $35,296 | $39,549 | $43,582 |
| Additional Cash Spent | |||
| Sales Tax, VAT, HST/GST Paid Out | $0 | $0 | $0 |
| Principal Repayment of Current Borrowing | $0 | $0 | $0 |
| Other Liabilities Principal Repayment | $0 | $0 | $0 |
| Long-term Liabilities Principal Repayment | $0 | $0 | $0 |
| Purchase Other Current Assets | $0 | $0 | $0 |
| Purchase Long-term Assets | $0 | $0 | $0 |
| Dividends | $0 | $0 | $0 |
| SUBTOTAL CASH SPENT | $35,296 | $35,489 | $43,882 |
| Net Cash Flow | $11,551 | $13,167 | $15,683 |
| Cash Balance | $21,823 | $22,381 | $28,239 |
8.5 Projected Balance Sheet
| Pro Forma Balance Sheet | |||
| Assets | Year 1 | Year 2 | Year 3 |
| Current Assets | |||
| Cash | $184,666 | $218,525 | $252,384 |
| Accounts Receivable | $12,613 | $14,493 | $16,373 |
| Inventory | $2,980 | $3,450 | $3,920 |
| Other Current Assets | $1,000 | $1,000 | $1,000 |
| TOTAL CURRENT ASSETS | $201,259 | $237,468 | $273,677 |
| Long-term Assets | |||
| Long-term Assets | $10,000 | $10,000 | $10,000 |
| Accumulated Depreciation | $12,420 | $14,490 | $16,560 |
| TOTAL LONG-TERM ASSETS | $980 | $610 | $240 |
| TOTAL ASSETS | $198,839 | $232,978 | $267,117 |
| Liabilities and Capital | Year 1 | Year 2 | Year 3 |
| Current Liabilities | |||
| Accounts Payable | $9,482 | $10,792 | $12,102 |
| Current Borrowing | $0 | $0 | $0 |
| Other Current Liabilities | $0 | $0 | $0 |
| SUBTOTAL CURRENT LIABILITIES | $9,482 | $10,792 | $12,102 |
| Long-term Liabilities | $0 | $0 | $0 |
| TOTAL LIABILITIES | $9,482 | $10,792 | $12,102 |
| Paid-in Capital | $30,000 | $30,000 | $30,000 |
| Retained Earnings | $48,651 | $72,636 | $96,621 |
| Earnings | $100,709 | $119,555 | $138,401 |
| TOTAL CAPITAL | $189,360 | $222,190 | $255,020 |
| TOTAL LIABILITIES AND CAPITAL | $198,839 | $232,978 | $267,117 |
| Net Worth | $182,060 | $226,240 | $270,420 |
8.6 Business Ratios
| Ratio Analysis | ||||
| Year 1 | Year 2 | Year 3 | Industry Profile | |
| Sales Growth | 4.35% | 30.82% | 63.29% | 4.00% |
| Percent of Total Assets | ||||
| Accounts Receivable | 5.61% | 4.71% | 3.81% | 9.70% |
| Inventory | 1.85% | 1.82% | 1.79% | 9.80% |
| Other Current Assets | 1.75% | 2.02% | 2.29% | 27.40% |
| Total Current Assets | 138.53% | 150.99% | 163.45% | 54.60% |
| Long-term Assets | -9.47% | -21.01% | -32.55% | 58.40% |
| TOTAL ASSETS | 100.00% | 100.00% | 100.00% | 100.00% |
| Current Liabilities | 4.68% | 3.04% | 2.76% | 27.30% |
| Long-term Liabilities | 0.00% | 0.00% | 0.00% | 25.80% |
| Total Liabilities | 4.68% | 3.04% | 2.76% | 54.10% |
| NET WORTH | 99.32% | 101.04% | 102.76% | 44.90% |
| Percent of Sales | ||||
| Sales | 100.00% | 100.00% | 100.00% | 100.00% |
| Gross Margin | 94.18% | 93.85% | 93.52% | 0.00% |
| Selling, General & Administrative Expenses | 74.29% | 71.83% | 69.37% | 65.20% |
| Advertising Expenses | 2.06% | 1.11% | 0.28% | 1.40% |
| Profit Before Interest and Taxes | 26.47% | 29.30% | 32.13% | 2.86% |
| Main Ratios | ||||
| Current | 25.86 | 29.39 | 32.92 | 1.63 |
| Quick | 25.4 | 28.88 | 32.36 | 0.84 |
| Total Debt to Total Assets | 2.68% | 1.04% | 0.76% | 67.10% |
| Pre-tax Return on Net Worth | 66.83% | 71.26% | 75.69% | 4.40% |
| Pre-tax Return on Assets | 64.88% | 69.75% | 74.62% | 9.00% |
| Additional Ratios | Year 1 | Year 2 | Year 3 | |
| Net Profit Margin | 19.20% | 21.16% | 23.12% | N.A. |
| Return on Equity | 47.79% | 50.53% | 53.27% | N.A. |
| Activity Ratios | ||||
| Accounts Receivable Turnover | 4.56 | 4.56 | 4.56 | N.A. |
| Collection Days | 92 | 99 | 106 | N.A. |
| Inventory Turnover | 19.7 | 22.55 | 25.4 | N.A. |
| Accounts Payable Turnover | 14.17 | 14.67 | 15.17 | N.A. |
| Payment Days | 27 | 27 | 27 | N.A. |
| Total Asset Turnover | 1.84 | 1.55 | 1.26 | N.A. |
| Debt Ratios | ||||
| Debt to Net Worth | 0 | -0.02 | -0.04 | N.A. |
| Current Liab. to Liab. | 1 | 1 | 1 | N.A. |
| Liquidity Ratios | ||||
| Net Working Capital | $120,943 | $140,664 | $160,385 | N.A. |
| Interest Coverage | 0 | 0 | 0 | N.A. |
| Additional Ratios | ||||
| Assets to Sales | 0.45 | 0.48 | 0.51 | N.A. |
| Current Debt/Total Assets | 4% | 3% | 2% | N.A. |
| Acid Test | 23.66 | 27.01 | 30.36 | N.A. |
| Sales/Net Worth | 1.68 | 1.29 | 0.9 | N.A. |
| Dividend Payout | 0 | 0 | 0 | N.A. |
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