Table of Content

    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’.

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    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.

    Web Hosting Business Plan - 3 Years Profit Forecast

    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:

    Web Hosting Business Plan - Startup cost

    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:

    Web Hosting Business Plan - Market Segmentation

    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

    Web Hosting Business Plan - Sales Monthly

    6.4 Sales Yearly

    Web Hosting Business Plan - Sales Yearly

    6.5 Sales Forecast

    Web Hosting Business Plan - Unit Sales

    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

    Web Hosting Business Plan - 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

    Web Hosting Business Plan - PROFIT MONTHLY

    8.3.2 Profit Yearly

    Web Hosting Business Plan - PROFIT YEARLY

    8.3.3 Gross Margin Monthly

    Web Hosting Business Plan - GROSS MARGIN MONTHLY

    8.3.4 Gross Margin Yearly

    Web Hosting Business Plan - GROSS MARGIN YEARLY

    8.4 Projected Cash Flow

    Web Hosting Business Plan - Projected Cash Flow Diagram

     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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