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Starting a VPS hosting business can require a significant initial investment. In theory, you have to buy servers and software, rent space in a datacenter, hire a few people and so on.

By the time it starts to collect enough revenue, your company might accumulate a lot of debt and already be approaching bankruptcy.

However, there is a cheaper, alternative way of doing this that will allow you to enter the hosting market with a modest initial capital and give you a platform that you can expand later, after you learn how to properly run such a business.

FIND A RELIABLE PROVIDER

In a nutshell, the alternative plan is to rent one or more servers from an existing hosting provider, set up a control panel to resell VPS from, and then sell them to customers.

This will allow you to significantly cut costs and actually start a hosting business with a modest investment.

In order to succeed, you have to find an established provider that offers cheap prices and has reliable services at the same time.

FOCUS ON A NICHE

Forget about selling generic VPS services, the competition is simply too high. You’ll have to target a specific niche; a proper market research will help you find one.

Since a few servers are easier to manage than a large number, you could focus for example on a very fast support response time, and charge premium prices for premium support. Make sure that you honor your promises if you take this route.

Alternatively, you might want to consider selling VPS servers to a crowd or niche that you’re particularly familiar with. Perhaps you’re part of a gaming community that needs VPS servers on a frequent basis. Or perhaps you’re a developer or data scientist who needs servers to run your software, and you know other colleagues who have the same need.

The possibilities are endless, and the key advantage of taking this approach is that you can speak very clearly in a language that your customers will understand (because you’re one of them!).

DESIGN YOUR INFRASTRUCTURE

After you buy your servers from a hosting provider and have a target in mind, it is time to create your VPS infrastructure.

You’ll have to design several packages, with a number of CPU cores and various amounts of RAM and disk space.

To make things extra easy, you can simply buy cheap VPS servers from a provider and resell them as is (without needing to set custom CPU or RAM, and just using the specs provided by your hosting provider for each VPS).

These packages can be target-specific; there are for example some applications that don’t need much CPU power but use a lot of memory.

In addition, you can install software or tools on top of the hardware, for example a CMS like WordPress. Offering obsolete packages, such as php 5.3, can also be an interesting niche for people who want to keep old websites online.

In order to create the actual virtual machines, there are several virtualization options. KVM and VMware are free and offer good performance, but most customers want some kind of control panel.

You can try to use one of the free hosting panels like Vesta or ISPConfig, but these can be buggy and require good technical skills for operation and maintenance.

Another alternative is to use Proxmox, which has an open source version that is very stable and offers both KVM and LXC virtualization.

If you want to resell shared or reseller hosting, instead of fully-fledged VPS servers, the safe options are WHM/cPanel and Plesk, which are very reliable and stable control panels. While Plesk is a little cheaper and can be installed on more operating systems, WHM is the best panel on the market and has great features and support.

AUTOMATE BILLING

If you start small and only have a few customers, you can use an open-source suite to manually handle billing.

Later, as your business grows, this will no longer be an effective option. There are several billing applications on the market that are especially designed for hosting companies and integrate with platforms such as WHM.

The best of these are WHMCS and Blesta, both have a form of free trial that you can use to test them and choose the one that suits best the needs of your company.

MANAGE YOUR INFRASTRUCTURE

Every hosting provider must have at least three basic systems in place: active monitoring, backups and a support ticketing platform.

There are both free and paid alternatives for all of these; you should try the open source options first, these include Nagios, Cacti, Zabbix (monitoring), Bacula, UrBackup (backups), or osTicket (for customer support).

Keep in mind that the open source systems are free but installing and configuring them can be quite difficult.

A central systems management solution like Spacewalk can make your life easier.

HANDLE SPAM AND ABUSE

Allowing abuse from your servers can ruin the reputation of your company, so you must prevent it.

WHM and Plesk include dedicated tools that detect and limit spam and other malicious activities. If you don’t use one of these panels, you’ll have to configure your monitoring system to alert you of any suspicious network traffic.

If you need an open source tool to handle your abuse requests (for SPAM, DMCA, and so forth), a good option is to setup a dedicated abuse email (IE, abuse@domain.com), and then forward all mail into a tool called abuse.io. It’s an open source software that helps you manage abuse requests that come via email.

CLOSING THOUGHTS

Starting a hosting company as a reseller is a very good idea because you can gain invaluable experience without risking a lot of money.

Many major players in the industry have actually started as resellers and then expanded their business, you can use the same strategy to test your management skills and build a solid platform for future growth.

Are you interested in getting a high-end VPS server with Proxmox installed, so that you can resell virtual machines? Alternatively, are you interested in buying cheap VPS servers in bulk and getting a discounted pricing? Contact us to start a conversation.