Reselling hosting services

1. What a Reseller Does

A hosting reseller purchases hosting services from a provider, and then sells these services on to their own customers for a profit.

This profit may take the form of a sales commission - for instance, 10% of all hosting services sold goes to the reseller. In this case, the reseller acts as an agent for the hosting provider. Alternatively, the reseller may purchase the services themselves at "wholesale" rates and then sell them at higher, "retail" rates. In this case, the reseller adds value in some way to justify the higher price. For instance, they may add web design services, or arrange to set up the web-site and email so the customer does not need to do this themselves.

There are many types of reselling arrangements. Here are some of the most common:

• The "affiliate" arrangements, where the reseller places a link on their web-site (or in their email) to the host's web-site and is credited for all leads originating from that link. The reseller provides very little in terms of added services and support and is essentially sales agent for the provider. If you are more interested in making sales than in providing service or the technical side of hosting, this may be the option for you.
  
  
• The reseller sets up his own web-site to sell the hosting services and receives a commission for all sales brought to the host. An example of this may be a web-designer who resells hosting services as a 'sideline'.
  
  
• The reseller purchases the host's services wholesale and then sells them to his customers for a profit - often without letting his customers know that he's selling someone else's services. (This is sometimes referred to as reselling under a 'private label' - the reseller uses their own company's name rather than that of the hosting provider).
  
  

Shared Versus Dedicated Servers

A reseller also has the choice of whether to resell shared hosting services or to rent a dedicated server.

Shared servers are less costly to rent than dedicated servers. They usually require a lower level of technical skills too, because most of server administration is done by the host. This is why shared servers are usually the best choice for entry-level web-sites or for small businesses whose web-sites do not have high traffic levels. If you plan to resell to such businesses, then you should probably be looking at reselling shared server space.

As for dedicated servers, you will need more technical skills to run a dedicated server and the initial cost of rental will be higher. However, dedicated servers can offer the reseller a couple of important advantages over shared hosting arrangements:

• Customised applications - With a dedicated server, you can provide customised applications for your customers. For instance, if one of your customers wants to run Oracle, but your host does not provide this as a standard application, then you will be able to install this yourself on a dedicated server. This 'customisability' can be particularly important if you are catering to customers who require specialised applications, or if you are catering to larger customers, who require a dedicated server to manage their traffic loads.
  
  
• Profit margins - Resellers who use dedicated servers will normally be doing much of the administration and servicing of customers themselves. As a result, profit margins will generally be higher. (Note: Dedicated servers usually require a higher monthly rental than shared servers, so will only be more profitable if your customer base is sufficiently large enough to cover the increased costs of renting the server. If you are just starting out, and expect to be servicing just a few, small customers while building your customer base, you may be better off using a shared arrangement to begin with.)
  
  

2. Choosing a Provider

Once you have decided upon the type of reselling arrangement that best suits you, you will then need to choose a suitable provider. Here is a checklist of factors to consider when choosing a provider:

• Reliability - Your reputation as a reseller will hinge upon the reliability of your provider. If your customer's "mission-critical" site goes down and it needs to be dealt with urgently, for instance, you will not be well served by a provider whose policy is to respond only every 24 hours. Check your host out for reliability and speed of response to service requests.
  
  
• Credit for Sale - If you are acting as sales agent, you need to be sure your host has a reliable way of tracking and crediting all referrals to you. Would you prefer to be paid once for each sale, or would you prefer a residual commission arrangement, where you get paid at regular intervals so long as your customer keeps using the host's services? Would you prefer the host to bill your customers directly, or would you prefer to bill your customers yourself and thus obtain the higher profit margin that usually comes with this? These are just a couple of ways to decide how you would like to be paid.
  
  
• Scalability - If you are just starting out reselling hosting services, you may want to pay for only a few domains at a time, and provide a very basic range of applications. However, as your business grows, the number of sites you service will increase and you may also need to increase the range of applications you can provide your customers. Does your host provide a relatively hassle-free way to upgrade? For instance, could you move easily from a shared server arrangement to a dedicated server without needing to change hosts?
  
  
• Level of Service / Automation Required - At the one extreme, your host may provide all of the technical service, support and billing for your customers. Your main job is to refer the customers to the host and collect the referral fees. At the other extreme, you may run the server and bill your customers yourself. The basic guideline as regards service and support is that the more you provide, the greater the profit margin there will be for you. Many hosts provide automation to streamline administration or to make it easier and more accessible for those who are not technically inclined. For instance, a web-based control panel may be available to help you set up email and web-based services for your customers, so you do not need to know how the underlying operating system works.