In this article I’m going to introduce you to GoDaddy’s new Reseller Hosting package, but more importantly, I’ll share the four secret ingredients that are required for leverage to be applied. Without these four things, you will cut into your profits, and in most cases lose money. Not to mention the potential risk of insanity!
What is GoDaddy Reseller Hosting?
It’s been a couple of months now, but GoDaddy recently rolled out a new hosting package geared towards Freelancers, WebPros, even IT Service providers, but really anyone wanting to offer hosting solutions to their customers.
The idea is simple.
You purchase your hosting package, it comes equipped with WHMCS, hosting management software, which allows you to white-label your billing and divide the hosting into separate accounts for each of your customers.
Through WHMCS you can also resell other products like, domains, SSLs, security, etc…
Now this product is built on GoDaddy’s best hosting solution, Business Hosting. It is a shared hosting package but with dedicated resources. It’s almost like having a VPS without the need for server management, and root access. If you’re dead set on hosting with GoDaddy, never buy anything less than Business Hosting!
Sounds pretty sweet at first glance!?
But when you take a deeper look under the hood, you’ll find a couple of issues.
- You are required to provide all support, GoDaddy doesn’t support this product outside of server issues.
- Most of the additional products you can resell through WHMCS are not GoDaddy products, so again no support.
Four Secrets Ingredients of Leverage
When I talk about leverage, I am referring to the concept of using other peoples services or products to add value to your business by offering additional solutions for your customers.
In this situation we are discussing hosting. If you are providing website services, offering hosting as a services or addon to what you do makes since. After all, it’s kind of a requirement.
However, in the case of GoDaddy’s Reseller Hosting, only 2 maybe 3 of the four key components of leverage exist here.
The four secret ingredients of leverage:
- Cost Savings
- Time Savings
- Quality Solution
- Easy Duplication
In order for a product or server to truly offer leverage and add to your bottom line, it must have all four components.
Let me explain using the hosting scenario.
With GoDaddy Reseller Hosting you are getting 1. cost savings, 2. easily duplicatable, and possibly 3. a quality solution.
- Since you can pay one fee and resell it to several customers at a higher price you will benefit there.
- With WHMCS you can easily divide the hosting into packages for your clients and handle all the billing from one system.
- Since Business Hosting is GoDaddy’s best hosting product, you are getting an, arguably, quality solution to build your business on.
However, there are two issues.
- Hosting is just one part of the puzzle you should be offering.
- Support (time savings) is the most costly part of the equation.
However, without the time savings, which in this case would be support. You will end up spending way too much time supporting the service and will slowly eat away at your profits.
This time saving component is probably the most crucial part, because it could be the most costly.
Let’s do some math…
You’re going to pay a minimum of $40/mo for tier one Reseller Hosting from GoDaddy.
You can probably host 15 to 20 client WordPress sites, given they are built with good code and optimized well.
I’d recommend you offer “managed hosting”. Which means you’re doing daily backups, keeping WordPress, plugins and themes updated, and providing website security. At a minimum.
Doing these three things will keep your support time way down!
Evaluating your cost…
- $2/mo/site for hosting
- $20/mo/site for website security
- $2/mo/site for daily backups
Giving you a total cost of $24/mo/site
Keep in mind this does not account for any time you will have to spend doing WP, plugin, and theme updates or supporting other issues.
Let’s say you have 20 customers paying $40/mo, that puts you at $800/mo in revenue.
With your cost at $480/mo for 20 sites, you can bank on $320/mo in profits, before calculating any time for service/support.
I know some of you are thinking that you can’t charge $40/mo for hosting, “it’s too much!” If you’re comparing your offering to GoDaddy and thinking, “they only charges $7.99/mo for hosting and they provide support for everything, maybe I can do it cheaper too!?”.
If that is your thought process you’ve already lost!
You must keep in mind, GoDaddy has the leverage of more than 14 million customers paying for services, and of those customers, only 1-2 million of them actually use GoDaddy support.
This number, $320/mo “profit”, may look good, but it is still too risky!
Let me explain…
If you charge $50/hr (being conservative), and you spend 5 hours on updates and fulfilling a few support issues, you’ve just burned up $250 of you $320, leaving only $70. Two more hours of support that month and you are in the negative. It is now costing you money to provide hosting services.
A Better Way to Resell Hosting
Sure, you could charge more, and I would always say that you should probably be charging more. But that just inflates the numbers, it doesn’t necessarily reduce your risk.
The secret is in the leverage of time and quality.
You need a product that rarely requires support (quality), but when it does, has an awesome team, that is more experienced and skilled then you, on standby 24/7 ready to assist.
Which is where WP Engine comes in!
They have a “reseller” option, but it requires a huge commitment. So if you’re just starting out, here is what I recommend.
You can get a single site hosted for $35/mo or 5 sites for $115/mo or 15 sites for $290/mo.
If you have less than 5 hosting clients, start with the 5 site pack. Which is the option I will use in this break down.
With WP Engine, you’re going to get the quality, time savings, and duplication. I honestly believe you get the cost savings too, since it is such a superior product.
The key to positioning this for your customers is in the offer. How you present your solution.
It’s not just hosting!
They are getting secure hosting, daily backups, the latest PHP, 24/7 support, global CDN, integrated SSL, software updates (WP core, themes and plugins), website uptime monitoring, security scans and hack prevention…
Some of this is include in the WP Engine hosting package, some of it you are going to be providing, but with tools like ManageWP, it will require little effort and cost for you to include in your offer.
- WP Engine: $23/site/mo
- ManageWP: ~$6/site/mo
- Total: $29/site/mo
Knowing your cost, means you can make a smart decision about how much you need to charge your clients.
Your Product Offer Price:
- Fully Managed WP Hosting: $60/site/mo (minimum)
I also teach a strategy for using WordPress multisite to milk even more leverage and profits out of your hosting.
While your margins and bottom line may be lower with this solution, you can be sure, that by using a product that has better quality and better support, you can hang on to the profits instead of burn them up in time spent supporting a cheaper product.
PRO TIP: Your hosting fees should change based on the type of site you’re hosting. For example, if you’re going to be providing “Fully Managed Hosting” for ecommerce and/or membership websites, you should charge a lot more than $60/site/mo.
Why This Strategy Works
The best way to explain this would be to give you an example from my own experience.
Most of the issues your clients have with WordPress are caused by a lack of maintenance, just like most other things.
You fail to change your oil regularly, clean your pool, weed your garden, stuff is going to happen that will cost you more, usually 3 to 4 times more to fix, then it would have to prevent.
By providing “Fully Managed” solutions you are reduce the risk that your clients will have issues. Things like:
- White Screen of Death (500 error)
- Hacked Websites
- Scheduled Maintenance Error
- Database Connection Error
- Fatal Errors
If they are not experiencing these issues, they’re not contacting you for support.
Our Hosting Support Stats
We don’t do a ton of hosting (currently), but we host about 50 websites.
Year to date (Jan to May 2019), we have had:
- ZERO support request from our hosted clients
- ~4 hours spent chatting with hosting support
- ZERO down time related to hosting issues
- ZERO hacks for hosted clients
We’re able to maintain these kinds of results because what we do is fully managed. Clients do not get access to the host, it is sealed off and locked down.
The time involved in maintaining these hosted sites totals 1.2 hours per month on average.
The Wrap Up
Hopefully this case study will offer some insight into how important it is to have all 4 secrets of leverage in play when reselling other peoples products and services.
By now, you hopefully have the tools you need to make sure the products and services you are reselling enable you to make the most profits without jeopardizing the future of your business.
If you’re looking for a great company to partner with, one that understands how reseller programs work and can ensure your business is benefiting from the partnership, checkout WP Mantis Partner Program.