Guide to pricing hosting in your agency

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As the founder of the Hosting Coalition, I talk to agencies every day, and one of the most frequent questions I get is how should hosting be priced? If you’re not offering hosting, you really should, here’s why.

In order to get a clear picture how to price, we really have to look at the industry as a whole. You’ve got basic hosting solutions starting at $3 to $8 a month, and then you’ve got managed (which doesn’t fit my definition of managed) which are around $11 to $35 a month.

The thing about hosting prices is that most of the time, it’s a business decision. Simply put, it usually boils down to how many customers do you want to put on one piece of infrastructure, how much density do you want to do. Budget hosts, they tend to go for high density, give their customers very little resources, and try to make the most off of that piece of infrastructure. There are a few budget hosts where they try to put thousands of customers on a single server, and that’s crazy. There are other factors too that go into hosting costs, like how much does it cost to support the customer, etc. There are a few who have made it to where you can’t email a ticket, you have to wait in a phone queue or a live chat queue for 30+ minutes to get through. It’s “smart” for business, because you’d have to have a serious issue to wait that long, so it weeds a lot of the basic questions out. It’s terrible for customers though.

Typically, I recommend our Hosting Coalition members to price hosting between $10 to $25 a month just for hosting. Our members offer great hosting, on the same level as the greatest providers. I also recommend that hosting be done separately, or through a complete “everything done for the customer” bundle. The main reason I recommend it to be done separately is so that you can show them the true benefits of a human managed care plan. Most managed providers today, they aren’t managing anything, their software is. They are just applying automatic updates without even checking to ensure your site is up, and that just doesn’t fit my definition of managed. If you’re not offering hosting with your agency, you really should be. It’s monthly recurring income, and if you own the hosting, you have a lot of control over the hosting that really benefits your customers, and keep really good margins.

From a technical perspective, pricing hosting is somewhat easy. Many managed hosts price things according to page views, and to me that’s a flawed pricing scheme. The reason businesses choose that metric is because it’s easy for the customer to understand. In reality though, the main driver of hosting cost is disk space, followed by CPU and Memory. Here at the Hosting Coalition, our infrastructure is capable of 5000 concurrent visitors on a $5 Digital Ocean droplet, that’s 300,000 page views over a one minute period. If you compare that number to most managed providers, you’d exhaust their base plan before that one minute is up.

So if you’ve got a $5 droplet, and put five clients on it, that’s a total cost of $1 per site. If you’re charging $20/month for hosting, you can calculate what the profit might be. The biggest problem is how much disk space those sites are using. On a $5 droplet, you get 25GB of SSD disk space. If you’ve got one site that uses 26GB, you’d have to move up to a $10 droplet to accommodate that one site.

Another way to easily keep track of costs, is put one customer to one droplet, and simply scale that droplet up as the customer needs it to be. Start with $5 droplet, and move to a $10 droplet as an example. This does lead to wasted infrastructure though.

Of course there are other costs that come into play, backups of the site, monitoring of the site, supporting the site etc. All that though, could come out of the care plan’s bundle. For me, in my personal agency, I’m moving towards an “everything done for the customer” model. My entry plan will probably be something like $150/month, and will include hosting, a care plan, two hours of development time (building something new), free content updates, one Office 365 or Gsuite user account, and a basic three page site.

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