How to choose a business.Ben writes in: “One of the issues I struggle with is focus. I have too many ideas and dilute my time pursuing several of them. What process do you use to choose which business idea you’ll run with?”
V also has a similar question: “I’d like to hear your thoughts about involving in many businesses at once. I’m mostly interested in web-based projects with a high requirement of up-front work (but not necessarily up-front money investment) and ‘passive-income’ potential.”
Instead of some boring stats and humdrum analysis, I thought the best way to show how I chose web hosting — and became successful in it — was to tell you my story.
My Story — How I Chose Web Hosting
I first wanted to start a web hosting company when I was a teenager. I set up my first website in 1996, on Geocities, and called it “All of the Coolest Free Stuff on the Internet.” I was 15 years old. I highlighted everything from free sample offers to free software.
I promoted it by posting on forums and UseNet mailing lists, and I built up a fair amount of traffic! People were emailing me samples they found and asking me to post them on the site. I even had a couple savvy companies ask about promoting their product on my site.
The free software page was the most popular part of the site, and with some birthday money in mid-1998, I registered the domain name thebestshareware.com. My goal was to post a new piece of shareware every week. I also hosted the large shareware files on my server, which resulted in my hosting provider shutting me down!
Even though I could log in and see that I was under my “unlimited” bandwidth allowance in their control panel, they claimed that hosting a download site was against their terms of service. This left a bad taste in my mouth, and I left their hosting service. (Actually, I think they kicked me off!)
Desperate, I called the owner of a local ISP in my small town, and convinced him to colocate (put in his garage and hook up to fast Internet, basically) my old 80486 desktop computer. He did so, but then his wife found out, got mad at him, and he returned the computer to me. My sites were down for over a week while I figured out what to do next. As a high school kid with little money, I didn’t have too many options.
My Third Try At Finding Web Hosting
I searched online for a colocation provider that was really cheap, and eventually stumbled on one that charged $59/month to colocate a server — money I could barely afford, but figured I would make via advertising. (It wasn’t a far stretch — my sites were already bringing in about half that much every month from advertising.)
Everything went fine for quite a while with that provider. I turned 18 and moved to California to seek my fortune. But one day, over a year after I had originally signed up with this provider, my websites went down. I called the owner of the company, and he said he and his wife had had a fight, and she had gone into the datacenter in a fit of rage, unplugged all the servers, and driven off with them in the back of his truck!
(Looking back now, I realize I had a bad run-in with two women who were threatened by their husbands talking to me about web hosting — likely a business they didn’t understand. In neither case was anything untoward going on, and I was naive enough to assume that the males involved didn’t see their relationship with me as anything but business. I certainly was never interested in anything other than cheap colocation.)
But this was all okay, because I had backups…right? Well, I did, but I didn’t ever think to test the restore process, and only a handful of files restored properly. Devastated, I let my domain names expire. I was angry and hurt, and distrustful of the web hosting industry as a whole.
2001: I Choose To Start My Own Hosting Company
Fast-forward to 2001. I was working with a particular web design client who was pushing the limits of his shared hosting account. Like many clients before him, he asked me to recommend a web hosting company. I finally told him I couldn’t recommend one. The experiences I had had in the past were not just bad business experiences…they had emotionally scarred me.
I was colocating my own sites again, this time in San Francisco, on a server a friend had given me in exchange for “free web hosting for life” (a deal I’m still honoring for him today!) I told my client I would host his sites on my colocated server. Then I wrote him up a contract, charged a price about 25% lower than the other web hosting companies had quoted him, and moved his sites over. His sites were super-fast because he lived close to the datacenter, and he was happy because he was getting charged a comparative bargain from someone he could talk to face-to-face.
I realized I needed to get serious about opening a web hosting business, and I set up a simple website at simpli.biz, a domain name I had bought when .biz domains were first available. I designed the site myself, wrote my own shopping cart, and with the help of my uncle, created a product and customer database. I opened for business…and the rest, as they say, is history. (Or at least another blog post!)
Why did I choose to start a web hosting company? Frankly, I was angry at the state of the industry. I felt ripped off, abused, and disgusted by it. These emotions created a perverse sort of drive within me; a determination to make the industry better however I could.
There was also the dream I had had of starting a web hosting company since I was young. This dream mostly stemmed from the monthly fee model — where, if you do things right, your revenue goes up every month. Monthly income excited me like no other business; even today, I won’t start a business where there isn’t a monthly revenue model.
How To Choose A Business: Four Guidelines
- Follow your “passionate disgust.” Some would say “Follow your passions,” but in my case, it was more like “Follow your passionate disgust.” It’s important to choose a business in an industry that excites you in some way.
Maybe it’s exciting because there are new things happening all the time, like Twitter or iPhone apps today. Maybe it’s exciting because it’s totally broken, like web hosting was when I started Simpli in 2001. Or maybe it’s just personally exciting to you because you know you’re on to something.
Whatever it is, that excitement better hold you over on those days where you don’t want to get out of bed. You should be powerfully moved to get out of bed and kick some butt every single day in whatever business you choose. In my case, I was so moved by my bad experiences, and so excited to show customers that we were different, that I had no problem getting out of bed.
- Start a business in an industry where you know you can be a leader. You should absolutely know you can rock your business better than whoever is out there. If you start a business selling books, you better have a lot of ideas of how you can do it better than Amazon and Barnes & Noble. You should become a customer of all those services that are like yours, and write out pages and pages of what you do and don’t like about those companies.
I have nearly 50 pages of other web hosting company websites printed out, marked up, and notated in an old folder I simply call “Competitive Analysis.” I used to have them hanging on my wall, taking up about a 5’x6′ section of my living room. That meant every time I walked in my front door, I saw what others were doing right…and it motivated me to do better.
For my new business, Inspiring Innovators, I joined three other websites similar to mine and wrote pages of notes on what I liked and didn’t like about each one. Do I know I can do it better than they do? Can I actually corner the market in a way that will inspire them to change? Yes. If I wasn’t confident in that assertion, I wouldn’t start a business in that industry.
- Choose one idea, and do it better than everyone else. If you spend your time working on 10 businesses, or even 2, you won’t get as much done on any of them as you would if you picked one and wholeheartedly committed to making yourself the best in that industry.
I learned this pretty quickly with web hosting. When I started, we did every kind of web hosting — shared; dedicated; Windows; Linux; BSD. By the time I finally sold Simpli in 2007, we were a lean, mean web hosting machine, doing only dedicated servers and colocation over $200/month, and catering to Silicon Valley’s hottest startups.
- Be prepared to stick with your business for years. Once your business gets going, it may really take off — but remember, it took me 6 years to build my business to the over-$1-million mark. Great successes do not typically happen overnight. If your business is growing at a strong clip every year, you’re doing something right; just have patience.
- 20 Ways To Make $100 A Day Online. You CAN make money online without being a geek! This is a comprehensive, 247-page guide to making your first dollar online. I bought it and devoured it. It’s one of the best “getting started” guides I’ve ever read on Internet marketing. As an added bonus, it’s written by top Internet marketing experts, not scammers. Well worth the price.
- Why Your Business Isn’t Doing As Well As It Could Be. What’s the #1 problem most businesses have? I discuss it and how you can avoid it.
- Three Business Ideas That Will Thrive In A Recession. Which businesses will work well now? Here are three…