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How To Set Up The Backend Of Your Web Hosting Business

This tutorial applies primarily to "Newbie" resellers using
the cPanel hosting platform.

How to Set Up Your Backend

What is a backend?

I'm sure many business people and "scholars" have much better
definitions of this than me, but I like to think of it as the
guts of the business that make things run behind the scenes.
When I think of a backend as it pertains to web hosting, I
consider the following elements:

-Billing system

-Order processing

-Support system

-Accounting and recordkeeping

Billing system

As you contemplate your billing system, the first piece of
information you should look at is what types of payments are you
going to accept. Hopefully, you've already outlined this in your
business plan. Will you take Paypal, or will you accept credit
cards through your own merchant account, or will you accept
checks and money orders by mail? Accepting payments by mail
significantly complicates your business, so I would suggest not
accepting payments by mail, or if you do—only accept annual term
payments.

The easiest payment system to implement, and my recommendation,
is to use a third-party payment processor such as Paypal or
2Checkout. These third-party payment processors allow you to
accept credit cards, debit cards, and e-checks securely through
their web-based system. They also allow you to create
automatically recurring billing, which is the most powerful
billing tool that all resellers should implement. Rather than
having to bill your customers each term (month, quarter, etc),
the third party payment processor will automatically bill your
customer on their due date, based on the terms of the
subscription that you created. In other words, if you create a
$10/month subscription, it will automatically charge your
customer $10 on the day they sign up, and then it will charge
them $10 on the same day of each subsequent month. This is a
huge timesaver, by automating the billing process you can
eliminate the need to bill your customers at all.

If you do wish to send your customers a formal bill, or if you
aren't using automatically recurring payments, there are several
software programs that can help automate the process for you.
The ones specifically designed for web hosting that I would
recommend are WHMautopilot, Lpanel, and Modernbill. There dozens
of other billing programs available, but I recommend those ones
because they also have auto-setup scripts and various
client-management features built in to them, which we will
discuss next.

Order processing

This part of your backend can basically be broken down into two
options: manual processing, or automated processing. Manual
processing is pretty much self-explanatory. Your customer places
an order and pays using one of your available payment methods.
When you receive the order and payment, you go into your Web
Host Manager (WHM) and set up the client's account, and then
send them a welcome email with the pertinent information. Using
this method there are a few different ways you can set up your
order form to collect the information you need. The most
important piece of information you need is the domain name. If
you use only Paypal as a payment processor, Paypal has a form
tool which will allow you to collect up to two form fields along
with each order.

For example, you could set up your form so that the customer
types in their domain name and username along with their order.
When you receive the order confirmation from Paypal, this
information will be included. Another method is to simply use a
form mail script. This is easily implanted using a two-part
order form. In the first part, they type in their applicable
information and click "submit", thus emailing you the form. When
they click submit, they are then redirected by the form mail
script to your payment page. The third method is to use a
shopping cart application which integrates the collection of
data and payment processing. The advantage of manual order
processing is it can help reduce the possibility of fraud and
abuse because each order is screened by you as you process it.

Automated order processing saves a lot of time for the
reseller, and also creates a smooth ordering process for the
customer. Automation is a huge key to building a successful
online business, and this is one form of automation that I would
highly recommend. An automated order processing program collects
the pertinent data from your customer, directs them through
their online payment, and then interacts with your web server to
set up the account and then sends out a welcome email to your
customer.

The programs I would recommend are WHMautopilot, Lpanel, and
Modernbill. I am certain there are several other equally viable
software programs available as well. The risk of automated order
processing is the potential for fraud, and abusers such as
spammers signing undetected. However, I would say the benefits
of automated order processing typically outweigh the risks. If a
customer on the other side of the world orders at 3:00AM, they
don't have to wait for you to wake up and check your email. Your
program will go to work for you and set up the account. On top
of performing all of these tasks, it also creates a nice
customer database which can be used for billing and a number of
client administration tasks such as suspending accounts,
performing server checks, etc. Just make sure you manually
review each order after it has been set up. This will help catch
fraudulent customers before they have a chance to run their
malicious activities (like spamming) on your server.

Support system

Your solution for a support system depends largely on your own
aptitude and preference. If you are familiar with the web
hosting platform (such as cPanel) and with basic server
administration tasks, you may wish to support your customers
yourself. This is especially true while your business is in the
startup phase with only a few customers, or if you intend to
keep your customer base small. If you choose not to be your own
support tech, there are a few alternatives. The obvious one is
you could hire a support tech to work for you. While this is
often the most ideal situation, most startups can not afford to
hire an additional person initially.

A more affordable solution may be to outsource your technical
support to a company who specializes in providing support for
web hosting companies. Many outsourcing companies are located in
technologically advanced areas in low-cost countries such as
India. Outsourcing to an overseas company can be a very
cost-efficient solution, but can also result in additional
problems and challenges so you want to make sure you adequately
research your solution before making any commitments.
Outsourcing companies typically offer one or more pricing
solutions including per-ticket, per-customer, per-server, flat
fee per month, or per representative hired.

There are also other creative support solutions available. One
solution I've seen work with success is creating a community
forum where customers can help each other, guided by more
experienced moderators and administrators. A host can offer free
hosting to moderators in exchange for their help in running the
forum. Other forms of bartering have been done successfully as
well. For example you could provide free hosting in exchange for
5 hours a month of answering trouble tickets in your helpdesk.

As for the support options themselves, again hopefully you've
outlined this in your business plan. Are
you offering email only, or a helpdesk, live chat, or telephone?
Email and telephone are self-explanatory; if you're even
considering starting your own business I'm sure you know to use
email and the telephone. Live chat is a nice option if you
decide to use it, however you need to be diligent in being
available or it could be counteractive. Have you ever seen a
site that offers live chat, but the operator is never available
during business hours? I think it shows a lack of
professionalism, and I rarely buy from such companies. On the
other hand, if you run it properly it can be a valuable tool
that helps you get customers problems resolved in one chat
session rather than a back-and-forth email or support ticket
conversation. To run live chat you could simply post your IM
screen name (handle) for one of the popular IM platforms such as
AIM, MSN, or Yahoo. The other method would be to use a web-based
chat client from a free download, or on a subscription basis
from a chat provider.

Regardless of whether you offer any other methods of support,
the one method I will strongly suggest is an online helpdesk
where customers can submit trouble tickets. There are several
free helpdesks available, as well as more powerful applications
available for purchase. The helpdesks I would recommend are
Kayako or Perldesk, both available on a monthly or yearly
subscription. Some client management programs such as Lpanel
also have a functional helpdesk integrated into them. It is best
to choose a helpdesk that supports email piping. In other words,
you can send an email to support@yourcompany.com and it
automatically opens a helpdesk ticket. Then when you answer the
ticket, it also sends an email reply to the client, who can then
reply from within their helpdesk account or by replying to the
email.

Accounting and recordkeeping

This side of the business can easily be overlooked by
enthusiastic startups, and is often the less-favorable task for
creative entrepreneurs. However, a solid accounting and
recordkeeping system is essential to the long-term survival of
your business. If you use an automated system such as
WHMautopilot, Lpanel, or Modernbill, it will automatically keep
track of much of your financial information which is a useful
tool and database.

However; regardless of whether you use one of those programs, I
would suggest keeping an offline record of your customers and
financials. This could be done through an accounting application
like Quicken, or with a customized database in Access, or using
a simple spreadsheet (which is my preferred method) in a program
like Excel. I personally prefer Excel for its simplicity. Your
records should include the following information at a minimum:

-Customer name

-Domain name

-Billing Due date

-Subscription ID number

-Price

-Size of plan

-Email address

In addition to your customer information, it is good to keep
track of your overall finances using at a minimum a general
ledger and P&L (profit and loss) statement. These documents are
much simpler than you may think; in fact if you know how to
balance your checkbook you're almost there. Your general ledger
is basically a list of all the expenses and revenues for the
month. Again this can be a simple Excel spreadsheet.

Your expenses would include any expense related to the business
such as your reseller account, advertising costs, support costs,
Paypal or merchant fees, etc.

Your revenues are the money that you receive from your hosting
clients.

You can then add up your expenses and revenues for the month,
and if your revenues exceed your expenses, you made a profit! A
P&L statement simply summarizes the information from your
general ledger in a format used by most businesses to gain a
good overview of a company's financials in one page. I'm not
going to give you an Accounting 101 class here in this e-course
because you can easily find a lot of information about P&L's and
accounting on the web.

If you've done your accounting each month, your taxes should be
a breeze, especially if you remain a sole proprietor with no
employees. All you need to do is take the information from your
year-end P&L statement and fill out a schedule C (profit or loss
from a business). NOTE: This is NOT official tax advice. I am
not an accountant, and you should consult your tax adviser
before filing your tax return.

Regarding business status, the simplest type of business with
the least amount of paperwork is a sole proprietorship. Another
way to simplify your business and paperwork is to avoid having
any employees. You can avoid hiring employees by only using help
on a contractual basis (in other words they are a contractor vs.
an employee). There are several restrictions in this regard (you
can't set a contractor's hours, etc.), so it would be best to do
some serious research and/or consult an attorney before making
any contractual or employment arrangements.

About the Author

Eric operates several successful online businesses, and uses the
flexibility of working at home to spend time travelling, working
in the
ministry
, and having
fun with his wife and kids in beautiful Colorado. Be sure to
check out his full e-course on setting up a web hosting business.

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