Being a victim of your own success

[JamesCWilson]

Every once in a while you may hear about some web hosting company that started out great, only to end up being dragged down under the weight of their own success, with the business growing a lot quicker than you had anticipated. What do you think really causes this, and what advice could you give hosts to be better prepared for success?

 

[handsonhosting]

These events are critical. We've experienced a number of growing pains over the years and each time they're handled differently. Most times the answer is to bring in more support staff or admin staff. This usually means that someones paycheck is getting cut initally in order to cover costs, but in the long run it's still a worthwhile deal.

The last thing that you can afford to do is lose the customers that you've worked hard to get. If it means that you cut your paycheck by $500 or $1000 in order to bring in another employee, then that's sometimes what has to be done.

If at all possible, find an investor, or take out a loan from the bank to help cover costs. If done correctly, you should only be "dipping" into the funds for a period of 2-3 months before the investment pays off.

You can usually see the strain coming, so when you first notice it, start to react to it - waiting until the last minute will only hurt you in the long run. Once you lose the customer due to support, you usually will not get them back later.

 

[SenseiSteve]

What I 've seen moreso in successful hosting ventures going belly up is financial mismanagement. An example would be a hosting firm in reality worth ninety thousand, but having bank loans against it for one hundred ninety thousand. Companies like this often face foreclosure by their bank, but the bank can't manage the business and will often take a fraction of the actual worth to unload it.

 

[FusedServers]

Take it as it comes, You work hard and it will pay off. Choose your staff wisely. Choose your pricing wisely. Choose your hardware wisely. The war is going to come and you have to be prepared for it when it comes. Growning pains that is.

Good Luck with the business.

 

[ldcdc]

What do you think really causes this, and what advice could you give hosts to be better prepared for success?

There's a sort of madness going on at times. For example, a special offer or a change (improvement) or the hosting packages while the support staff barely keeps pace with the current flow of issues; a huge marketing campaign without having hired and trained an extra number of techs; too much of a reliance on affiliates.

About that last point, imagine the following scenario: hiring new techs is extremely hard due to various reasons (maybe not today, but it certainly was the case in better economic times), but new customers keep coming in, as the affiliates do their job just as good as they did before. If a sizable portion of the marketing would be done "in house", then there would be more control over the company's growth, but given the lack of it, the options are few and have unpleasant side effects: lower affiliate commissions - bad reputation in the affiliate market, affecting your marketing efforts in the long run; rise prices - would not only affect the company's positioning in the market, but it would also affect the relations with the affiliates as their sales would be affected; closing up shop for a short while - same as above, but I've seen it done by companies that did not run affiliate programs when they realized that either growth was too fast, or they underwent an internal reorganization. They closed the shop for a week, sometimes even more - no biggie, in happens in the off-line world too.

 

[narendrasv]

Success is a two way process in which both self and the enviroment most get along without balancing this both side success would be a great failure.

 

[emorales]

Scalability is not just about resources. There is such thing as runaway growth, and sometimes spending isn't always the answer.

The current vogue in tech right now seems to be VC funding. People are wary, and rightfully so in many cases, about approaching the IPO front should they get to be that size. VC's offer enticing funding, but from ServInt's perspective (and let me be clear, your results may vary) we've been successful by becoming obsessed with healthy growth.

Slow and steady wins the race as they say.

It also depends on what your goals are. If you're looking to get acquired then why not seek out VC funding? It helps with your valuation and can build a very strong brand. There are very successful companies out there that specialize in targeted acquisitions, the UK2 Group comes to mind, that still have great products and support.

We've been around for a while -- since 1995 actually -- and have experienced just about every potential up and down this industry can provide. Every single success we've achieved ourselves, without funding or loans, and we like the independence that brings with it.

Every company is different however, if you're trying something really new and esoteric...funding can be a terrific avenue as they often have their own followers that can evangelize your product. There's a remarkable startup subculture surrounding VC's that is really fascinating as well.

 

[bjdea1]

This does not sound like a very common problem

It sounds like GREED may be the factor leading to this kind of failure scenario.

If you're getting too many sales, its very easy to stop advertising and/or take your order system offline for a while. This sounds a bit rediculous, I don't think this happens much in the real world. Its more the other way around, not enough sales.

 

[2AM-Cameron]

It's true that too many sales can hurt a company just like too little sales can.

It's an absolute necessity to plan for these situations beforehand and react at the first sign of trouble. If you have a well thought out plan, even an idea of what you can do to handle the additional incoming load of clients / server / support needs. The problem for a lot of hosts is they don't plan ahead for various situations and they may not realize that if they advertise well and build a good rep, their clients and increase very quickly and they are caught off guard.

Planning is the key to every business, no matter how likely or unlikely the event is.

So far, we haven't had any major challenges we haven't been able to quickly overcome, we have a few employees and our current work loads are lower than expected, so it means an excellent response to clients and customer service with lots of time to spare, which I am happy with. When things pickup, we'll look for more staff, if they explode, we'll bring in a qualified outside management company in whatever particular field we need help in until we hire on the appropriate amount of staff.

 

[tom.schavo]

See the essential part of business is proper planning at the start and slow and steady steps towards success. A sane person would any time ensure that he wisely decides whether to expand or not at any given time.

Its purely proper management and if it is done the way it should be, then there will not be any problem with success.

 

[nozone]

when read victim i think some one are a victim not sure to write about your thread but what i can say are : web hosting business like a normal / offline business, you sale something, you have own client, you must manage them and so on...

 

[-Jab-]

See the essential part of business is proper planning at the start and slow and steady steps towards success. A sane person would any time ensure that he wisely decides whether to expand or not at any given time.

Its purely proper management and if it is done the way it should be, then there will not be any problem with success.

To be honest in the world we are in right now it is so hard to do planning i have planed many business methods and projects and they just don't turn on right, no matter how much money or time i put in.

 

[Exciter]

I agree that planning is difficult, Jab, but it is necessary. If it is hard for you to do yourself, find someone who is capable of doing it.

I think more people need to read Napolean Hill, lol.

 

[JamesCWilson]

I have lost count of how many seemingly great web hosts that ended up fading into nothingness in only one or two blinks of an eye. Whatever the reasons for their demise, it certainly seems to keep happening.

 

[Joes Datacenter]

My suggestion is to come up with a good business plan that includes growth estimations. Be sure to check back and update it as you go. We have months that are really busy and months that are slower be sure to anticipate this and be prepared to slow things down if you need to. Its great to have lots of business but if you cannot support it than you can lose the whole thing. It's better to know your limits and know your growth and stick to the plan even if the idea of selling lots fast seems possible it can sometimes be a costly trap.

 

[host1plus]

I agree that planning is difficult, Jab, but it is necessary. If it is hard for you to do yourself, find someone who is capable of doing it.

I think more people need to read Napolean Hill, lol.

Planning is key to success and it is better if you plan before you open your business door for customers.