How to Set Your Web Hosting Budget

Let's ask a simple question. If your servers were down for a week, would your life change? Could you meet payroll? Would you have to cancel that family vacation? Could you pay your server bill? If you are unsure how to answer any of these questions, then you really need to take a hard look at how much you spend to assure your IT infrastructure continues to earn you money.

Too often, I see clients who started with a small project that later became a stable source of revenue. Along the way, they've never re-evaluated their hosting infrastructure. Not aligning your hosting costs and infrastructure with your business needs can be a serious business mistake.

IT will Fail

Just like the stock market, past performance does not indicated future results. Just because your server has operated flawlessly for 2 years does not mean it will continue to do so. The hardware, network or human error can cause an outage at any time.

Google did a huge study on hard drive failure. Their conclusion? SMART and similar items like temperature are poor indicators of drive failures. In other words, there's no easy way to predict a drive failure. The point is outages will happen, and you need to be prepared.

Affording Downtime

A key component in looking at how much to spend on your hosting solutions is to ask how much downtime can you afford. To figure out how much downtime you can afford, you need to get a grasp on how much an outage would impact your business.

The more sensitive your business operations are to an outage the less downtime you can afford. Trying to identify exactly how much downtime you can afford is not an exact science, but there are some useful starting points.

Costs of Downtime

Most of the information you find on the web for calculating the cost of downtime is geared to large businesses, especially the manufacturing sector. Many small online businesses don't fit these models and have many indirect costs associated with a downtime event.

I like to break cost into direct and indirect costs. With direct costs being those immediate expenses and losses related to the outage and indirect costs being less tangible or potential future losses.

  • Server Repair Costs
  • Support Staff Costs
  • Client Refunds or Lost Sales
  • Overtime for Staff
  • There are many indirect costs you need to consider as well:
  • Search Engine Impact
  • Delayed Cancellations
  • Loss of New Clients
  • Delayed Support Costs

If you server is down for an extended period, then your search engine results may be impacted. Also, consider the client who bears with you through the outage but then 3 months later cancels once they've moved their operations elsewhere.

Crunching the Numbers

I like to look at downtime from the standpoint of the number of hours your operations are impacted. Set benchmarks for 30 minutes, 60 minutes, and the in reasonable increments for 72 hours.

If you are a web designer for small businesses with no e-commerce operations, you may be able to "afford" 24 hours of downtime with negligible business impact. However, if you site is generating revenue 24/7, an outage may be more costly. Take into account the impact of an outage and set a hosting budget.

Infrastructure as Insurance

Just like your office catching on fire, for which you likely have insurance, investing in the proper infrastructure insures you against downtime events.

Insuring yourself can be something as simple as spending an extra money for RAID and off site backups. Or you may need fully redundant operations.

If you need help getting these hosting costs right, then you may need to turn to a managed service provider (MSP) and IT consultant to get a solution in place. A good MSP will walk you through a needs assessment and recommend a solution.

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