It's not me thats going in to the webhosting business ( I already have a small company in Norway for a few customers, paying top dollars to host with me). But I have a friend that want to start in the hosting business. His plan is to make money of this.
He want to buy large servers, like this one from Hetzner, that costs allot.
He also have to have some kind of backup system. All in all a very expensive start. It's not LEB, but kind of LEB, just in Norway. But there all thing is expensive. The smallest plan starts at around $15/mo (512 MB RAM 50 GB disk) and the largest plan $45mo for 8 GB RAM 1 TB disk)
I'm saying that it's better to start small. Buy smaller servers, fill them up, then expand with more servers, then when you earn good money, buy new expensive hardware with all the bells and whistlers. Actually it will be more issues with one large server, if there is a hardware or network issue with that server, all customers loose connection. If he uses several smaller servers, only a few customers will be affected.
I think it takes time to build up a good customer base that stay, pay at time, and not abuse the server. So with a large server that can host 30-50 customers, he will loose money every month until he has so many customers on higher plans that he makes money on the big server.
On the smaller servers, he need just 2-3 customers to don't loose any money.
I know that the best thing is high end servers, with SAN storage, or with a really good RAID setup. Backup servers onsite and offsite. Using a host that has excellent support, that change hardware failures within minutes etc. But if you don't have money to all that, what is the best thing of the two mention, or is there other better options?
And yes, i know, I will be short handed in the start, probably a one man show. Maybe two. So no support staff on 24/7/365. But he will not offer managed hosting, just unmanaged.
Hope we can get a good discussion in this thread, and not just only "don't do it", or you have to invest $1 million and get a 30 man support and sales crew from the start. I think many of the host both on LET/LEB and larger companies started out small, if they did not have a larger company behind them, or if they did not have lots of cash to spend for a long time.