A data center is a facility that centralizes an organization’s shared IT operations and equipment for the purposes of storing, processing, and disseminating data and applications. The average data center occupies approximately 100,000 square feet of space. On the other end of the scale, there are behemoth data centers that consume as much power as a mid-sized town.
The utilization of a data center allows a business to outsource its power needs. Organizations benefit from data centers in a variety of ways. Most specifically, they allow a company to focus on its consumer objectives instead of technological maintenance.
The United States Data Center Market was valued at USD 8.4 billion in 2020, and it is expected to reach USD 13.91 billion by 2026, registering a CAGR of 8.63% during the forecast period (2022-2026).
Steps on How to Start a Data Center Business
Table of Content
Conduct Market Research
If you are considering starting a data center business, you would need reliable market research to be able to maximize profits from the business. The first step in the market research process for your data center business should be to develop market-based research questions in line with your overall business goal and objective.
In this regard, you should source information that will help you maximize your business, information that will help you know what your potential market is looking for from a data center business, and also help you operate your data center business with strategies that will help you compete favorably and build the business to profitability.
a. Who is the Target Market for Data Center Business?
- Banks, Insurance Companies, and other related Financial Institutions
- Blue Chips Companies
- Corporate Organizations
- Manufacturers and Distributors
- Real Estate Owners, Developers, and Contractors
- Research and Development Companies
- The Government (Public Sector)
- Schools (High Schools, Colleges, and Universities)
- Sport Organizations
- Religious Organizations
- Political Parties
- Television and Radio Stations
- Printing Press (Publishing Houses) and Authors
- Branding and Advertising agencies
- Individuals and households who own computers
- Entrepreneurs and Start-Ups
b. Is Data Center Business a Profitable Business?
Yes, the data center business is very profitable. In recent times, the need for secure and reliable data storage has exploded, and is expected to continue to do so. That makes them great investments. Data-heavy devices will hit the market in increasing numbers over the coming years.
c. Are There Existing Niches in the Industry?
No, there are no existing niches when it comes to the data center business.
d. Who are the Major Competitors?
- China Mobile
- China Telecom
- DuPont Fabros Technology
- QTS: Atlanta Metro
- Range International Information Group.
- Switch SuperNAP
- The Citadel Campus
- Utah Data Centre
- Yotta NM1
- Digital West
- Cloud Nine Realtime
e. Are There County or State Regulations or Zoning Laws for Data Center Business?
Yes, there are county or state regulations or zoning laws for data center business, and please note that if you are planning to house your data center in a purpose-built facility or proposing an extension to an existing building, you must apply to your local planning department for approval.
An architect experienced in factory planning will draft your initial plans. They might collaborate with, or seek input from your local Fire Safety Officer to ensure that the appropriate safety measures have been accounted for, following the safety regulations as defined in the Regulatory Reform Order.
f. Is There a Franchise for Data Center Business?
Yes, there are franchise opportunities for data center business, and here are some of them;
- Digital West
- Cloud Nine Realtime
g. What Do You Need to Start a Data Center Business?
- A Feasibility Report
- Business and Marketing Plans
- Business Licenses and Permits
- Business Facility
- Startup Capital
- Equipment and Gadgets
- EIN (Employer Identification Number)/Federal Tax ID Number.
- A Corporate Bank Account
Choose a Memorable Business Name
When looking to start a business, before you can begin to file the necessary documents with the constituted authorities or start your website, it is necessary that you come up with a name that you will be recognized with. It is essential that the name you come up with can easily be pronounced, is unique and easily memorable.
Some of the catchy business name ideas suitable for a data center business are;
Creative Data Center Business Name ideas
- Emmet Group© Data Center, Inc.
- Brest Technologies® Data Center, LLC
- Bally Tryone© Data Center, Inc.
- Data Solutions® Data Center, Inc.
- Marshal Kings™ Technologies, Inc.
- Green Group™ Data Center, LLC.
- Cloud 24™ Data Center, LLC
- Techie Jones® Data Center, Inc.
- AmEx© Technologies, Inc.
- 3D Technologies© Data Center, Inc.
- Redo Technologies® Data Center, LLC
- Orange Group® Data Center, LLC
- Canto Technologies™ Data Center, LLC
- Fred Junes© Data Center, Inc.
- Back Upfront® Technologies, Inc.
- Dominic Perez™ Data Center, Inc.
- Reco Technologies™ Data Center, Inc.
- Purple Tree © Data Center, Inc.
- Big Network® Data Center, LLC
- Freo Technologies™ Data Center, Inc.
Register Your Business
a. What Type of Business Structure is Best for Data Center Business?
When it comes to the business structure of a data center business, the one that most players in this line of business consider is an LLC. It is common to consider an LLC because providers want to protect themselves from lawsuits. Please note that an LLC will need an EIN if it has employees or if it will be required to file any of the excise tax forms listed below.
b. Steps to Form an LLC
- Choose a Name for Your LLC.
- File Articles of Organization.
- Choose a registered agent.
- Decide on member vs. manager management.
- Create an LLC operating agreement.
- Comply with other tax and regulatory requirements.
- File annual reports.
c. What Type of License is Needed to Open a Data Center Business?
- General Business License
- Zonal Permits
- Signage Permit
- Operational State Facility Inspections
d. What Type of Certification is Needed to Start a Data Center Business?
- Cisco CCNP and CCIE Data Center
- Epi’s Certified Data Center Professional (CDCP)
- Epi’s Certified Data Center Specialist (CDCS)
- Uptime’s Accredited Tier Designer (ATD), Accredited Tier Specialist (ATS), Accredited Operations Specialist (AOS)
- BICSI’s Data Center Design Consultant (DCDC)
- VMware Certified Professional 2019.
e. What Documents are Needed to Open a Data Center Business?
- Business and liability insurance
- Federal Tax Payer’s ID
- State Permit and Building Approval
- Certificate of Incorporation
- Business License
- Business Plan
- Employment Agreement (offer letters)
- Operating Agreement for LLCs
- Insurance Policy
- Contract Document
- Company Bylaws
- Memorandum of Understanding (MoU)
e. Do You Need a Trademark, Copyright, or Patent?
No, you don’t need a trademark, copyright, or patent for your data center business.
Cost Analysis and Budgeting
a. How Much Does It Cost to Start a Data Center Business?
The average startup cost for a data center ranges from $10 million to $25 million. A little less than half is spent on hardware, software, disaster recovery, continuous power supplies, and networking. Another large portion goes toward the maintenance of applications and infrastructure.
Please note that it will cost you about $1000 a square foot to build a small data center. That’s not taking into account that it can often cost over $10,000 per mile to have fiber installed to reach your location.
b. What are the Costs Involved in Starting a Data Center Business?
- The total fee for registering a business in the United States of America – $750.
- Legal expenses for obtaining licenses and permits as well as the accounting services total – $3,200.
- Marketing promotion expenses (2,000 flyers at $0.04 per copy) for the total amount of $80.
- The cost for hiring a business consultant (writing of business plans inclusive) – $4,500.
- Insurance (general liability, workers’ compensation, and property-casualty) coverage at a total premium – $12,400.
- The cost of software, accounting software, CRM software, and Payroll Software – $150,500
- The cost for leasing a facility (long-term lease agreement) – $235,600.
- The cost for facility remodeling and installations – $20,000.
- The cost for the purchase of hardware, equipment, and parts: $750,000
- Phone and utility deposits will cost – ($2,500)
- Operational cost for the first 3 months (salaries of employees, payments of bills et al) – $90,000
- The cost for the purchase of office furniture and gadgets (computers, printers, telephone, TVs, tables and chairs et al) – $45,000.
- The cost of launching an official website – $600
- Miscellaneous – $2,500
c. What Factors Determine the Cost of Opening a Data Center Business?
- The size of the data center business
- The choice of location
- The required licenses and permits
- The cost of hiring and paying a business consultant and attorney
- The cost for branding, promotion, and marketing of the data center business
- The cost of furnishing and equipping the data center business – facility
- The cost of insurance
- The cost of registering the business
- Cost of recruiting and training your staff
- The cost for the purchase and customizing of uniforms
d. Do You Need to Build a Facility? If YES, How Much Will It Cost?
Yes, you would have to build a new facility for your data center and it will cost you a minimum of $10 million and the rate of $1000 a square foot to build a small data center. That’s not taking into account that it can often cost over $10,000 per mile to have fiber installed to reach your location. The average data center occupies approximately 100,000 square feet of space.
e. What are the Ongoing Expenses of a Data Center Business?
- Computer and server parts
- Utility bills (internet subscriptions, phone bills, signage, and software renewal fees et al)
- Salaries of employees
- Hardware maintenance
- Marketing costs
f. What is the Average Salary of your Staff?
- Chief Operating Officer (President) – $60,000 Per Year
- Data Center Operations Manager – $48,000 Per Year
- Admin and HR Manager – $42,000 Per Year
- IT Specialists – $41,800 Per Year
- Network/Computer System Engineers – $40,000 Per Year
- Marketing and Sales Executive (Business Developer) – $36,000 Per Year
- Accountant – $36,000 Per Year
- Help Desk Officer – $33,100 Per Year
g. How Do You Get Funding to Start a Data Center Business?
- Raising money from personal savings and sale of personal stocks and properties
- Raising money from investors and business partners
- Sell shares to interested investors
- Applying for a loan from your bank/banks
- Pitching your business idea and applying for business grants and seed funding from the government, donor organizations, and angel investors
- Source for soft loans from your family members and your friends.
Write a Business Plan
a. Executive Summary
Cloud 24® Data Center, Inc. is a registered and licensed data center business that will be based in Los Angeles, California. We are in business to store data for both the United States and international market.
Cloud 24® Data Center, Inc. has been able to secure all relevant licenses and permits to operate in the United States. We will ensure that we abide by the rules and regulations guiding the data center and IT industry in the United States of America.
b. Products and Service
- Storing, processing, and disseminating data and applications.
c. Mission Statement
Our mission is to ensure that we build a successful data center business that will not just work for clients in the United States of America and Canada, but all across the world; a company that will boast of having some of the best and most reliable Engineers and Technicians in the United States of America.
Our vision is to become one of the preferred choices when it comes to storing, processing, and disseminating data and applications in the United States of America.
d. Goals and Objectives
The goals and objectives of a data center business are to engage in storing, processing, and disseminating data and applications for its clients.
e. Organizational Structure
- Chief Operating Officer (President)
- Data Center Operations Manager
- Admin and HR Manager
- IT Specialists
- Network/Computer System Engineers
- Marketing and Sales Executive (Business Developer)
- Help Desk Officer
a. SWOT Analysis
- Excellent operational history
- Attention to detail.
- Experience and trained professionals.
- Large manufacturing facility.
- Excellent customer testimonials.
- Safe, reliable, and efficient storing, processing, and disseminating data and applications process.
- Not enough existing clientele to run at full capacity immediately
- The owner is new to large scale marketing
- We will need a loan to build our facility and to purchase hardware and software
- Lack of economies of scale.
- Growing acceptance of data centers in the United States.
- Build upon existing clientele
- Online market, new services, new technology, and of course the opening of new markets.
- Increase in technological activities on a global scale.
- With the rapid advancement of technology, data centers may likely become obsolete in the nearest future.
- Loans diminish profitability until they are paid off
- The first year will be financially tight while we gain customers and pay off loans
- Competition in the area could increase
- Management of employees requires time, money, and efforts
- The regulatory authority could change its regulatory status and decide to enforce strict regulations that can strangulate new businesses.
b. How Do Data Centers Make Money?
Data centers make money by;
- Storing, processing, and disseminating data and applications process.
c. Payment Options
- Payment via bank transfer
- Payment with cash
- Payment via credit cards
- Payment via online bank transfer
- Payment via check
- Payment via mobile money transfer
d. Sales & Advertising Strategies
- Introduce your data center business by sending introductory letters alongside your brochure to businesses, corporate organizations, schools, and key stakeholders within your market space
- Print out fliers and business cards and strategically drop them in offices, libraries, public facilities, train stations et al.
- Use friends and family to spread the word about your business
- Post information about your company on bulletin boards in places like schools, libraries, and local coffee shops et al
- Place a small or classified advertisement in the newspaper, or local publication about your company
- Leverage on referral networks
- Advertise our business in relevant magazines, newspapers, TV and radio stations.
- Attend relevant expos, seminars, and business fairs et al to market our firearms
- Engage in a direct marketing approach
- Encourage the use of word-of-mouth marketing from loyal and satisfied clients
a. How Much Should You Charge for your Service?
A data center will either charge you a flat rate for your consumption or will meter your usage. If you use more than 300kW, then you probably would be better paying the metered rate. On average, you will find data centers renting Us of rack space out for $100 to $300 per U per month. Generally, this monthly fee will include a pre-set allotment of bandwidth and IP addresses.
b. How Much Profit Do Data Center Business Owners Make a Year?
On average, a data center business owner is expected to make $9.9 million per annum.
c. What Factors Determine the Amount of Profit to Be Made?
- The capacity of the data center business
- The location of the data center business
- The management style of the data center business
- The business approach of the data center business
- The advertising and marketing strategies adopted by the data center business.
- The number of years the data center is in business
d. What is the Profit Margin of a Data Center Business?
The profit margin of a data center business is not fixed. It could range from 22.5 percent to 45.85 percent.
e. What is the Sales Forecast?
Below is the sales forecast for a data center business it is based on the location of the business and other factors as it relates to such startups in the United States;
- First Fiscal Year (FY1): $11 million
- Second Fiscal Year (FY2): $30 million
- Third Fiscal Year (FFY3): $45 million
6. Set Up your Office
a. How Do You Choose a Perfect Location for your Data Center Business?
- The demography of the location especially as it relates to ICT activities
- The demand for the services of data centers in the location
- The purchasing power of businesses in the location
- Accessibility of the location
- The local laws and regulations in the community/state
- Traffic, parking and security et al
b. What State and City are Best to Open a Data Center Business?
- Los Angeles, California
- New York City, New York
- Fort Smith, Arkansas
- Atlanta, Georgia
- Tucson, Arizona
- Orlando, Florida
- Fort Wayne, Indiana
- Columbus, Ohio
- Jefferson City, Missouri
- Baton Rouge, Louisiana
c. What Equipment is Needed to Operate a Data Center Business?
- Environmental Control Equipment.
- Server Racks.
- Redundant Power Sources.
- Cable Management Supplies.
- Computer & Network Equipment).
When it comes to hiring employees for a standard data center business, you should make plans to hire a competent chief executive officer (you can occupy this position), data center operations manager, admin, and HR manager, IT specialist, network/computer system engineers, marketing and sales executive (business developer), accountant, help desk officer and security guards.
Launch the Business Proper
In recent times, no data center business opens its door for business without first organizing an opening party to officially launch the business. You can choose to do a soft opening party if you are operating on a low budget or you can go for a grand opening party.
The bottom line is that with a proper launching of the data center business, you will officially inform people in your city that your data center is open for business.
a. What Makes a Data Center Business Successful?
- Choose a good location and facility to launch the business
- Secure reliable and efficient software and hardware
- Come up with a unique concept for the business
- Partner with key stakeholders
- Hire only competent, hardworking, and trustworthy staff
- Be deliberate with your marketing sales approach
- Encourage the use of word of mouth to promote your data center business
- Leverage all available online and offline platforms to promote your data center business
b. What Happens During a Typical Day at a Data Center Business?
- The business is open for the day’s work
- Customer’s requests are taken and they are scheduled or attended to
- Schedule and ongoing maintenance of infrastructure are carried out (equipment and systems monitoring, formalized staff training, thorough procedures, and regular maintenance, disaster recovery, and networking)
- Marketing/website upkeep
- Administrative duties
- The business is closed for the day.
c. What Skills and Experience Do You Need to Build a Data Center Business?
- Excellent ICT skills
- Ability to pay attention to details
- Customer services skills
- Interpersonal skill
- Business management skills
- Work experience in the data center and management industry
- Experience in managing people
- Experience in business administration
- Experience in handling different types of hardware and software.