When you start your free hosting business, the cash is always a constraint, at least for most people. As I mentioned in a previous post of Checklist for Free Hosting Providers, you need prepare sufficient cash for at least a few months.
Different free hosting or free services need different server resources. For example, If you are providing free forum hosting, or free WordPress blog hosting, the major concern is the database. Your MySQL database will consume the most resources. So, once you get a few hundreds active signups, your reseller hosting provider may stat to give you hard time. At this stage, you should prepare to move to a dedicated server.
On the other hand, if you are providing free web proxy service, you then need real bandwidth. Some and actually most providers are overselling their resources for reseller and shared hosting account. Before you reach the bandwidth promised, they may find an excuse to boot you out. A simple change of TOS will give them sufficient legal base.
If you are providing free web hosting with any server side programming features (e.g., PHP, or CGI), then you should not consider reseller hosting. Once there is an abuse complaint (it is common for free hosting providers), no matter it is on spamming, or phishing, the server admin may suspend your account totally. If you have to use reseller account, you should at least host your reseller account with a different provider.
Reseller hosting account may be sufficient for initial stage if you closely monitor your signups or services. But once you have a few hundreds active users (this should translates to use more than 200GB monthly traffic for forums or blogs), you should consider to move.
In fact, the dedicated server is not as expensive as many people conceived. You need go directly to the datacenter who provide physical servers, not the resellers. The price markup can be anywhere between 20-100% without any additional services. In the coming article, I will show you how to find a reliable, yet affordable dedicated server for your free hosting business.