This is the 2nd day in a row I've heard of hetzner.de. If they remove their one-time setup fee of 149 eur I might give them a try.

One-time setup fees seem like one of the dumbest things a hosting company can do. I can think of few more effective ways to keep me from trying a service.

Yeah, it is annoying; they do sometimes have specials where the setup fees are waived or reduced. I have to say their service has been excellent for me though (I've used them for years).

Note that you might want to check if hosting in Germany has any legal implications for you - German data protection laws are vastly more strict than the US, say.

It's not just annoying it's counterproductive. In my head setup fees trigger warning bells on two areas:

1. The company is so un-automated that it actually needs considerable human intervention to prepare a server and doesn't actually bother to include this basic operation into their total cost (they sell servers after all).

2. It's a trick to squeeze at least the 150 euro from you. Because if I find out in the first months that their service is sub-par I can just cancel my subscription but I'm not getting my 150 euro back.

As lsc explained the setup fee is not normally for human labor but part of the hosts cost calculation.

Serious hosts will give you free trials (before you pay the setup fee) any time, unless you ask for special hardware that they themselves have to buy first.

speaking as a hosting company, setup fees are /really really nice/ - I've got to go buy a rather expensive server and get it to you - now, obviously, I've priced it so that I make a profit long term, but I need to go buy another server /now/ not long term.

Personally, I address this by having pre-payment discounts. cover your account for a year and I knock off 20% (and usually use the cash to go buy a new server) - I also allow people to sign up and pay monthly (at a higher rate, of course) but with my current price /discount setup, the majority of my income is from pre-paid customers.

I wouldn't know what the margin is in this business but I assume you buy a bit over the capacity, specifically to allow new customers to come in.

Perhaps setup fees /kinda/ make sense if you are some high-quality name in the business and people will know they are staying long-term. But if I see a well-known company without setup fees and your company with a setup fee it won't take long to decide.

What you mentioned is far more decent: a bonus for payment in advance but I don't see how they expect to charge me the equivalent of 3 months in advance just to test them out.

Yeah, well, I did what I did mostly 'cause i recognize that I don't have the name recognition to carry off the setup fees... your points as to the customers perception of setup fees are all very valid.

Really, it's less about margin, though, and more about credit. If I had more, it wouldn't really matter... but I don't, so it does.

for a while I was renting out whole servers at nearly co-lo rates... with the catch that the customer needed to pay a setup fee that would cover the parts cost of the server up front.

It was pretty popular, actually; I only stopped doing it because it put me in a bad place as a provider... thing of it is, sometimes you really do need to fire your customers. I don't want to be in a position, though, where I get a bonus for firing my customers.

The smallest root server at hetzner is the EQ-4 package for 49 EUR/mo: http://www.hetzner.de/en/hosting/produktmatrix/rootserver-pr...

Also if you explain that you are an American company (if you are), they will waive the VAT which bring down the cost per month to 44 usd or something.