We rolled out own data center build-out in the late 1990's - and from there have expanded or moved entire buildouts as required, though we currently reside in several data centers at which we have remained since 2012.
in 2012, with all the "free everthing, forever, unlimited" marketing garbage, we made a decision to focus on CMS hosting and VM's for specific types of clients. This moved us toward a more boutique offering, but it has served us well, and we never became part of the "get everything for nothing" marketing hype. We all see where that has gone.
Additionally, we do target customers and industries that need good security and performance. Since we built our own cloud system (been through several iterations over the years) and finally settled on Xenserver, then XCP-ng (open-sourced version of Xenserver) our management of VM's both for our and our customer usage has become a breeze.
If I were starting out again, I would select to rent a couple of smaller VM's than move up to dedicated hardware (without concern of self-build-out or rental such as Hertzner etc) as my requirements grew.
I would opt for Enhance servers running on 4 core (minimum); 8-16GB RAM, 500GB-1TB storage for the main web server, then get a tiny VM for DNS secondaries. You could run mail on the original web server, but I would plan to migrate that to a dedicated server in the Enhance cluster.
In plans like we offer, this setup would run you (approximately)
$50-60 for main VM web server (6 Cores, 8G RAM 500GB disk)
$10-15 for DNS Servers (2 Core 4 GB 150GB Disk)
$40-60 for Mail Server (4 Core, 8GB RAM 500GB Disk)
So $120-150 to get started with all VM's and your own Enhance Cluster. You could even start smaller with just one server for web/mail/control/dns but you still need a secondary DNS or utilize Cloudflare...
We don't aim to be as inexpensive as Digital Ocean, Akaimi, etc...
As part of our Enhance build out, We also added plans where we add a customer with dedicated servers into OUR enhance cluster (we now have a number of customers who love this and moved away from our Plesk VM offerings almost immediately). You still get your dedicated VM's but you get to take advantage of OUR big-beefy Mail, DNS and backup servers at no additional cost, so you just buy the dedicated web server to get started and run Mail, DNS and Backups for Enhance on our infrastructure, and your websites on your dedicated servers.
These comments are not to sell our services, they are simply reflection of what works in the markets in which we operate (Eastern US; Great Britain; Brazil) and to give you ideas. Pay attention to @twest as the comments there are very good.
One final thing, since we have our own rather robust multi-data center infrastructure, it is easy for us to spin up Enhance servers in any of them. This is not necessarily the norm for all companies, but I am quite certain there are other hosts here who could do similar things. Ask around, ask questions, join the hosting party!!!
All that to simply say, there are multiple paths to profitability. The two main things, you must spend money to get started, but do not try to buy the whole farm. Start modest with a good VM provider. Plan for the inevitable upgrade (Enhance makes this a breeze, turn up new, bigger, better server and migrate customers over to it/them).
Plan to spend more money in the first 6-12 months than you take in, but keep it TIGHT, and when you become profitable take a close look as the cost to migrate up to the next step. Start small, not too small, plan carefully for the place/time where the tipping point that requires the "next level" of resources happens to be, and do not wait until you go over that edge to upgrade your servers.