How do you decide what you need?
How do you know if a host is good?
What do you need to look for in a host?

When you compare your virtual "location" or host server with a brick and mortar storefront then a few similarities come to the fore.

As with a real world business that is open 24 x 7 your hosting company should have an excellent record of up time and most do.

Choose according to your needs.
Most websites rarely exceed 5 megs in size so for all intents and purposes you can ignore the extra of anything more than, say, 10 meg.

If you do need more than 10 megs it will probably be due to your offering a download from your site, which brings its own set of limitations.

Be careful of limitations on bandwidth.
Let us assume that you will be offering a 10 meg download. If only 10 people download this a day, you are looking at 3 gigs a month in bandwidth or "data Transfer". Taking conversion factors into consideration (1000 downloads equals one sale or a .1% conversion factor) your bandwidth per sale would be in the neighborhood of 10 gigs per sale. To this 10 gigs you can probably add another 2 gigs for site graphics and html.
This would bring your total monthly bandwidth to 12 gigs.

If you had a 10 gig a month plan you might be paying an extra $8.00 to over $100 a month in bandwidth charges.

WebMaster Tip: And shameless plug. Our hosting plans do not impose a bandwidth limitation. However there are limits which most sites never reach. If you do reach a point where your virtual server is taking too much bandwidth/processor overhead we will let you know and you will have to upgrade.
However, if such a time does come, it will be because of the success of your site and as such. it is a part of the normal progression. 

Be prepared for success.
Be prepared to pay for success.

Let me digress by recounting an actual "success story". The names have changed to protect the ignora....errrrr innocent.

Skip the story and go directly to the rest of the lesson.

Once upon a time a group of like-minded of enthusiasts joined together to form a modding group dedicated to producing free add-ons to a certain commercial game.

A wildly disparate group, they were held together by a shared interest to produce for, and support the free modding community.

A new website was formed, and featured mod and industry news combined with a number of support and idea sharing forums.

With the formation of a new group, many of which were well known in the community, developing a new mod, community interest was high and traffic to their site grew.

Once they released their highly successful mod, their traffic (and bandwidth) went ballistic.
Monthly bandwidth charges passed the $1800 mark.
Pretty hefty charges for a "Hobby" site.

A policy change was made which caused a lot of dissension in the community. (Not the first nor the last negative publicity this group would generate).

The modding group started to ask for donations, to support the website, and a Pay Pal donation link was put on the main page. Polls were run to see how the community would accept this and a membership option. No attempt was made to find a better host at this time.
Nor was there any advertising on the website.
After a few months of this, and cutting bandwidth by not allowing user uploaded images, removal of streaming media,  and a redesign of site graphics, a choice was made to find alternate hosting.

The owner chose a $7.95 a month host with "UNLIMITED" bandwidth.
Here we have a website with somewhere around 20,000 visitors a day and 300+ concurrent users at peak times.
As the majority of the site is a bulletin board system, this meant very high processor overhead as the MySql database was accessed for each thread.

A month or so of many database problems, (mostly due to lack of processor power due to the amount of traffic for 100 other virtual hosts as well as this one), their hosting company said "Upgrade ($500 a month) or leave".

During this period traffic dropped to under 5000, (from 18.000+), on good days and many days no one could get on.

Their next choice was to get a commercial host that offered support for their demand loads. Ironically it was the first place they should have looked, as it was the service provided by the designer of the Bulletin Board they were using and had a sliding scale according to bandwidth.

This served them well until they made another poor choice. This time they decided that they had enough experience to turn from free modding to developing their own game and marketing it.

While there is nothing wrong with turning a hobby into a profession, the way this should be presented is most critical. Remember that this is a FREE community and this group is a central focus point for players to learn about, discuss, and contribute to the game.

As you might probably assume, the "Fit hit the Shan" so to speak.  The community was instantly divided into pro and con groups. The division was further fueled by their announcement that they would no longer be supporting the free community.
Some of the team members did not want to "Turn Pro" and left the group. The spokespersons for the remaining professional members made it clear, and in complete disregard for copyright laws, that they had full and sole rights to the old mod developed as a free team. 

While the main players in the new pro group tried to apply pressure to stop anyone in the free community from using any part of the old mod, public opinion eventually forced them to shut down their website and disappear into obscurity.

Not the best beginning for a new company.
I call it "Snatching defeat from the jaws of Victory"

They had a huge following of the very people that would be buying their game, and they threw it away. Thousands upon thousands of dollars in potential sales went out the widow because of a series of poor decisions.

What should they have done?

First was their hosting. They lost many a visitor because of their problems. First it was being shut down when their arguments/pleas went unanswered by their first host who was collecting hefty bandwidth fees.  Perhaps they cancelled. On this I am not sure but the net effect was that the site went down permanently.

Before it went down, they were asking for donations, but they did not discuss or display collections and/or their objectives.

Given their circumstances and the mood of the community, if their donation plan had displayed their needed income to satisfy the current community demands it probably would have worked.
As the donations are needed to keep the site up for the community, the community should have been informed of the donation amounts, if not the names of the donors. It would have sparked a healthy interest in seeing their expenses met and covered by involving the community.  $1 per user would have equaled some $20,000.
Alas this was not done and the money disappeared into their pockets and an accounting was never made.

Polls on opening a membership only site were not in favor. 

At no point in the several months that this took did they attempt to do any advertising on their website.

They opened another site with the discount host and with a different domain name and did not have the courtesy to put up a forwarding link. As hundreds of sites were linked to them all their links now needed changing. Not the first sign of what I could only describe as incompetence, or perhaps it was ignorance, either way it got their fans upset.

When the second host failed to give them a stable platform, instead of moving immediately they again tried to argue the host into supplying "what was promised", something that, as you will see, they could not live up to themselves.

The third and last move saw a repetition of using a new domain name and not linking the old.

One would expect that given the problems with businesses living up to advertised promises, they would do their utmost to live up to their own promises of new mods and add-ons to the current mod and to the newly released host game, which offered superior everything.

As their visitors and site users are their target market for a new game, it did not make sense to me to not want to support the community anymore, unless you were going to use the community's efforts when making the new game. This was a highly discussed possibility, especially in the light of the Team Leader's attempts at claiming sole ownership.

It is not easy to blow a success like theirs, but they did it.

Lets take another client, xyz software sales.
Working with the system, supporting users, listing on search engines, getting linked on other sites, promoting his products, a single person has managed to develop 1500+ Gigs of traffic a month.
Downloads account for a large segment of this traffic. However sales are good and the $600.00 a month server fees are a cost of doing business. 

Evaluating your intended hosting company.
If they have a BBS system, take a peek around.
If the mod owner had done this he would have seen how many folks had similar problems and how this host coped. (Not well- their forums were full of complaints)

I usually contact a company that I wish to use by email and ask their service department a couple of questions. I judge their company on their response time.

Your basic needs are:

• A stable server.
• Fast reliable support.
• No bandwidth charges.
• Scalable
• Full email options. Unlimited accounts, unlimited aliasing, and a catch all system that directs everything before the @ to your primary account.
• Full cgi-bin access.
• Front Page Extensions.
• Secure option.