What adds to the cost:

1 - Upgrade options. Most of the times the hardware configuration for these servers creates a bottleneck. They advertise an Intel Pentium 4 server, but with 256mb RAM only that the customer fails to take notice of and soon will need a memory upgrade. Too bad, the company has purposely priced these upgrades on the high end.

2 - Licensing Fee. To run a dedicated server, one definitely needs a control panel, not just for himself but for the customers that he'll sell hosting too. Hosts have different pricing for the same control panel. For example, the same CPanel license can be bought from $15/m to $50m at various hosts. Then there are other software in the list.

3 - Backup Solution. It doesn't take long before this hidden cost is uncovered. Cheap hosts tie you to high cost per GB backup solutions or offer backup in volume slabs that are pretty useless for you, specially when starting-up.

4 - Emergency Help. Find out what per hour charges does the host make to offer emergency system administration tasks etc.

5 - Loss of Business. You get what you pay for. Yet many of us try to see if there was a mistake when this quotation was made. Very expensive is the cost that thus you get to incur. HOw will your host react in times of hardware failure, network connection issues etc is the key to your success. You can easily loose that established customer base if your server goes down for more than a few hours.

Some respectable offers for cheap dedicated servers are listed here.