Customizing resold accounts?

I am planning to offer a PHP web application as a service, but while I know how to setup a LAMP server, I don’t consider myself a professional administrator or security expert. I was thinking that, if I found a hosting company that let resellers customize the account creation process, I could run a script to install the software and just send my customer the application’s administrator credentials. I would update/fix the application, and depend on the hosting company for things like backups.

Is this a crazy idea? Does such a company exist, or should I get ready to spend serious money in a managed server?

I suppose you can ask reseller companied to integrate your web application for free (trial) and let them use that.
Only then you will be able to start trying being competitor to existing ones.

No that is not crazy idea at all. Just would like to suggest you to choose low end VPS instead reseller account.