Viability Of Hosting Own Servers

For a small business where there is no colocation facility within any reasonable distance, who needs to host an application on ~5-10 servers in total, would such businesses simply be out of luck - or could they self-host their servers?

What are the reasonable alternatives to colocation? Getting a colocation facility in a different city wouldn't be an option. Neither would going with dedicated/managed hosting (because the business has its own servers and the in-house resources to administer them).

What is the viability of creating your own mini "data center" - by this I don't mean anything like a real data center, but just someplace where you could host 5-10 servers?

Perhaps you could give some advice as to the kinds of things one would have to keep in mind before attempting such a thing. (e.g. physical security, bandwidth, power, etc). The reason I ask is because surely you couldn't just rent a little office space and set up the servers there, right? (Or could you...?)

Do you know anyone who has hosted their own servers, numbering around 10 of them? (How did it turn out?)