I was in talks with a webhosting company who I won't name, they have 60 clients with a monthly turnover of $550 they have been in business for two years and hosting with verio, the machine is costing $250 per month.

they are trying to sell the business for 3 months the monthly turnover, looking for the figure of $1800

If you were to transfer these clients to your own servers and change all the clients billing company I would rekon on loosing some of these clients who would not be happy having to move to a new provider and ordering a new account?

Would you say I am right or not? Would you think it's risky to pay $1800 up front for it all when you don't know how many of the 60 clients will choose to host with you as you would have to ask them to transfer to you so you can charge there cards.

good deal or bad deal?

Originally posted by garysmith
Would you say I am right or not? Would you think it's risky to pay $1800 up front for it all when you don't know how many of the 60 clients will choose to host with you as you would have to ask them to transfer to you so you can charge there cards.Three months income isn't bad, especially for a company that has been in business for two years. But you might be able to negotiate it so that you'd only pay for those clients who do make the switch. In that case, though, I'd expect to pay for more than three months' income from that lower number of accounts.

Is it worth it? How much do you want to grow? If you were to advertise an offer for "first three months free" you'd probably pick up a lot of clients, too... for basically the same cost. Consider, too, that you'll probably have a higher than usual number of support requests for clients that transfer, so there is an added cost there, for a while.

hiya

thats what we offered, offered to take over the business paying $500 upfront then offered to pay 2 x the value of each account after they had signed up with us.

The worry yeah was they would be moving from a verio control panel to a plesk control panel and technical support would probabley be a lot and a handful would just go to a different host.

Do you mean offer the clients who are switching free hosting? or just offer everyone free hosting for 3 months?

Originally posted by garysmith
Do you mean offer the clients who are switching free hosting? or just offer everyone free hosting for 3 months? No, what I meant was that buying an account for a price equal to three months' income from that account is comparable to signing up a new account by offering the first three months free.

Whether you would consider the second to be worthwhile might help to decide whether the first would be, to you.

Gary,

I would do it. Thats a hell of a bargain. I think the going rate for hosting companies is 1.4 * yearly GROSS income. Your getting 1/3 net income. Thats awesome

yeah you think it's a good idea but what happens if you hand the money over then they all choose to cancel because they don't like the new setup?

Then you come up with an alternate offer, or revise your own plan.

To think about:

A. Leave the box where it is. If the users are happy there, leave them alone. Run the box, and you might even think about offering plan(s) similar to what the host is offering now in order to just fill that box and increase the revenue level of it. When it's full, cut off those plans.

B. Offer a sliding payment based on the number of clients that remain (whether you decide to migrate them off the box or not). x% of the remaining balance if y% of clients remain, a% of the remaining balance if b% of clients remain, and so on.

For such a tiny acquisition, though, and for such a tiny purchase price, you'd be better off just handing over the money. If you can't afford or are worried about two grand in an acquisition because of fears of potential revenue if people cancel (again, whether you migrate them or not), then it's probably not a wise decision to be pursuing it at all.

Originally posted by JayC
No, what I meant was that buying an account for a price equal to three months' income from that account is comparable to signing up a new account by offering the first three months free.

That's an interesting way to view it.

If one was to give three free months to new clients, it might be a good idea to charge for month #1, and give free months after that.

Originally posted by Annette
A. Leave the box where it is. If the users are happy there, leave them alone. Run the box, and you might even think about offering plan(s) similar to what the host is offering now in order to just fill that box and increase the revenue level of it. When it's full, cut off those plans.

I'd second this one. I'd expect more cancellations if you attempt to migrate them over to Plesk (not that Plesk is bad, just that the change might not be welcomed).

Hi

ok yeah good ideas thanks

one other problem we don't have a choice but we have to move them to our billing company, so they will have to go to our billing site on worldpay.com and sign up all there payment details.

Would you think they would be ok doing this? or is that one more thing to make them decide to change host?

I think I read somewhere that around 40% of the clients stay with the new host. But that is only if the current host is kinda crappy. These ae figures from a big company buying a good sized one out, that wasn't doing great on support etc.

Aloha,
well why not send out a letter to them showing advantages of plesk (assuming you offer plesk as someone else wrote) and that you offer better services (if this is the case)
if you can find out from your (future) customers that would be best.
or you will leave them where they are at on the same price plan etc...

how was the prior service before ?
more than you offered or worse ??

I would think this way you can get numbers to migrate those that want to and those that do not you can decide if it is worth keeping the other machine

I agree with Annette, if the $1800 is going to hurt you if most if it is lost, don't do it.

In any take over, your not going to get all the customers, so it will be less then 60. Also, 60 in two years in not very much at all, so your not going to get very much in brand recognition or new sales from their domain or established business.

Given the price of the deal, if your company can afford it, its not a bad deal even if it doesn’t go entirely well. I also definitely agree emailing them and asking if they would rather stay how they are, or be upgraded to such and such, and go from there.

get-hosted... where in the world did you get that 40% stay with the new host number?

I have bought a few companies, and 85% is the lesser after 6 months.
These numbers of yours must have been from a company that was poor, being bought by a worse company... hmmmm,,, I can think of one that you might be thinking of.. (won't name drop it though)

Shoot, on a company of 60 customers, with a small host like that, they are most likely happy loyal customers, and will be more willing than you think to see what the new guys have to offer.

For that price, go for it. it is a bargan. Just email all the new customers personally, and treat them right, and you will keep most of them.

Good Luck Gary

Tim L :cool:

$1800 I would say its a good deal. A nice website and a server setup fee would probably cost you $600-1000.
So basically you pay about $1000 for 60 customers and everything is ready to go!!!

Oh well thats just my opinion. You got to plan for the worst. Anything could happen in the cyber space.