We're looking for information on how to sell our profitable hosting operations. We currently have over 1,000 customers with hosting revenues over 100k last year (which will definitely double this year) and profit over 30k.

The problem now is when selling a business like this, what is the fair market price? How do you arrive at such figure? How do you solicit for a postential buyout. We prefer a smaller company buying us out than the big boy simiply because we've been so successfull with our customer by giving some superior service experience.

Any information, advice, tips, etc. would be greatly appreciated.

Thanks.


Munachi.

Well it depends on your company.

If you're in business since 1 year, you won't get a lot of for it. If you're in the business for 2+ years then it's another story. You have to take in consideration the profit on it.

Overall, I think 12 months X profit is about what you can do. I suggest trying to sell to local hosting business as they will probably pay more to "kill a competitor".

Good luck!

munachi, all things being equal (and there's lots of varaibles here), you could look to 1 x yearly revenue, as being a ballpark figure for selling your business. Might be more, might be less.

You could post in the ad_forum, and see if anyone is interested. You'll be asked for a LOT of details, and it can be a long process getting through the contract stage to settlement.

I would recommend that you goto www.thewhir.com and contact them they will help you out. Midphase is one company that has on its page that they want to buy companies so you can contact them http://midphase.com/acquisitions.shtml happy selling :)

Greetings:

Over the past nine years (eight in hosting as of this November), we’ve seen hosting providers sell at various revenue points; and, in some cases provided consulting to the seller as it related to the best way to migrate (to increase or keep the revenue multiple).

The constant factors, over the years, involve the following:

1. Ease of migration to the buyer’s platform – whether it is just billing or the complete automation picture.

2. Whether the buyer can keep the same price points and feature sets as the seller.

This can be key because ROI will be based on the buyer’s monthly price for those customers (not the sellers).

Please note that if your pricing is higher doesn’t mean a benefit to the buyer if they cannot ethically, morally, or legally keep those high price points.

We’ve turned down just as many purchases of higher priced hosting customers as we have lower priced hosting customers for ROI reasons.

Legally, most of the time the contracts have expired so the customer is no longer bound to a given price point. Ethically and morally, if you have published pricing lower, unless you can justify starting and managing a new division, you would have to bring those customers into your pricing.

3. How long the seller has been in business? What has the seller’s churn been like over the years? The more years in business, the lower the churn rate, the higher the value.

There are also a number of variables that will vary from buyer and seller to buyer and seller.

Furthermore, the buyer may pay a deposit, and put money in escrow that is paid out over time (typically within 6 to 18 months) where some of the money in escrow may go back to the buyer if there is churn from the sale.

Lastly, in terms of ranges, we’ve seen two to four months of revenue for low price providers who have not been in business long or who have what the buyer considers being too high a churn rate.

And we’ve seen as high as twelve months of revenue (though that is becoming rarer in this market).

Lastly, from a personal stance, my one business mentor told me that any acquisition has to break even in nine months or less to make sense financially. So the greater than nine months of revenue would only make sense, if the buyer was able to optimize the situation to break even in nine months.

Thank you.

There is no specific rules that will tell you how much you can sell your business. All depend on how many hours a week you spend to answer your costumers questions.

Right now the market is over populated, however if your company stands out, it might be worth alot more than most would expect.

Originally posted by vigor
Right now the market is over populated, however if your company stands out, it might be worth alot more than most would expect.
They have 100k/yr in revenue and running with a 30% pre-tax profit. That's not bad. It's a good beginning, and that company would probably sell for around the 100k mark, depending on many other varaibles.

IMO, a hosting company's multiple_selling_price, is going to be worth less and less, as the years go by, due to the huge oversupply in the hosting marketplace. The same relevance can be seen with the cost of hosting plans (greatly declining) over the last 5 years.

5 years back, hosting companies could sell for 5 (maybe more) times yearly revenues. Now that figure is down around the 1 x yearly revenues, maybe more if you are very unique. :)

2 years from now that 1 x yearly revenue will probably be 0.5 X yearly earnings (or less), as hosting prices in general continue to fall, and the eventual trend of hosting sites from home PCs (in the next 5 to 10 years) etc. Maybe hosts will eventually have to pay someone to take over their business? :D

Originally posted by Aussie Bob
...as hosting prices in general continue to fall, and the eventual trend of hosting sites from home PCs (in the next 5 to 10 years) etc. Maybe hosts will eventually have to pay someone to take over their business? :D

Bob, you are succumbing to taketo's paranoia. Snap out of it! ;)

Justin

Originally posted by jbigelow
Bob, you are succumbing to taketo's paranoia. Snap out of it! ;)
*slaps own face - tips cold water over face*

Ok, much better now! :blush:

The industry standard for one customer is 35-45$, is that right? Does the price of the customer increase if he/she has been with the host for more years? i.e. loyal customer. thanks

We prefer a smaller company buying us out than the big boy simply because we've been so successfull with our customer by giving some superior service experience.
Your concern for the customers is really impressive. I really hope you'll find someone to sell your business to that will be able to maintain high standards of service for your customers. Good luck!

munachi: Do you (your company) own your own servers, or do you lease servers? Where are you located? Are your clients mostly local clients? Are employees (if any) planning to stay onboard?

Depending on the answers, either a local buyer might make more sense or the geographic location might not matter.

but, why you want to sell a profit company??

Originally posted by pueblosnet
but, why you want to sell a profit company??

To get some sleep. :smokin:

Originally posted by DeathNova
To get some sleep. :smokin:
Oh I hear that!! :gthumb:

Originally posted by Aussie Bob
Oh I hear that!! :gthumb:
Oh come on. I can't believe you are complaining. Everytime most of us in the US and Europe work, you actually sleep. ;)

That's perhaps the problem... He was not sleeping... :)

too much customer support i guess :D
or maybe he wants to start another venture, maybe he wants to afford his dream car and mansion :D there can 10000 reasons for selling :D Search engine market is growing by leaps and bounds, maybe he wants 2 acquire a search company or advertising, damn i can go on, oh wait maybe hez waiting for Google's IPO :D