How would you acquire a company?

I wouldn't aquire a company based on one single thing. Revenue, reputation, additional assets: these are a few of the other factors I would consider.

Saw a company auction on Ebay for $2100, it had around 300 clients. Yearly PROFIT? haha maybe a thousand bucks, can't make much when you're selling "unlimited everything" for $5 a year reselling someone else's servers.

Oh, just saw the part about additional assets, this company existed on paper and Paypal alone as far as I could tell, they didnt' own their own server as resellers they woudln't. The business plan ruled me though, the INCOME was when you sold 100 new accounts this month for $5-20 an account (for all year).

I think the problem is that people don't look at this in the same way that they would if purchasing any other company.

It is a much more complicated matter then just looking at the number of customers or the current income. Both of these mean nothing if you don't know what prices the customers are paying or what the expenses are.

What you need to do is to look at the return on investment and then make a judgement call taking into account the risk that many of the customers will leave to another host if the company is transferred.

One last point. I often find that in expenses the only items included are server costs (including bandwidth). This will get you into a lot of trouble. You must take into account at the very least support and accounting costs and the time it will take to maintain the new customers.

I hope this helps.

David Delisle

Remember, when buying a company , reputation is a key factor as well. If they have 100 customers but only get 1 signup a week, then they have no reputation. If they do have one its likley to be very small. Thus without a reputation it greatly reduces the worth of the company down to income after expenses only.

If the company makes 3000 a year, but it costs 2500 a year to run (server expenses) then in my opinion its not worth anything to buy unless you already have plans to remove those accounts onto your own servers where the profit increases.

You have to think about support and what it takes to support those clients, for all you know those 100 clients are what would fall into the design client catagory, where the previous owner designed all of their sites and hosted them as well, not a bad way to get hosting but generally a lot of the people who have design sites and also rely on the designer to host them are very very high maintinance customers and would require or expect of you to upkeep their sites etc.

Also you want to make sure they were a legal company soto speak, bank and asset records should allways be looked at, espically if you are buying a company name you run the risk of assuming all debt under that company I believe (not a lawer but to an extent you are i think)

So buying a company should never be a quick thing, and definately not an ebay thing.

Just to point out an excellent place to buy or sell the business

bizbuysell.com - they helped me!