I just got off the phone with a guy that was offering me 6000+ account ( $5.99 type accounts ) .

He was trading the accounts at 16 time monthly gross revenue ( gross sales ). I ask him if he knew that the internet boom was over. ( gee he wanted $ 575,040 for those )

Dont get me wrong. If he thinks he's going to get that price he might ( good luck to the buyer ). But my latest numbers are much lower than 16x gross sale for those 5.99 and give the store away accounts with unlimited band width . I might have talked more if it was 24 to 29.95 type accounts then I feel a margin of safety.

even if you made 4 bucks an account it would take you about 24 months just to break even on the cash outlay add some basic labor on that figure (2 bucks) and you are looking 48 to 60 months before break even.

Even if you finance the trade it still depends.

- Sqposter / Michael

Thats sounds like the guy from Web Host AZ. He had all these customers but FastHost pulled the plug on him. He was selling accounts for 5 bucks with unlimited everything.

Not sure who the host is or why anyone would by $5.99 accounts, but his number are right. Host sell between 1 to 2x yearly revenue. Quality host a lot more. (I think hostpro went for 10x when they sold to Micron).

6000 accounts x $5.99 x 12 = $431,280 in total sales (If he had all monthly accounts and didn't have another source of revenue). Looks like he is asking about 1.3x his revenue.

$ 575,040
Do you think he would accept just $575,000 ;)

Originally posted by UmBillyCord
Not sure who the host is or why anyone would by $5.99 accounts, but his number are right. Host sell between 1 to 2x yearly revenue. Quality host a lot more. (I think hostpro went for 10x when they sold to Micron).

6000 accounts x $5.99 x 12 = $431,280 in total sales (If he had all monthly accounts and didn't have another source of revenue). Looks like he is asking about 1.3x his revenue.

OK, if you think the number's are correct please tell me why.
I will list my reasons why I think they the valuation is bad.

1) unlimited bandwidth. even is you can get your cost down to .90 per gig on some decent carriers ( with this many accounts your going to need atleast 2

2) unlimited e-mails, can you imagine the resource used every time some-one comes in for e-mail (6000 accounts and have an average of 5 names that's 30000 e-mail address)

3) let's not even talk about the hard drive space lost to these accounts.

take a look at the numbers on the micron deal
http://about.micronpc.com/financials/investor_presentation.ppt
( it's a nice walk through )

then take a look at http://www.hostingtech.com/oh/01_05_hostpro.html that's another good one.

Please look at the numbers on the merger. I think I added correctly and it's not in the 10 x range, also there is a huge ammount of cost savings when the deals get this big.

then take a look at there site. the cheapest plan they have is 14.95 share services ( 24 month plan ) with a 5 gig bandwidth limit and 150 meg hard drive space. Bandwidth alone gives them a minimum of $ 4 profit at the end of the month. If they place 250 clients per server, thats gross $ 44850 per year bring that to 400 clients then it's $ 71760. Money just pours out at these prices.

With these types of margins then I might be willing to pay 2 to 4 times yearly sales or as the stock currently trades ($ 2.30)
3.75 times sales.

- Sqposter / Michael

Well of course the numbers don't work out. How can you reasonably try to work out something that makes sense based on myths, smoke, and mirrors?

Wow, That's a huge amount . Why does he want to sell his business.... ??
I'm confused..

Have a great day :)

regards
amar

Is he just selling you the customers or his entire webhosting business as well? If he's selling you the business, then you'd have to factor in the number of new signups per day/week. That to me is worth a lot more than what he's got right now.

Also, if you do any sort of trade with him, stipulate in your contract the average # of months his customers must stay with you. I mean, if he's got the type of customers that quit after 2 months then forget it.

And the types of customers he has is important too. Ask him for their domain names and look for yourself and see. Are they the high bandwidth picture gallery type of folks?

Originally posted by bobcares
Wow, That's a huge amount . Why does he want to sell his business.... ??
I'm confused..

Have a great day :)

regards
amar

I am not able to disclose whom he is or the name of his business ( NDA with a huge fine), but I'm sure that He reads this forum. I will drop him an e-mail and advise him that I posted something.

The amount in question is not huge. There are some HUGE deals out there that are offered in the 1.5 to 3 million range ( 5000 to 8000 accounts that are the big billable). Also I know if atleast 1 company that is up for grabs ( with employees ) that the asking price seems good.

If I had that sort of cash I would persue them. I like the very smaller deals.

-Sqposter / Michael

Originally posted by Skeptical

Also, if you do any sort of trade with him, stipulate in your contract the average # of months his customers must stay with you. I mean, if he's got the type of customers that quit after 2 months then forget it.


Not only are you correct in the above statement, it should be manditory.

I have, in the past bought part ownership of business. A term on the contract that I like to see is.

Management stays:
XYZ percentage growth must be kept over the next 8 quarters ( or the lenght of the payout ) otherwise the payout is lower.

Straight customer base no management:

Payout is a direct reflection of the length of customers staying. example would be like this.
I bought at 8 times monthly earnings, 90% of the customers still must be in place at the end of the 12 months. The less customers the less the last payout.

The examples are all based on some sort of financing that you have made. Cash deals are somewhat more complicated due to the fact that you might have no recourse, unless you can have your counter party agree to an escrow release over a certain period of time.

Originally posted by Skeptical

And the types of customers he has is important too


Again you are correct. I have a general fear of even negociating to purchase any accounts that has unlimited bandwidth unless the margins justify the risk (hey if the accounts are being billed out at $25.00 each then there is some risk room). Unlimited e-mail I don't worry about ( yes you loose resources but you should make it back up on the bandwidth )

- Sqposter / Michael