Not sure where to post this. If it's in the wrong place please move it for me, Thank you

What is the general rule of thumb on the amount to offer a hosting company for sale based on their monthly sales?

How do you ensure your not going to get screwed once you send them a wire transfer, money order, etc. as far as the company not holding their end of the bargain?

Please post other relevant things to look out for or ask for when buying a hosting company.


Thanks alot.

Originally posted by samborocks
How do you ensure your not going to get screwed once you send them a wire transfer, money order, etc. as far as the company not holding their end of the bargain?


Because you have your attorney draw up a contract and you both sign it.

--Tina

be careful. Its easy to get screwed in a web hosting purchase. Make sure that you a) get (and stay) on top of the billing for the new customers, b) make sure they know that the ownership of their account is being transferred and c) make sure the person you're buying from doesnt steal them and start a new company.

That's what contracts are for.

--Tina

Greetings,

Another thing that you should pay close attention to is to the way the owner acts and conducts himself. Obviously, that if he's acting professional and polite doesn't mean that he can't screw you at the end, however, in most cases it will also indicate the way he runs his businesses and the current state of his affairs.

Furthermore, it might be a good idea for you to research the company through WebHostingTalk and Google and see what comes up.

I definitely agree that a contract is a must, however, let's face it - if you're located in different states and the total amount of the transaction is less than $2-3K, it WILL cost you more time and money to get this resolved legally.

If the stakes are higher (around $5K+), then it's a different story.

Also, keep in mind that the contract is useful because it outlines exactly what both parties intend to do (e.g. if the current owner promises to spend 80 hours over 1 month period in order to help you with the migration, make sure to put that in the contract - the less either one of you assumes, the better off you'll be at the end).

Boris

First, sign an NDA.

Go actually look at the sites hosted. Do they say 'coming soon', 'last updated may 12, 1998', or 'we have ceased operations'? Are the domains valid? Are the customers paying their bill, or are they all deadbeats?

Because you have your attorney draw up a contract and you both sign it.

:D I don't think you need an attorney to buy a small hosting business let's say less than $5000.

True, contracts will help you minimize the amount of problem you may incur. However, make sure the "company" you are purchasing is a legal corporate entity. Also, not sure if you looked into the laws regarding company ownership. If it's not in your home state you need to have a primary office in the state it's registered in.

As for the comment about not needing an attorney, that is totally wrong. In any legal transaction where you are taking responsibility for another company's contracts and assets, you are required to have an attorney draw up a legally binding contract. Who's to say that I pay you $3000 and you decide to retain controling power over the company? W/o a contract you'd be free to do so.

One last point I'd like to mention is the fact that every current client must be notified. Their privacy policy will change because a new party will have access to their personal information.

I would also say to try and pay for it in stages. Certain amount up front...certain amount after clients are successfully transitioned, etc. Like the others have said, do you research. Ask for financial statements, copies of contracts, etc. Even if you need to first agree to purchase, you can agree with the stipulation that all of the elements must check out okay as they were presented.

Hosting generally goes with 1x annual revenues.
But I have seen some people get better deals.
It should be legally handled. At the same time all the customers must be informed about the change in ownership. This way you know who many leave and who stays. Also take a look at the revenues for the last 3-4 months closely. Minimum variation means the clients would stick longer.

Regards
Amar

Originally posted by marketforum
:D I don't think you need an attorney to buy a small hosting business let's say less than $5000.

Try it, watch where it leads.

You'll end up with no sale.