Hello,

How would one go about putting an offer for a company that makes $5000USD gross profit per year. We are thinking about buying another host. They don't own their own servers they resell for 3 different hosts one of them being fasthosts. :eek:

So how would one calculate what the business is worth?

Thanks
Robert

you need more info. What are their plans like? Do they oversell, how is their reputation, what is their NET.

EXTREMELY SHORT & SWEET concept would be to offer 6 to 12 months revenue for each of the retained clients.

The larger the sale the more "months" you pay for. For simplicity sake let's say you offer 12 months per each client.

If they have 10 clients paying an average of $10 per month that's $120 per client going by the 12 month rule.

So if all 10 clients remain with you and are successfully moved to your services, then you would pay the seller $1,200 for all 10 clients.

If you retain only 5 clients then you would pay the seller $600 for them (this helps to ensure the seller does everything in their power to help the clients move successfully as well)

Another question would be with the name of the selling host. Would you be purchasing that too? Is the name worth purchasing? Does the ability to "announce to the world" that you purchased them help your own company's reputation of strength and stability? etc etc..

With such a small host however a lump sum may be the wisest move... like davidb noted, there is just not enough info.

I have seen these calculations before and although maybe technically correct I do wonder what is the point of buying up other companies at these prices?

I am pretty sure that if I shove $ 1200.- worth of advertising on overtoure and google paid ad words that I'll receive a lot more then 10 new customers.

$1,200 for 10 clients?

I'll have some of what she's smoking. :)

Maybe deb has mixed up gross and net revenue. I mean all what matters is net.

I would calculate on the net value of each client ( might be hard to get trustworty numbers from them, then estimate - look at the plans and see how much it would cost you ).

6-12 months of that is reasonable.