Hello,

I work for Illusionfxnet in the executive branch, and we are looking at selling our customer base, but not the company. This sale would be between IFX to another company which is willing to buy only customers. However we are not sure of what a going rate would be for our figures, and what the process is. If someone who has experience with buying and selling could help us it would be most appreciated.

Our current billing statistics (Modernbill):

Hosting Customers: 295 (From Modernbill, customers may have more than one Invoice)
Total Amount from Invoices [394]: $8,922.29/year
Total Amount Paid [377]: $8,605.65
Total Amount Due [17]: $316.64

Our current account/server statistics (WHM)

Total Accounts on Server: 464
Total Load on Server (At time of posting): 0.81 (Dual Opteron 146)
Total Memory Usage: 31.1% (2GB Installed)
Total /home partition space utilized: 68% (55GB of 86GB)
Total Average amount of outgoing bandwidth per month: 493.532GB

Currently we have the distribution amount of each of our six plans in this order:

Plan Revolution: 259 @ $25.00/year
Plan Profx: 21 @ $30.00/year
Plan Cloudfx: 10 @ $5.00/month
Plan X (Reseller): 5 $15.00/month or $120/year
Plan Coronafx (Reseller): 1 $20.00/month or $240/year
Plan Universefx (Reseller: 0 $30.00/month or $360/year

Specifications of the Plans can be located at the link below:

http://illusionfxnet.com/

Tech Support issues are fairly low, and most users do not ever have to file a ticket in our support system. Our support forums also remain fairly inactive due to the low amount of required tech support.

I have provided below an attachment of our main billing area (with personal info grayed). This image is provided for confirmation of the above posted billing figures. If any information differs from that in the billing area image, please disregard the posted data, and use the image as reference.

I would appreciate if someone here could appraise the value of our customer base, and whether it would be worth selling for cash to develop a new base from scratch, with everything my colleagues and I have learned over the last few years.

Sincerely, The Illusionfxnet Management.

If the brand doesn't come with the client base, then you won't get as much for the clients. Removing your clients from your brand, immediently, is unsettling for those clients, so a buyer would have to pay less, for just the clients.

You could be looking at around 10mths revenue for your client base, and maybe more if you sold the clients with your brand/site etc.

Why just sell the hosting clients and not the brand?

If the brand doesn't come with the client base, then you won't get as much for the clients. Removing your clients from your brand, immediently, is unsettling for those clients, so a buyer would have to pay less, for just the clients.

You could be looking at around 10mths revenue for your client base, and maybe more if you sold the clients with your brand/site etc.

Why just sell the hosting clients and not the brand?

The main reason for not selling the brand/site/etc. is because we are interested in using this money to reorganize the entire company into a much more profitable, high-end company that will focus on a lot more than just quantity. If we could do that without having to sacrifice the brand in the name of money, we would be very happy. However 10 months revenue is around 6k, and is more than acceptable to work on the plans we had in mind.

Another reason we would not like to sacrifice the brand and such is the fact it is a well developed brand that we have woven into many marketing resources, and would like to keep our links and such active to us when we finish a potential reorganization.

However, if significant money could be made by selling the brand along with the customers, that route would be considered as well. But we are talking about a substantial increase from about $6,000USD.

However I understand where you are coming from with the customers being possibly disturbed by a move without the brand behind it, and it could lead to problems down the road now that I think about it. Your point is very interesting, and has been overlooked by us, but now it will be factored in with the rest of our decisions.

Well, I am going to do some thinking out loud here and maybe it will help. My first impression is wow, low prices! Second is WOW big plans for the price! If I were a potential customer, it would entice me to sign up; but as a business person it makes me worry about profitibility :(

Income:
If your invoices total about $9,000/yr

Expences:
Nice server/licensing cost $4500/yr

Profit before payroll:
About $4500/yr

And this is IF you collect 100% and IF there are no additional costs for emergency technical, etc. Realistically, I do not forsee anyone paying you what you think they might be worth. I am sure you have a nice program going there and am not judging or anything like that, but 400+ customers is a real business with commitments. From a company standpoint you need to think, "How much would a company pay (cost) to take on / consolidate 400+ customers (cost) and 60GB of space (cost); spend the time to address new concerns (cost), regain customer confidence (cost), etc. in hopes of possibly coming out in the black (cost); but doubtful since only $4,500 for paying staff and keeping the lights on."

If I am missing the mark (or is helpful to you), let me know. :)

Dynawebd, you also bring up some good points that really do seem to drive the nail in the coffin for the idea of selling just the client base.

You bring up a feature/profit argument that in my opinion is valid. We have cheap plans with large features; we also have no paid technicians on hand as we have never had the need for lots of support. But this is exactly why we are considering selling IFX, to develop a strong, well-designed business. But that is not the problem of the purchaser.

I suppose the only route would be to sell the brand, or sell small chunks of customers rather than the whole base outright. Though just selling customers is starting to look, less and less feasible every hour.

The server costs about $3,600 a year from LiquidWeb. Licenses do not really need to be renewed as an existing company would most likely have forums, support desk, billing already licensed, and integration would be the only expense.

I would personally revise the profit at about $5,400USD a year.

Our only other route would be to bring the prices up on our current customers in return for putting a better infrastructure in place. However I am not sure this would settle well with out our existing base, and might do damage, which would not be helpful to us.

Does anyone have experience with committing to massive price/feature overhauls with their current customer base, and have any suggestions? Changing features and prices I am sure would anger customers, but does the resentment ever go away, especially if you tell them it will be going to creating a better infrastructure?

Also, alongside selling the customer base only, what do you think could be fetched for the whole brand?

Also, alongside selling the customer base only, what do you think could be fetched for the whole brand?
Maybe a year's worth of revenue. Sorry for being blunt here, but your domain/brand is just not that good. 3 worded domains are so so, if you get my drift. A buyer would most probably want the domain/brand, and then most likely migrate those clients slowly over to their existing brand.

Hey, you copied my forum names/descriptions:

http://forums.illusionfxnet.com/
http://forums.asmallorange.com/

No biggie, just think it's funny :)

Hey, you copied my forum names/descriptions:

http://forums.illusionfxnet.com/
http://forums.asmallorange.com/

No biggie, just think it's funny :)
And you just broke the WHT rules by posting a link to your own site.

"No biggie". :D

And you just broke the WHT rules by posting a link to your own site.

"No biggie". :D
What else is he supposed to do in order to prove the rip? Even if he didn't post the link. . .people would visit his site anyway to see the rip . . .

However, I do believe this issue should have been delt with via PM.

-[Unknown]

Just the customers? 10 months of revenue is probably a bit on the high side, I've seen "just customers" sell for as little as 3-5 months revenue.

']What else is he supposed to do in order to prove the rip? Even if he didn't post the link. . .people would visit his site anyway to see the rip . . .
I know. It's just one of those wierd situations. I'm just foolin' around. :nuts:

Just the customers? 10 months of revenue is probably a bit on the high side, I've seen "just customers" sell for as little as 3-5 months revenue.
Volume is also a major considerationary factor to multiples of revenue. If you have a small client base to sell, then you're dealing in small multiples. If you have a very large client base to sell, then the multiples increase.

But it's a free market, and you can only get what someone else is prepared to pay for your business.

Does anyone have experience with committing to massive price/feature overhauls with their current customer base, and have any suggestions?

Changing features and prices I am sure would anger customers, but does the resentment ever go away, especially if you tell them it will be going to creating a better infrastructure?

Yes, I was part of a company (co-owner) that did this a few years ago.

We went from "middle of the road" (not budget, but just above) to "premium" (way higher then budget).

At the time, we had about 6000 customers, with an average of about $6/month each.

We went from that to a minimum plan price of $25/month.. so it was a HUGE jump.

It can be done, but there are some things to remember:

1) Not everyone needs or wants premium level hosting. You must be prepared to lose a LOT of your customers.

2) A great deal of your retention ratio will be SOLELY determined by how you word your announcement, present the announcement, and what *value* you are giving to the customers.

I will expand a bit on #2.

Many customers do not understand how the hosting industry works. They see many budget companies (like yahoo, 1and1, and soon google) and they do not understand the difference between a $1/month account that offers 50gb/100gb and a $25/month account. Cheaper is better, to them.

You must *concisely* explain (in 1 paragraph) why paying $25/month is better.

If you can do this, then you will retain all the customers who *need* or *want* premium level hosting. They will thank you, and stay with you forever.

A few "tricks":

1) Offer a freebie. People love to get a deal. It might cost you a bit, but will save you a lot more in advertising and "new customer" costs. ie: Give them 2 months free to "test out" the new service level. It is cheaper to lose $25 for two months, then to lose the customer forever.

2) If you offer premium services, then you MUST be 100% accountable and actually offer those services. People will NOT be happy if you raise prices and don't also raise the level of service. Show them exactly what they are getting for their new price, and then invite them to test you on it. Then deliver it. 100%

Personally, I think it's easier to work with a customer base you already have.. then to sell them all and try to start with nothing.

Attracting "high end" clients who want premium level hosting is MUCH more difficult then attracting budget clients. Everything costs more. $6000 will get you very little, unless you are extremely careful how the money is spent.

Good luck. Be sure to come back and let us know what you decided and how things are going.

:agree:

Hey, you copied my forum names/descriptions:

http://forums.illusionfxnet.com/
http://forums.asmallorange.com/

No biggie, just think it's funny

It was done out of admiration Tim, IFX absolutely loves the way ASO works. It will be changed though if you have a problem with it, ASAP.

Also, Thank You for your input Mrzippy. However it looks like we have decided to go to market at this time to sell the whole brand. There will be a sale thread created in a few hours or days regarding this in the appropriate location.

Hello Everyone,

The company is now officially for sale and you can follow this link to our sales thread:

http://webhostingtalk.com/showthread.php?t=466036

Sincerely, The Illusionfxnet Management

Personally there is no way that I would pay 12 months revenue for that business even with the brand. To be blunt, the prices are too low on average for the resources being sold to make it viable. EVen $5400 Gross Profit is only about £3000 and the number of clients that need supporting is just not a good ROI. Your average income per client is only about $30 per year which would just not make it attractive to an established company like us.

Having recently purchased another company that had an excellent reputation, client base and a healthy turnover, we were paying around 12 months Gross Profit for the business.

I agree with everything mrzippy stated. Although I have not done a rate hike like he was talking about, I have been considering it but in a smaller fashion. Just like a 30% increase on some plans. It obviously will take a lot of planning and wording will be very important. The increase in value has been developed over the last 2 years and I know we will have to SHOW that as well as add in some extra kickers.

Heh, I got a kick out of you saying that you are in the "executive branch" of the company that has a profit between $3,000 and $4,000 per year.

Something that I wanted to highlight: You are saying that you want to sell your customer base so that you can move into a more structured (premium) business route. I think that selling out your customer base would hurt your reputation if you plan on using the existing brand for the new endeavour. How well you treat your existing customers will have an impact on how well your new venture turns out.

Also bear in mind that if you sell the business or customers in whole then most purchasers would want you to sign a Non Compete agreement for 12 to 24 months as standard practice. I know I would.

Heh, I got a kick out of you saying that you are in the "executive branch" of the company that has a profit between $3,000 and $4,000 per year.

I can dream can't I?

Something that I wanted to highlight: You are saying that you want to sell your customer base so that you can move into a more structured (premium) business route. I think that selling out your customer base would hurt your reputation if you plan on using the existing brand for the new endeavour. How well you treat your existing customers will have an impact on how well your new venture turns out.

We are selling the whole brand, not just the client base. Decided it would be unfair for exsisting customers to have to deal with the pains of a massive movement.