I've seen this on some threads before, but I can't seem to find them now. How much would you say a $5/month client would be worth to sell to another webhosting company? I have heard of webhosting biz's selling there clients because they are failing, or have no further interest. I'm not saying I plan to do this at all (so no PMs please!), just interested in knowing.

Thanks for your kind feedback! :)

It depends on how long the customer has been with you, your track record as a host, and who you are selling it to.

If the customer you are selling has been with you more than 1 year and you have a decent reputation as a host that services it's customers well, you will see offers anywhere from 0.8 to 1.5 times the annual revenue of that customer.

Well I know people selling $5/month clients for $50, is that too low??

Ummm - That sounds okay if that customer has been with you for awhile. That is roughly 10 months of earnings from that customer.

Ummm - That sounds okay if that customer has been with you for awhile. That is roughly 10 months of earnings from that customer.

Yeah, I just remember trying to buy clients and I offered something like $20 for $5 clients and people told me I was crazy to try and buy for so cheap..

It really depends on the quality of the $5/mo client. Has he been with you for awhile? Are you a reputable/solid host? Is there any indications, to clients, that your business is failing or going downhill?

All of those things factor in to how much your client is worth.

--Tina

There's a simple answer to your question. It's how much can you convince some sucker to pay for that client. The final price will be a combination of your sales ability mixed with the maximum price the buyer will pay. Go ebay style and don't set a final price. Allow for negotiation and keep a reserve price in the back of your mind.

the simple answer is that the client is worth what someone is prepared to pay for them :p

it depends on what you offered them for the $5, what they use of it, how long they've been a clinet, how reliable at paying they are, what payment method tey use, how many support requests they generate and so on.

I'd say what goes usually on these forums and most brokers I've seen for smaller companies is 10 months worth of net

As the others stated above, it depends. We got between 9-12 months for each of our clients when we sold. There are a lot of grey areas in this. One thing - you want to always make sure your client is taken care of

I didn't realize clients in the web hosting biz are only valued at < 12 months of revenue.

I would say a good metric to use is to look at churn (% of existing clients who leave each year) historically. Then, take the revenue per year (or month.. same concept) for the clients, and for the next year reduce the number by the churn rate, and the following year, and so on. Map this out for about 5 years and then place a terminal value on the clients that remain. Then run a present value (NPV) on the expected cashflow and you have the value of each client in revenue terms.

Then it's up to the acquirer to decide what their profit would be on each client (perhaps they can leverage economies of scale), and now you have the value.

Justin

Well of course it would be just like an investment, your not guaranteed a thing.. I say this method would be better then advertising.

Well of course it would be just like an investment, your not guaranteed a thing.. I say this method would be better then advertising.

It all depends. If you're talking about purchasing clients you need to remember that yes, buying them may help you. However, for 50 cents a click on Google with properly designed ad's (or just a monthly banner ad on a niche market targetted site) you could easily generate 25 clients that may stay with you for years for a $25-$50 /month ad. It all depends on whether or not you want immediate results or a little gamble. Besides, on a good month those 25 clients may actually be 100 clients. The best advertising, in my opinion, is treating your clients right. Word of mouth advertising is the best and cheapest on the market.

One example I have (from myself) was my free host I ran a little bit ago. $15 for 6 months (banner rotate) generated me > 600 signups. Granted this is free hosting, but remember that with your company if you have good support the word of mouth could generate clients at an alarming pace as well. After all, it's a different case for every person.

Well, this is my 2 cents at least - good luck bud!

But is it usual to sell clients? or it just happends when your company is going down? is it part of the business, like selling clients that give problems, for example?

I guess I did not understand why there are people trying to sell their clients :P

But is it usual to sell clients?
Only when these segments are costing more then they are bringing, IMHO.
or it just happends when your company is going down? is it part of the business, like selling clients that give problems, for example?

You can see this happen alot when a company is going under...but mainly see it before a merger or buyout. Example? Interland Selling their dedicated customer base to Peer1 then selling out to Web.com :)


More money this way.