I'm curious as to how people here would go about purchasing (or making an offer on) a hosting business. Nothing of the grand scale, but just small to get additional clients from small resellers who are giving up.

For example, please let me know what you think of this scenario:

ResellerCompany has 1000 clients. For ease of calculation, let's say 800 are on a $5/month package and 200 are on $50/year pkg's. Say each package is 100MB disk and 3GB bandwidth.

If you were to make an offer for ResellerCompany, how much would it be? Please explain your reasoning.

Thanks!

I would multiply the montly fee by 6
so let's say

800 X 5 = 4000 X 6 = $24,000

Or you can just make an offer say 10k and they can take it or leave it. Basically just make them an offer and discuss the terms of the agreement. If they are intested you should have no problems getting the deal to go through on your terms as they will be interested in selling. Good luck.

Originally posted by DynastyHost
I would multiply the montly fee by 6
so let's say

800 X 5 = 4000 X 6 = $24,000

Would you expect to get the yearly customers included in this price? I would almost be tempted to reduce the price because of the yearly customers. They're pretty much just a drain for the 1st year, anyway.. no?

Originally posted by esdjco
Or you can just make an offer say 10k and they can take it or leave it. Basically just make them an offer and discuss the terms of the agreement. If they are intested you should have no problems getting the deal to go through on your terms as they will be interested in selling. Good luck.

The problem is that if my first offer is not even realistic.. then they won't even respond. The market for other people's customers is very strong, judging from the rapid responses on the forums here when anyone offers to sell customers.

If I am unable to come up with a decent initial offer, and then say "take it or leave it".. I will never win a sale. I'm just trying to learn enough about purchasing a customer-base so that I can at least make a realistic offer.

Thats true but sometimes its better to start and make contact with them before you offer a price. If the price you offer is too low they will let you know by the reaction they give you but I think it would be best if you tried to contact them first and discuss the possibility of the sale before offering a price. Good luck.

All you are doing is selling yourself as a buyer (reverse selling, works great on car salesmen).

You do the same thing as you do when you are selling in real life. Make contact, establish rapport, talk about stuff... The last thing you do is make the sale. In fact, don't even make the sale, that takes too much effort.

There will come a time when you, and they, will know that something is up. At that time express your interest. If they aren't even interested in selling then you've saved yourself the hassle.

If they are, then play it cool. If you are really planning on spending 20K+ (which I totally disagree with teh above analysis anyways) you need to really play the negotiation game.

I would be wondering what their per-customer profit was and base my bid on that.

Originally posted by Jeremy W.
If you are really planning on spending 20K+ (which I totally disagree with teh above analysis anyways) you need to really play the negotiation game.

I would be wondering what their per-customer profit was and base my bid on that.
Using the above example I gave of a ResellerCompany (totally fake, by the way).. what would you offer?

For a serious offer or just testing the waters?

For a serious offer, probably around 4,000$ or 5,000$ if they signed immediately (2-3 weeks).

Math is that I figure they are making .50-1$/customer/month. That's about 400-500$ per month. Give them 6 months worth of operations profit (standard for most small buys) puts you at 3K. Throw in money for their profit and so as not to insult them and you have a 4K offering. The extra 1K is both so they aren't insulted (you've put 2 numbers on the table, giving them the option of how much/little they get.

A tentative offer? Probably 2500 flat.

That's just me though, I tend to hit high and low at the same time when I'm buying businesses (I've bought 7 separate sites, not hosting company though) and I've never been turned down for one yet.

Mind you that could be cause I've found desperate buyers, who knows. Anyways, the above has worked for me, I don't know about others. Either way, even if you up the offer it's better than 25K.