We've had the opportunity to "buy-out" a few one-man shows in the past. We usually offered them a commission scheme with future business (or additional contract-work since they were usually programmers).
So my question is how much you have paid for an account in the past, or how much do you think they are worth?
Let's assume like 20 accounts @ $20 / month.
Or is this amount too big / too small for something that you would even consider?
To give an example of what we have done in the past, a client had about $20,000 gross / year. (Hosting mixed with development services). We offered about 10% + future work. Over 3 years and with churn, it amount to about 40% of one year's gross revenue and they didn't have to do anything.
Thanks,
Lawrence

The oft-quoted rule of thumb here at WHT seems to be that the price is around a year's revenue for hosting clients. I haven't seen a measure for how to add design or programming revenue into the mix.

The oft-quoted rule of thumb here at WHT seems to be that the price is around a year's revenue for hosting clients. I haven't seen a measure for how to add design or programming revenue into the mix.
So like. 20 accounts x $20 / month = $4800 buyout price?
Is this before or after the accounts are verified?
Or is this just one of those "rule-of-thumbs" like 2-months for an engagement ring, which someone randomly makes up and people rarely adhere to in reality? :)
Thanks,
Lawrence

It's been pretty standard, pricing-wise at least here on webhostingtalk.
Recently I've seen a few firms go for roughly 45-60% of their annual revenue and obviously, to each their own as far as pricing is concerned.
I don't think the 'standard' will be applying to too many future purchases here. In all honesty, I've picked up a few firms myself at extreme discounts in comparison to what people pay around webhostingtalk.

I don't think the 'standard' will be applying to too many future purchases here. In all honesty, I've picked up a few firms myself at extreme discounts in comparison to what people pay around webhostingtalk.
Same here. It's been mutually beneficial since they wanted to get out of the business anyways.
But ya, i don't plan on purchasing any accounts if the person wants premium-dollar for them. Customer loyalty (especially with the aggressive pricing) makes customer retention difficult.
Thanks,
Lawrence

You can buy me out for a 6 pack and a nice dinner! Ahem.
I would look at a year spread of sales, and growth / decline first. If it looks like a nice growth pattern and the price is decent. I go for it!

You can buy me out for a 6 pack and a nice dinner! Ahem.
I would look at a year spread of sales, and growth / decline first. If it looks like a nice growth pattern and the price is decent. I go for it!
Ya, clearly i'd go for it too, but i was just trying to get an idea of other people's past experiences.
Thanks,
Lawrence

I think offering a years revenue is desired by people selling there clients but not always entertained.i dont see how a company being around for 4months is worth a year of its projected rev, i if a company's being a round for below 12 months for example 8 months and there average monthly income is $100 i think $800 is fair, if they have been in business 2 years,id take the average monthly income from 1 year then offer them that

I think offering a years revenue is desired by people selling there clients but not always entertained.i dont see how a company being around for 4months is worth a year of its projected rev, i if a company's being a round for below 12 months for example 8 months and there average monthly income is $100 i think $800 is fair, if they have been in business 2 years,id take the average monthly income from 1 year then offer them that
That's why i was trying to get an idea of the "going-rates".
Besides, you really don't know much up-front about the accounts you would be buying - whether they pay, or are in the gray-market or if they are great clients!
100% of the annual revenue, up-front seems pretty high in terms of risk.
A lot of it isn't just the company you are buying from. Some clients just like leaving or looking for better deals, so the churn is usually not zero.
Lawrence

The twelve month of revenue "rule" seems to be pretty widely followed. It could arguably be too high or too low, but it seems to be the norm.
-mike

The twelve month of revenue "rule" seems to be pretty widely followed. It could arguably be too high or too low, but it seems to be the norm.
-mike
Do you know if the volume matters? Like 1 vs 100 accounts? You could probably make an argument for both. :)
Lawrence

Do you know if the volume matters? Like 1 vs 100 accounts? You could probably make an argument for both. :)
Lawrence
Well, Lawrence, less accounts would seem to have more risk. I think that the "rule" would best apply at 50+ accounts, if I had to apply an arbitrary minimum amount.
-mike

There are a lot of factors involved. The main things we look for when buying are listed at our site (link in sig). Of course, each time we buy one, we learn a bit more.
The length of time clients have been with the host is important. Many places have a lot of churn and that's not good (and therefore would be a discount from the 1x annual revenue figure).
My 2 cents.

In the past, purchases that we have made have been a 1 year revenue for hosting accounts that were with the company longer than a 12 month period. We then provided 6 month revenue for any accounts newer than 11 months old.
Purchase was secured with a 60% up front payment, and then 40% payment within 90 days.
You must remember that when you're buying from someone else (or selling), once they hand over all that customer data, they have little to stand on. Also, when we purchased we also bought the domain, company name and took over any leased server contracts. Customers really had almost no idea that there was a takeover. Through the year, they were molded into our existing company, but that's the best way of purchasing if you can do it.
12 month revenue is standard these days. YEARS ago, you could get up to 3 and 4 YEARS revenue, but not any more.

Well, Lawrence, less accounts would seem to have more risk. I think that the "rule" would best apply at 50+ accounts, if I had to apply an arbitrary minimum amount.
-mike
What, are you stalking me now with psots? :) With all the headings in the forum, i'm surprised, there's the same person on two of my topics!
Ya, somewhere around 50 i think would feel stable. Then again, i guess i woudn't really complain if i got 5 random accounts at a cheaper price.
Have you had much luck i acquiring accounts? Or often, is it just not worth it for you?
Lawrence