Hey,
Im thinking about buying a hosting company, but I need to see what everyone thinks about the price. So far, the guy has told me this is what they have and are willing to sell me.

- 130 to 150 clients (most paid for year in advanced)
- 2 RAQ 4i and 1 RAQ3 servers
- 800 number
- Website
- 2 Domain names
- bunch of referals
- about 40,000 hits on their main page in the past month
- marketing advice + tech advice for the next month
- consulting services

Most of the clients have very low cost hosting payments, and the billing period starts in December. They are a small company out of Maine, USA and they want us to buy them. What Price should I tell them? I was thinking like $8,000 but Im not sure.

Jim

Jim,

We would need some more information:

1. What is the monthly/annual revenue?
2. 40,000 hits or unique site visitors? 40,000 hits is a lot less than 40,000 unique visits.
3. How many new signups a month? If he is get 40,000 visitors and only 10 signups a month, that's not a good ratio.

We can give you a better idea about whether or not $8,000 is enough with answers to those questions.

Hey, Just called the guy, and he gave me this info:

- They stop orders whenever they get 100 sites a month, and last month they got 100 so they stopped. This is basically why they are selling. They never expected that growth I guess.

- Monthly income must be at least $500.00

- Servers cost $120/month

I hope this helps.

Jim

How long have they been in business? Because if they have 150 clients, and 100 of them signed up last month that menas they had only collected 50 clients in their entire existence.

When you say servers cost $120 a month, are you saying the servers are colo'd, so you would not own them? And is that $120 or $360 total (based on 3 servers x $120).

If you are right about the $500 a month figure, is the guy going to give you cash equal to the remainder of the contract for the customers who have paid for the year?

My feeling is this, and this is a little harsh, but I would take whatever the difference is between what you are paying for the servers and the monthly income and multiply it by 12 and make that as an offer:

$120 a month for all 3 servers = $4560 (still too high)
$360 a month for all 3 servers = $1680 (more like it)

The reson for this is that if they only have 150 customers they are not getting that much word of mouth business, so most of their business has to come from advertising. Which is going to cost you. You won't show a profit in the first year, based on your existing numbers, and you want your business to be profitable. You also are not going to be getting any revenue from customers who have paid for the year, so you are, essentially, going to be hosting them for free, with no guarantee of future income (ie they may cancel, no matter how good your service is :)).

Anyway, these are my thoughts, take them for what they are worth.

He's getting that many hits per month and only has less than 200 current customers...and they are all paid up for a year???? Something's not right there. Either he's got a horrible reputation (or something) or he's totally lying about the traffic...that'd be my guess.

The 800 number - that's a monthly expense, not something you're buying, unless he's paying the bill for you? You can get your own 800 number.

Take the $8000 and invest in starting your own hosting company. Something sounds very suspicious about this deal.


--Tina