Web Hosting Talk : Web Hosting Main Forums : Running a Web Hosting Business : starting or buying an existing webhosting company?

[mjixx]

what will you benefit most from starting a new webhosting business or buying an existing business?

i'm trying to figure out what would be the smartest way to spend my money for an webhosting business, apreciate some advise about this!

let's say you have around 10000$
how would you spend that money for an web hosting business?

how many clients can i expect buying from an existing webhosting business with that amount of money?

let's say i take those 10000$ and put in a new webhosting business and use all the amount of money in google adwords how many clients do you think i can expect receiving from it?

[Itslee]

Id spilt it 50/50. Build a new host, new design etc.. then buy web hosts for sale for the clients and move them over.

[limevps]

I have found that the difficulty in buying clients is that they are on specific packages that might be nothing like the ones in your business model. Therefore if you move them onto your own system you'd have to re-create specific packages for them, or transfer them onto the nearest equivalent package in your own business. If you buy customers that are paying more than they could in your new business, then you might overpay for them as they'd soon realise that your own prices are less than they are paying, if they're on cheaper plans then could you get away with raising the price without them leaving?

This is the reason I've continually failed to find a web hosting business for sale that had a client base that I could easily merge into my own offering.

How have other people gone about it?

[praveenkv1988]

Buying a good hosting company will give a very good start. But you should be ready to provide good service and support for the clients you buy.

[John_M]

I like the idea of splitting the money as well. Build a good foundation for your new host with the first half of your money, and then buy other web hosts as they are starting to sell. The merging part will not be that difficult, and could be your chance to impress the new customers coming over.

[megaworldhosting]

You could always purchase a small hosting company and grow it from there. It would just depend if you liked the way their plans were setup and if their billing/support would fit with what you are trying to accomplish.

[unique-links]

Its a good idea to start with buying an existing company, buy a good established company with good customers is a best way.

[MyITGuy]

Originally Posted by limevps

This is the reason I've continually failed to find a web hosting business for sale that had a client base that I could easily merge into my own offering.

How have other people gone about it?

I'm in the same boat myself, especially when many of the hosts being offered for sale are offering *unlimited* disk/bandwidth or reseller plans, neither of which would be compatible with our own offerings and would definitely cause some customer churn if we acquired them.

Otherwise, I have no issues grandfathering in customers on their existing plans, or putting them into a comparable plan as long as the price point we have is the same.

[BassHost]

I agree with a lot of the statements that you should split it 50/50 half into the new business and the other half acquiring other hosts. However, you mentioned AdWords... I'd stay away from that. You will end up spending all that money and MAYBE bringing in a couple clients, meaning most of that money will have gone to waste. If you are going to use a lot of that money to advertise, you should probably buy ads on other websites and other blogs that are frequently traversed by visitors. But just make sure you get a view of their traffic stats so you can judge how much it is actually worth it for whatever price you'd be paying.

[PabloEscobar]

When it comes to buying or starting.Thats not just like buying new or old car. If you buy something, you might buy company that has clients, bad rep, good rep, or whatever else. So yes if there is a good company for sale, why not.

[tomkb]

Originally Posted by limevps

I have found that the difficulty in buying clients is that they are on specific packages that might be nothing like the ones in your business model. Therefore if you move them onto your own system you'd have to re-create specific packages for them, or transfer them onto the nearest equivalent package in your own business. If you buy customers that are paying more than they could in your new business, then you might overpay for them as they'd soon realise that your own prices are less than they are paying, if they're on cheaper plans then could you get away with raising the price without them leaving?

This is the reason I've continually failed to find a web hosting business for sale that had a client base that I could easily merge into my own offering.

How have other people gone about it?

limevps speaks the truth here, it's the packages that are the problem and figuring out if you are going to accept the packages from the sale or force the customers to change over to yours.

I used to host websites with cpanel and have bought customers before. I would say it depends on your clientle. If you are hosting cheap customers who pay only a $1 per month or whatever, it probably doesn't matter, nobody is going to complain for $1 per month no matter if you force them to change or create new packages.

The other thing with hosting is the customer churn. If you are in the cheap hosting business, the churn is pretty high, they come and go so quickly. If you are buying this kind of business, the "norm" 6x monthly revenue is out the window, I would only pay 2x monthly revenue.

If you are buying customers/company whereby you are making on the order of $5-$10 per month, I would treat this more carefully. I would probably put them on one of your high tiers and keep what they were paying before even if it's lower. It's better for them to think they are getting a good deal than to shop around your own website and find out the same customers are paying less than they are.

[funkywizard]

Originally Posted by Itslee

Id spilt it 50/50. Build a new host, new design etc.. then buy web hosts for sale for the clients and move them over.

If you move customers over to a new brand, you risk losing a lot of them. It better be worth it to take that risk. Might just be better to maintain the brands that you're buying out.

[limevps]

funky - in some respects I agree that maintaining a status quo with clients can be a good thing, but if you're trying to build a business of your own then do you really want to end up with 4 or 5 smaller distinct brands that youre running? Do you simply integrate them behind the scenes by transferring the clients to your own servers.

What do you do about billing? Does 5 brands = 5 versions of WHMCS and 5 different websites? What about marketing budgets? Having to do everything related to overheads 5 times over is a serious turn off for me - I'm wanting to build my own business, not continue someone else's brand ideas.

I've pretty much given up on the idea of giving my business a boost by buying clients as I'd want to integrate them into my brand, and as you say it is a huge risk.

[tomkb]

Originally Posted by limevps

funky - in some respects I agree that maintaining a status quo with clients can be a good thing, but if you're trying to build a business of your own then do you really want to end up with 4 or 5 smaller distinct brands that youre running? Do you simply integrate them behind the scenes by transferring the clients to your own servers.

What do you do about billing? Does 5 brands = 5 versions of WHMCS and 5 different websites? What about marketing budgets? Having to do everything related to overheads 5 times over is a serious turn off for me - I'm wanting to build my own business, not continue someone else's brand ideas.

I've pretty much given up on the idea of giving my business a boost by buying clients as I'd want to integrate them into my brand, and as you say it is a huge risk.

That's why you only pay a low acquisition cost, the churn. You are going to loose some in the conversion no matter how well it goes. You are going to loose some for no other reason than they are tired of their blog. Buy them as cheap as you can, expect to loose half, and expect to keep half. Factor all that into your offer and you will be fine. Any seller wanting to get a rediculous premium for his customers doesn't really understand the game. Don't be turned off by an acquisition, it's one of the best ways grow fast.

[HostGamma]

You don't buy an "established host" at USD10,000. To those suggesting 50/50 other than kiddie hosts/free hosts what type of hosting company or what number of hosting clients do you expect to buy with USD5,000???

If my budget was limited at USD10,000 I guess I would start a new company, keep costs low, use aggressive guerilla marketing methods both locally and online and see how it works.