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  1. #1

    Growing Through Acquisition

    I am looking for some advice here. I had a hosting company I started in 2004, then I acquired another one in 2012. I am thinking about getting another one now. With the first and second company I kept them separate so that I do not disturb the existing clients. I plan to do the same with the third, which I think I can handle, but I can see getting very complex if a fourth or fifth comes along. What is the best way to merge all in one without turning off existing clients.

  2. #2
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    Quote Originally Posted by aridelhosting View Post
    I am looking for some advice here. I had a hosting company I started in 2004, then I acquired another one in 2012. I am thinking about getting another one now. With the first and second company I kept them separate so that I do not disturb the existing clients. I plan to do the same with the third, which I think I can handle, but I can see getting very complex if a fourth or fifth comes along. What is the best way to merge all in one without turning off existing clients.
    My wife had this situation about 10 years ago with three different brands for her business. it got where it was causing confusion and costing her more money. She made her a new name for her business and informed her clients she was making improvements and was changing the name of her business.

    None of them never knew the difference, none of them left her and it actually did improve her business and the growth over the last 10 years has been awesome.

  3. #3
    Quote Originally Posted by bruc View Post
    My wife had this situation about 10 years ago with three different brands for her business. it got where it was causing confusion and costing her more money. She made her a new name for her business and informed her clients she was making improvements and was changing the name of her business.

    None of them never knew the difference, none of them left her and it actually did improve her business and the growth over the last 10 years has been awesome.
    While that may be so, I believe the perfect scenario will apply to certain industries only. In hosting, whenever there is a public ownership change, brand name change etc. there is an expected number of leaving clients. They cannot be persuaded with promises, they will jump ship anyways. And this process will normally continue for some time.

    Now, if those businesses are fairly small and you have a more personal connection with your clients, you can spend some time and communicate with them all, explaining the whole situation and your detailed plans for the future. Loyalty goes a long way with smaller brands so you can press on that and hope for best results (provided you deliver on your promises).

    Consolidating the brands should/would happen at one point anyways - how you handle the customers before and during the process is just as important as how you deal with them after. Provided you think everything through before you start and you should be able to make the transition fairly easy.
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  4. #4
    You can try what bruk wife did, with the company you acquired in 2012. If it works well then you can do it to future companies you acquire. Also, keep in mind what WHF-Rado said is true, so study your move carefully before you start.

    You will need to email all clients informing them that its just a brand/domain change, and it won't affect them at all. Note that not all clients will read your email so keep that in mind.

    Do you plan to change the current server or the nameservers of the acquired company?

  5. #5
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    I agree with the above 3 statements, very true, but every client is different so you can never predict the results.

    I would think that you can of course have 1 group of techs, 1 accounting system per say and simplify the billing process and business process and simply have the logo and branding remain independant.

    I do like the idea of the unity and have BIG BRAND as the one company but it could have negative affects.
    Maybe another approach is to place ALL the brands on every invoice allowing people to see the growth of the company.

    This lets them see the brand they signed on for (Company 1) and that there is a Company 2 & Company 3, at some point if it consolidated it might be an easier transition since they had seen Company 2 for a while.

    Of course we fully understand the goal is to have zero loss.
    Thanx!

    Joey

  6. #6
    So i see you've plenty of company. So it is wise to establish separate entity for each and hire CEO, you can play role of Chairman.
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  7. #7
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    As others have said try not merging right away if possible and make as little changes as you can. We've bought a few companies in the past and merged a few together which in turn we found people just jumped ship right away without even giving us a shot because ownership had changed and they didn't want something going wrong.

    Others we kept the same and found much less in terms of clients jumping ship which is always nice. Still I feel a good amount of clients bail when they hear change is happening.
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  8. #8
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    Laundry Detergent Business Model

    What you are talking about is the "Laundry Detergent Business Model" (as I call it). There are dozens of different brands of laundry detergent. There are actually only about three major companies that make those brands. Multiple brands give more market exposure and gives the illusion of competition.

    There are many ways to go about it, but here are a couple options you may want to consider. Some of your choices include:

    1. Taking the strengths of each brand, and creating unique products and services for various market segments. For example, you might have one that provides superb support for the average customer, and another that is a cheap no frills host with only basic support, and another that is for high end hosting, another that concentrates on WordPress hosting, another that is a WYSIWYG website builder, etc.
    2. Standardize things across brands, where you roll out similar products and services under all brands, and consolidate systems on the back end as a cost cutting measure. For example, if one host offers reseller hosting, and another does not, perhaps roll reseller hosting out to all the brands. If three of your brands use cPanel, consolidate the backend so that all three hosts use the same system but still shows each hosts unique branding on the front end.
    3. A combination of the above.

    You would also want to divide your company up into divisions. Each of your brands should have their own CEO in charge of that brand. That CEO should report to the main corporate owner (i.e. you).

    Ideally you would be able to take advantage of economies of scale, and consolidate redundant systems, where possible. But having multiple brands with their own CEO provides a unique opportunity. You have multiple divisions with different leadership reporting to you. You get to look at each of their best practices, and then take those and distribute those to other brands.

    Larger hosts that you acquire might remain their own entities under your umbrella, while smaller hosts may wind up becoming a front end to consolidate backend that multiple brands use.

    You basically grow through a combination of delegating and consolidating.

  9. #9
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    I should also add that you will want to get your priorities straight, as this will dictate what you do.

    1. If your priority is to give customers the best possible experience, then you will be very careful about making changes, and will sometime have to sacrifice some additional profits to maintain the customer experience.
    2. If your priority is to increase profits as much as possible, then you are going to make a lot of changes consolidating systems to save money even when it is not necessarily the best experience for the customer. But your financial numbers are going to look good.

    I suggest the first approach, obviously. You want profits, but if your customers are unhappy, that hurts profits in the long term.

    Either way, you are going to come to situations where you need to make some tough decisions. Sometimes you are going to need to make some changes. Consolidate systems, change the back end, standardize products and services so they are easier to support, move customers to better equipment or a different data center, make changes to the support staff, etc.

    And some people are not going to like these changes (especially while things are changing). If you've done your job right, once the dust settles, even the complainers will like the new changes.

  10. #10
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    Quote Originally Posted by aridelhosting View Post
    I am looking for some advice here. I had a hosting company I started in 2004, then I acquired another one in 2012. I am thinking about getting another one now. With the first and second company I kept them separate so that I do not disturb the existing clients. I plan to do the same with the third, which I think I can handle, but I can see getting very complex if a fourth or fifth comes along. What is the best way to merge all in one without turning off existing clients.
    So you currently have two entities in the same industry that you are thinking about merging or not merging. Honestly, if I were you, I would merge the brands/billing information as soon as possible (but keep the infrastructure diverse). This is a short term solution that will allow you to better assess your next move. Either way, best of luck!
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  11. #11
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    We are working on employing a similar strategy but we are looking at it from a marketing perspective, it seems like you're looking at it from an operational perspective.

    1) If the niches/markets of the companies are similar and the clients are similar then go ahead and merge it letting them know this is purely an administrative move and the quality will only improve.
    2) If the niches/markets are different then it wouldn't make sense to merge them as you will be alienating some of your customers.
    3) Take a look at your procedures and determine what is really taking up your time or driving up the cost and see if that can be avoided/improved rather than dealing with the mergers.

    I hope this helps.
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  12. #12
    A lot of good feedback, thanks all..... the 2 companies right now have their own billing process, but for shared hosting they both share the same server, so that is technically consolidated. I have 7 other servers that are part of the second company. To me, I think the hardest part is the pricing and the packages. Each have their own package, and with 2, I manage just fine, however adding a third set of hosting packages will make it somewhat complicated. In addition, I would want to move the 2nd and 3rd(new one) to the same billing back-end, at least for credit cards, but then that means setting up the new packages in the gateway.

    Like a lot of you guys said, it is a lot of stuff to think about, I just dont want to over think this, and loose the opportunity for growth...

  13. #13
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    Quote Originally Posted by aridelhosting View Post
    A lot of good feedback, thanks all..... the 2 companies right now have their own billing process, but for shared hosting they both share the same server, so that is technically consolidated. I have 7 other servers that are part of the second company. To me, I think the hardest part is the pricing and the packages. Each have their own package, and with 2, I manage just fine, however adding a third set of hosting packages will make it somewhat complicated. In addition, I would want to move the 2nd and 3rd(new one) to the same billing back-end, at least for credit cards, but then that means setting up the new packages in the gateway.

    Like a lot of you guys said, it is a lot of stuff to think about, I just dont want to over think this, and loose the opportunity for growth...
    If the brands are all small I'd look to merge them about a year after acquisition. Choose a primary brand and just have a "Legacy Plans" section for the brands merging in.
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  14. #14
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    Having multiple brands has the benefit that you can target multiple groups of customers. So instead of being all things to all people, you can have a brand focussed on businesses (e.g. ecommerce), a brand focussed on personal sites and so on.

    The downside is that there is a significant overhead in running multiple brands. You have multiple websites to maintain and market - effort spent building one brand doesn't count for anything for the other(s).
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