Web Hosting Talk : Web Hosting Main Forums : Running a Web Hosting Business : How much is my business worth?

[tar4heel2]

I am relatively new to this biz, and one of the reasons I got into it was to build it up to sell. It is my understanding that when my customer base gets to about 1,000 clients that it would be worth about $500 each. Less than that it depends on your mix, and other variables. But it seemed that 1,000 clients was the magic number to start attracting buyout offers.

I have had only one cancellation since I started last September, and only two people that engaged in hacking. (I have about 50 clients now; I know, not taking over the world, but it's growing...)

How large are some of you and how long did it take you to get there, and am I full of beans?

Thanks!

Phil

[creid]

It depends,
What Is your Monthly Revenue right now?

[tar4heel2]

About $2,500 a month, roughly.

Phil

[joe52]

Originally posted by tar4heel2
About $2,500 a month, roughly.

Phil

You said earlier that you have about 50 clients. So you have about $50 in monthly revenue per client?

[bombino]

I don't know if any company would pay $500 for clients, unless their monthly payment was really high (I'd say >$60)

[creid]

I Would Estimate (from What I have heard) Maybe $2,500-$7,000 for your company.

What Sound right?

[BurstNET]

In general:
Companies with revenues in the <$10.000.00 per month range usually go for 1x yearly revenues.
Companies with revenues in the $25000.00 per month range usually go for 1.5x yearly revenues.
Companies with revenues in the $1000000.00 per year range usually go for 2x yearly revenues.
Companies with revenues in the $5000000.00 per month range usually go for 3x yearly revenues.
Anything larger is usually a publicly traded company, and is a different situation for buyouts/stock.
Also, if you have a huge growth rate, or your own data center, important proprietary software, patents/trademarks, or a well-known/household company name...that would affect the overall offering alot.
Other things come into play as well...including what exactly you sell/focus on....what additional services you provide, profit margins, etc...Someone will pay more for clients paying $100 per month, then they will for $9.95 accounts. Then again if you meet the right buyer, a large amount of smaller accounts may be more valuable to them, then a handful of really large ones...for they may think they can sell them value-added servers or increase their plan packages/sizes. You may be a perfect match for buyout for one company, but a waste of investment for another. Aother factor to keep in mind is competition....someone may buy out their main competitor not just to gain their client base and revenue, but also to get them out of the game and obtain all future business they would have gotten. In that case oe managed server provider would pay alot more for another managed server provider he competes with every day, than he would for a software development company with the same reveue as his direct competitor. What it all comes down to is who is doing the buying, and what they focus on. This is a general idea of pricing, but you my get offered a price that is an insult to you, or you my get lucky and walk into a sweet enough deal to say it's time to sellout. Never sell out to quickly though...especially if your growth rate is really high....you may be worth twice as much next year. On the other hand, don't wait for the industry to level off, because buyers pay more during the climax of industry growth.

OK, that's it for my work break...back to actual business now



Sean R.
BurstNET

[tar4heel2]

Hey, thanks! Thats the most thorough discussion I've found on the subject!

Thanks a lot!

Phil

[BeDifferentSolutions]

I have had only one cancellation since I started last September, and only two people that engaged in hacking. (I have about 50 clients now; I know, not taking over the world, but it's growing...)

I remember those days. I think that was right around the time we lost our first customer.

Your cancellation rate will increase proportionately. This is just the nature of the beast. Web sites and businesses just don't make it. Dead beats just don't pay bills. Abusers will hit all the time. And penny-pinchers will always find another host they can get an extra MB of storage. There really isn't a lot you can do. However if you start to notice a big cancellation rate because of service complaints or support issues, then you got problems.

I think the a good way to place a value on a company your size is to figure how much other smaller companies pay in advertising to acquire 50 customers. If company A pays $50 per customer, then that is what they will be willing to pay for example.