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  1. #1
    Join Date
    Aug 2002
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    1,632

    Buying a hosting company, help!

    Hello,

    i would buy a local hosting company but this is my first time so i would undestand what i need to check on it, what suggestion can u give me to make a good deal? They have about 3 or 4 server with 1100 domains.. what can be a good price?

    thx

  2. #2
    Join Date
    Oct 2004
    Location
    Singapore
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    290
    I would say it depends on what type of accounts are being offered and the price the clients are paying the current owner of the host.

  3. #3
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    Aug 2002
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    average price is around 60-70$

  4. #4
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    Singapore
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  5. #5
    Join Date
    Nov 2001
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    Originally posted by dlc2000
    average price is around 60-70$
    Gee that's helpful
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  6. #6
    Join Date
    Aug 2002
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    the price is yearly! can i get more comment on what i need to valutate before that i buy this company? Do u think that i should move all in my actual site or is better to have 2 different site? pls give me all your impression on this thx

  7. #7
    Join Date
    Aug 2002
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    The People's Republic of Poolking
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    Would it be easier to just buy the clients instead of the company?

  8. #8
    Join Date
    Nov 2001
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    5,383
    You need to include more information $60-70 might mean they are offering 100mb of space and 500mb of traffic. On the other hand it might mean 200gb of traffic and 20gb's of space
    Clustered Hosting With Continuous Data Protection (CDP)
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  9. #9
    I would not buy the company because that entails assets. Just buy the clients if you can!
    data center directory - The comprehensive data center resource. Version 2.0 coming soon!

  10. #10
    Join Date
    Aug 2002
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    1,632
    umm true, but if i buy also the scomapny i will have two site in internet and i can get more incoming

  11. #11
    Join Date
    Jan 2004
    Location
    NY USA
    Posts
    280
    Besides current revenue stream you need to research also monthly or yearly growth rate.
    In addition, you can find a few clietns and call them to ask if they are satisified with current service and are how long are they going to host.
    Then you can search in Google for this company and check what people say about it.

  12. #12
    Join Date
    Apr 2002
    Posts
    779
    One thing that a lot of people forget that your maximum guarantee on the clients is their current contract term ... if they are all signed up on a monthly basis, you might be spending thousands of dollars on a lemon which might become customerless in 3 months ....

    I'm not saying that it will be but juts remember that just because the guy is selling 1100 domains, doesn't mean that they will all stay with you once you take over

  13. #13
    Join Date
    Aug 2002
    Posts
    1,632
    yes i know, but i am friend of the owner of this company and he is selling it cause the problem with the second owner, what u think should be a right price for 1100 account with a average cost of 60$ yearly? how can i calculate it?

  14. #14
    Join Date
    Apr 2002
    Posts
    779
    is it 1100 accounts or 1100 domains ? as 10 people can have 110 domains hosted ... that will help with the calculation


    PS: never do business with friends and family

  15. #15
    Join Date
    Aug 2002
    Posts
    1,632
    1100 domains and about 900 account

  16. #16

    *

    dlc2000,

    I think that its your own company, which you want to sell...

    still thinking......

  17. #17
    Join Date
    Aug 2002
    Posts
    1,632
    no thank you i dont want sell nothing and i only wondering how to buy a new company, but all the reply that i get till now are out of topic! thx anyway

  18. #18
    $60*900accounts= $54,000 yearly income or $4500 monthly income

    Follow your plan to determine where on the timeline your breakeven point is.
    If it's a year then say $45-50k, if it's a quarter $10-$12k, etc

    NOTE All calculations were done early in the morning and without any coffee in my system !

  19. #19
    Originally posted by MAndrew

    NOTE All calculations were done early in the morning and without any coffee in my system !

    You pour coffee in your system? How does that effect the systems performance?
    Small. Local. Personal. Design | Development | Hosting | www.PortEighty.biz

  20. #20
    Originally posted by Steve_Oaks
    You pour coffee in your system? How does that effect the systems performance?
    Makes it run like windows.
    Web: www.explosivefx.com | Mail: me[at]nemelization.com | AIM: Nemeliza | MSN: me[at]nemelization.com

  21. #21
    Join Date
    Sep 2003
    Location
    UK
    Posts
    184
    Originally posted by TheOtherOne
    Makes it run like windows.
    THAT BAD!!!!

  22. #22
    Guess I walked into that one

    Back to the original topic...

  23. #23
    Join Date
    May 2002
    Location
    Chicago
    Posts
    132

    Re: Buying a hosting company, help!

    I think you already own a hosting business. Right? If so, do not evaluate the new company in vacum. Meaning don't try to find out how much this new business is valued to somebody else. Instead try to do the NPV analysis (break even , IRR whatever is your favourite metric) of your existing business first. Then try to do the same of the joint company once you buy the new company. The joint company company analysis should include the savings you might realize in marketting, tech support, software licenses, server, bandwidth etc.. The difference is your starting point. But when you negotiate with the seller you use the stand alone analysis of the new company. Which should be less than the value of the company to you. If you get it for any price less than your value (the delta) you come out as winner. Also try to quantufy the startegic value of eliminating some local competition..


    Good luck with the deal..

    Thanks,

    Aji


    Originally posted by dlc2000
    Hello,

    i would buy a local hosting company but this is my first time so i would undestand what i need to check on it, what suggestion can u give me to make a good deal? They have about 3 or 4 server with 1100 domains.. what can be a good price?

    thx
    SupportPRO.com Quality outsourced hosting support and server administration @ affordable rates. Let the PROs handle your customer service 24/7.

  24. #24
    Join Date
    Aug 2002
    Posts
    1,632
    i got more info on the company, it are 1100 account for a total of 60.000$ yearly you should remove the domain cost, server and tax

    so what u think is a right price for this company? it have 1 year of activity and the account renew will start right this month

    thx

  25. #25
    Also why is this host leaving? I would make sure you find this out as well.
    Joel McLaughlin - Cheap Web Hosting

  26. #26
    Join Date
    Aug 2002
    Posts
    1,632
    the two owner not are compatible for this job so they want sell it

  27. #27
    Join Date
    May 2004
    Location
    madison, wi
    Posts
    839
    Best to talk to a lawyer, a business consultant and the bank about this one. Seems you have little knowledge about this process. Time to get some help buddy

  28. #28
    Join Date
    Aug 2004
    Location
    Indiana
    Posts
    1,192
    Originally posted by WebWobbler
    is it 1100 accounts or 1100 domains ? as 10 people can have 110 domains hosted ... that will help with the calculation


    PS: never do business with friends and family
    I would avoid doing business with family or friends as well

  29. #29
    Join Date
    Mar 2004
    Location
    Omaha, NE
    Posts
    19
    Ok, as someone pointed out: it's roughly $54000 per year. You have to ask yourself a few questions:

    Servers:
    How old are the servers we are talking about? Are they being depreciated on the books and do they hold any value on the books? The approximate lifecycle of a server can vary, but are you buying "needs-to-be-replace-in-a-year" servers? This will also need to be considered.

    Available Cash:
    This business obviously thrives on yearly, not montly, subscriptions. What is the month-by-month revenue stream? The average is about $4500 per month but since these are yearly subscriptions, some months may represent heavier revenue months than others. Now look at the monthly costs associated. What does the power bill run? Renting the facilities? Marketing expenses? What you need to do is break out the free cashflow from the business on a month-by-month basis. Where are the weak months where the revenue stream dips? Where are the strong months?

    $54000 looks pretty good on paper but you also have to break out the calculator and due some ratios. Does the business have any outstanding debts? What is the debt to equity involved. A $54000 business may have a high expense ratio so $54000 may turn into $10000 per year after all said and done, bills, taxes and permits.

    Now think of how much support costs would run. How many tickets are you answering per day? What percentage of revenue does support represent? Do the owners spend 40+ hours a week on client support? If this is the case, then break down the average monthly profit after expenses and divide that by the number of hours spent supporting the service. Is this a decent wage to live on or will you have to work a second job? Now factor in the time and expense of keeping the books and managing the business. If you are working a second job and this is your business without any help involved, how will you provide support when you are not there?

    There is a lot of due diligence involved and should not be taken lightly. Let's say that you own the servers outright. It runs around $200 per month on electric for four servers and other electric use. $300-$400 per month on connections (I'm realy taking a wild guess as I do not know what these would cost and they can vary wildly by connection type), a breakdown of licensing fees for the software on each server which may run $100-$200 per month or more based upon 4 servers, and we can't forget about insurance for the equipment and property, then you have to take into account general office supplies used and other expenses. Oh, and you can't forget that you probably won't be taking vacations unless you can find someone to cover for you. You could outsource for an additional expense. Then we have to figure in your payment processing fees of $35-50 per month or more. Now we won't even begin to get into the potential for chargebacks or fraudulent use which may end up costing you extra, etc.

    Now, assuming that you are like most of us and don't have thousands of dollars laying around, you'll probably need a loan or seller financing which will cut into the overall profitability in the first couple of years.

    And, whatever you do, do NOT tell current customers that you are interested in buying the business. Tell them that you are considering getting an account and wouldn't mind getting their suggestions or feelings. If you tell them you are thinking about buying the business, this may end up hurting you, planting the suggestion that there may be some instability in the company. Don't start fires outside of the fire pit!

    If everything looks good - throw out the idea of seller financing. A trick I learned in a previous business was: is the seller trying to get out ASAP, then it should throw up a red flag. If the business owner is willing to do owner financing for you, that means they have some faith in the business and still have an active interest in the company until completely bought out. Since their money is tied into the business, they want to make sure it is successful. Sure, this may mean that they will butt into your business because their money is there, but the entire business is not entirely on your shoulders at first.
    Cheers!
    aoco

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