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  1. #26
    Join Date
    Aug 2002
    Posts
    1,633
    the two owner not are compatible for this job so they want sell it

  2. #27
    Join Date
    May 2004
    Location
    madison, wi
    Posts
    842
    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

  3. #28
    Join Date
    Aug 2004
    Location
    Indiana
    Posts
    1,205
    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

  4. #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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