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  1. #1
    Join Date
    Apr 2002
    Location
    Houston, Texas
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    842

    How to determine what price to sell a server at?

    Is there any advice on what price to sell a server at? Say If a server cost me $900 dollars to buy, should the server be paid off after one year of renting in out? Should I make any profit off this server in the first year?

    Thank you,
    Kyle

  2. #2
    Join Date
    Feb 2006
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    Swellyville
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    2,340
    Typcially you would want the machine to be bringing in a profit after 6 months, which can easily be done.
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  3. #3
    Join Date
    Apr 2002
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    Houston, Texas
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    How do you figure it can be easily done?

  4. #4
    Join Date
    Feb 2006
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    Swellyville
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    Say you buy a server for 800.00 right? Well divide that by 6 and that is your selling price which would be $133.00 after 6 months, that machine is paid for, and the profit off that machine would start to come in. Now ofcourse you have to figure in your colo costs, power, upstream, etc. and add that into the price and setup fees
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  5. #5
    Join Date
    Jul 2003
    Location
    Goleta, CA
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    5,550
    Well do do an NPV analysis with cash inflows and outflows and set the fair/time value (interest rate) of money at your desired rate of return.

    Start with a rough idea of cost + 10% or something and tweak it from there basing it on the desired operating life of the equipment or how quickly you want to make the return be it 6 months or 2 years.

    Don't forget you also have the option of doing nothing or pursuing a safer investment in treasury bills.

    While hostfrogs example was blindingly simple he fails to take in inflation and variable costs of power labor etc. So use at your own risk. Although he does add it as a footnote so that's good, just be aware that pricing can change depending on the length of your contract.
    Last edited by cywkevin; 11-13-2006 at 03:45 PM.
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  6. #6
    Join Date
    May 2002
    Location
    Internet / Colorado
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    1,652
    You might want to add a setup fee like most do as well if they want a lower length contract, so say no setup fee for a 12 month contract, half off the setup fee for a 6 month contract and the entire setup fee for a month to month contract.
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  7. #7
    I agree with the NPV, we use it for all our stuff and it is a much better method then using the payback method, the nice thing about using NPV is that you can put your profit into the cash flows and pocket money right away, assuming you use the correct discount rate. The trick is using the correct cash flows with NPV, you have to be able to accurately predict you revenues, expenses and salvage value at the end.

    Of course Pixelized brings up a great point with treasury bills, or opportunity costs, if you can make more money doing something else you should probably do that.
    Jay Kramer - Operations Manager
    Affordable Colocation and Dedicated Servers
    www.colostore.com 1-877-719-3698

  8. #8
    Join Date
    Feb 2002
    Location
    New York, NY
    Posts
    4,612
    The industry standard seems to be 6 months ROI. If you're willing to take more risk, you can get away with making your money back after a longer period (perhaps up to a year), but keep in mind the various risks involved in selling dedicated servers.
    Scott Burns, President
    BQ Internet Corporation
    Remote Rsync and FTP backup solutions
    *** http://www.bqbackup.com/ ***

  9. #9
    Join Date
    Nov 2005
    Location
    Michigan, USA
    Posts
    3,872
    Why are you asking us? It's your business plan...do what you do to compete in the market place...

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