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  1. #1

    Hosting business sale - how does it work ?

    Hello all..

    I see many people are selling off their hosting businesses these days.

    One thing I came across many posts is that generally people accpet bid's on the basis of 10 months. I also read it somewhere to be referred as 10 month rule.

    My question is how is it sellers expected starting bidding amount calclulated according to the 10 month rule ?

    For example, if the seller is earning a total income of $10 per month i.e a total income of $120 per year then as per the 10 month rule, is it $100 ?

    OR, is it this way that the seller earns a PROFIT of $5 then as per the the 10 month rule it should be $50 ?

    I know the starting BID is as per the sellers decision, but still just interested to learn the 10 month rule..

  2. #2
    Join Date
    Aug 2004
    I think it depends on a lot of things - how long they have been in business, the number of clients that we're talking about, assets included in the sale, etc.

    Even if that is a common rule, it's also very common for small businesses to sell for much less than they're worth. Isn't it true that something is only truly worth as much as someone is willing to pay for it? Even if the 10 month "rule" says $100, what if you need to get rid of it because of changes in lifestyle and the highest offer you have is $50? That makes the sale price $50, you don't have a choice.

    Basically, I think you should focus on getting the most you can for it. It's probably a small business and so think about who you want to sell to and get as much for it as possible.
    Ankit Gupta - Cernax Hosting
    "We're always second in the industry, the customer comes first."

  3. #3
    Join Date
    Nov 2003
    You need to even consider:

    1) how many clients they have?
    2) since how long the clients are there with the company?
    3) What is the renewal rate? Like what percentage of clients are renewing?
    4) What is the account cancellation rate etc...


  4. #4
    Join Date
    Jul 2002
    London, United Kingdom
    Every purchaser will have their own method for calculating what they think a clientbase is worth - some use a simple system like x times income or y time profit, others on a fixed $z per client.

    To us it depends on what the clients pay and what for, how long they're been clients, what kinds of sites they host, which method they pay by, and a host of other variables.
    Rob Golding Astutium Ltd - UK based ICANN Accredited Domain Registrar - proud to accept BitCoins
    Buying Web Hosts and Domain Registrars Today @
    UK Web Hosting | UK VPS | UK Dedicated Servers | ADSL/FTTC | Backup/DR | Cloud
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  5. #5
    Join Date
    Oct 2006
    New Jersey
    What about hosting packages? Myself i wouldn't buy hosting company which offers, 10GB Space for only 2$ dollars. I think this is quite reason too... It just simply clients you bought makes your servers to oversell...
    UNIX IS user friendly, it's just very choosy about who it calls a friend.

  6. #6
    Hello Guys,

    Thanks for your input. Indeed many factors decide the valuation of a company and its client base!

  7. #7
    Join Date
    Jun 2004
    Omaha, Nebraska
    What makes a $40 steak better than a $20 steak?

    Many times it's the extras, the friendliness of staff, the atmosphere and THEN you have the food.

    Same thing in running hosting a business. Support is the key factor in hosting.

    Pricing on a sale can entale everything from the market (just like a house), location of sale and what goes with it - business name, years of good (and bad) reputation. The chance of customers leaving after the sale is completed. etc etc.

    Tons of factors. A 10 month scale doesn't work for everyone. If I was to sell my business, I'd want 6 times annual revenue as that's what it's WORTH to me. Few places will buy it at that rate, but that's my value on what it's worth.
    Conor Treacy
    Hands-on Web Hosting
    E-Commerce cPanel Web Hosting | PCI Compliance Hosting

  8. #8
    Join Date
    Nov 2006
    Whangarei - New Zealand
    Hay Mate,

    I am from NZ and i recently looked at purchasing a hosting company. I spoke to my accountant about it and the price was far too much for "clients Only". My accountant said that the general rule is when purchasing a business is that you pay between 6-12 months of the revenue. So if i own a company turning over $100,000 i might put it on the market for $75,000 etc but rarely will a business turning over 100k sell for $200,000 unless it comes with assets or is a very good business with a lot of potential.

    Also if you are getting finance to purchase it, you obviously want to pay it off asap so you can make a profit (but interest is tax deductible down here ;-) )


  9. #9
    Join Date
    Nov 2003
    Quote Originally Posted by FalconHost
    What about hosting packages? Myself i wouldn't buy hosting company which offers, 10GB Space for only 2$ dollars. I think this is quite reason too... It just simply clients you bought makes your servers to oversell...
    He makes a good point, most customers that do buy these plans DO know the difference of good support and bad support. They just want to spend at little as possible, end of story.

    These people have a very good potential of leaving you after you buy them from someone else if they find their plan has changed. be it you raised the price or lowered the features to accommodate their low fee.

    Would i buy a bunch of customer with cheap plans that will overload my servers just to make a buck? I think not.

    Not only are their quality hosts, there are actually quality customers.
    - Steve D
    SERVBoston: Hosting since 2003
    Shared, Reseller, VPS.
    Top Notch Support from a veteran hosting company!

  10. #10
    Join Date
    Jan 2002
    I am currently working on an acquisition...a big factor is how easy can you support and incorporate the clientbase into your existing business model.

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