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  1. #1
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    Why:Selling and Starting a new hosting company?

    I was thikning about this question for quite a while now, but could not find any logical answer.

    On this board I have seen at least 2-3 Owners who are very reputable by quality of service they offer, sold their hosting company to start a new hosting company Now I don't understand the logic, generally pople sell business if they want to get out of it or if its making loses or something like that. But selling the business to start the same business again is beyond my thinking capacity

    Is it just for making money? build a brand, sell it start new, build --- sell and so on..or there is some different trade secret

  2. #2
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    No, they don't sell if they need to exit the business. There are many good reasons to sell - a good offer is only one of them. Somene might think that a particular brand is good, but owners might need to change. For example you might sell shared hsting provider to invest in VPS or server hosting.
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  3. #3
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    They simply want to start the same type of biz on different approaches to see what works best.

    Getting a fresh clean start everytime, and to have fun.
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  4. #4
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    If they think their company is going downhill, they might want to sell it.

  5. #5
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    Maybe they want to get that year's worth of revenues in one shot?
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  6. #6
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    It would be stupid, imho, for the purchasing company to allow that to happen. There should definitely be a solid non-compete put in place.

    Though if there is no non-compete, I can see it making sense. Over time they found out better ways to run things, but with the current configuration it is too late to change. The money from selling would give them a good amount of start-up capital to establish a new brand exactly as they want it, using the lessons they've learned, etc. We're doing similar, but instead, it is starting a new brand of the same company, same concept though.
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  7. #7
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    Quote Originally Posted by LuckyAnonymous View Post
    They simply want to start the same type of biz on different approaches to see what works best.

    Getting a fresh clean start everytime, and to have fun.
    That's what I'm thinking too.

  8. #8
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    That's an interesting approach Karl. Interestingly, I have seen some users following to these owners from old co. to new co.... so why no rebrand the same compnay (like you guys are doing) than selling it off to take an impact on person's credibility?

    Quote Originally Posted by KarlZimmer View Post
    It would be stupid, imho, for the purchasing company to allow that to happen. There should definitely be a solid non-compete put in place.

    Though if there is no non-compete, I can see it making sense. Over time they found out better ways to run things, but with the current configuration it is too late to change. The money from selling would give them a good amount of start-up capital to establish a new brand exactly as they want it, using the lessons they've learned, etc. We're doing similar, but instead, it is starting a new brand of the same company, same concept though.

  9. #9
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    sometimes, IMHO, it is because they have the wrong type of customers. For example they might be struggling in the linux environment when they have a solid ASP/Windows background. Equally, they might have a bunch of developer customers that they are losing money on, and want to cater to the bulk of 1 domain type customers.

    Although I agree the non-compete is important, sometimes there are extenuating circumstances to sell. We buy hosting businesses and customer bases all the time, and have heard many different reasons. Mostly, they realize after they get into the business that they think is easy money in fact they see that the revenue is quickly diminished with a couple of service tickets that eat into their profits.

  10. #10
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    It would be stupid, imho, for the purchasing company to allow that to happen. There should definitely be a solid non-compete put in place.
    The non compete will not be valid till the end of time though.

    Getting that big pile of money, a well deserved vacation, taking care of other projects you kept on postponing (which the new found wealth will be able to fund) etc are all valid reasons to sell a business.

    Why start a new hosting company? Because you're good at it, it's what you do. Why do people keep on playing WOW? Business is better than a game. It's the real deal.

  11. #11
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    Every company has its peak, when they are in the best shape they probably ever will be. That is the time to sell, obviously. Others are just looking for a different direction, brand, or challenge.

    For me, for example, one of our companies was at the absolute pinnacle of our specific sector; we felt we could do no more with it, idea wise, and finally accepted an offer. I personally turned down many offers for the company because the time wasn't right and/or proposition wasn't right. Myself and the staff agreed that with a different brand we'd be able to attack the hosting industry from a different direction.


    Simon

  12. #12
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    Let's say that a web hosting company has a few types of customers - shared, VSP and Dedicated. It can sell on of those and to put money in another... There are alos dozens of other reasons to sell... one of them would be a divorse, especially if your ex-wife was partner in business
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  13. #13
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    I would feel this would be better in the Running a Web Hosting Forum

  14. #14
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    Quote Originally Posted by ldcdc View Post
    The non compete will not be valid till the end of time though.

    Getting that big pile of money, a well deserved vacation, taking care of other projects you kept on postponing (which the new found wealth will be able to fund) etc are all valid reasons to sell a business.

    Why start a new hosting company? Because you're good at it, it's what you do. Why do people keep on playing WOW? Business is better than a game. It's the real deal.
    Perfectly said.

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  15. #15
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    Quote Originally Posted by AH-Tina View Post
    Perfectly said.

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    I'd have to concur.
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  16. #16
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    Firstly I think the money is nice and second it is nice to take what you learned with the first venture and apply it into a new business applying all those new things you have learned to run a more effective business.

    I think a large majority of those selling also sell when they find they did not correctly write out a business plan (or vastly oversell) and dig themselves into a hole, when a larger company comes around offering to pay for these customers and the host is just looking for a way out well that is when another buyout happens.

    Hopefully they learned some lessons and do a better job the second time around but I would imagine quite a few of them get 'burnt out' of dealing with what is really involved in running a hosting company smoothly.

  17. #17
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    Sometimes people sell because they are growing too rapidly, not enough time, etc. Some people prefer to be small.
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  18. #18
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    To me, there's almost nothing better than having sold a hosting company to then start out fresh with another. It gives you a chance to approach things differently the second time and see what works best. Other reasons might include a change in hosting VPS vs Shared/Reseller vs Dedicated vs etc.

  19. #19
    But of course all that recurring revenue you've come to rely on magically disappears, so you better have your new venture ready to go and have some idea how/where to begin building a new customer base.
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  20. #20
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    The money is nice, especially if it's a nice big chunky 6 figure sum, but then there's capital gains tax to consider, and that's a kick in the guts. It's a great feeling to look at it in a bank account and think you could buy a nice Ferrai or 2 before it all starts to dissappear, with frivilous things like building a house.

    I sold HTTPme to build the family home, and 12mths after the sale I jumped back into the industry with another brand. I didn't intend this, it was just how it worked out. We were going to be flippers - which means build a house and then flip it for tax free profit, and then build another house. But that didn't transpire, so we decided to stay put for 5 yrs minimum. I missed the cashflow and it's sooooo much better to have cashflow than to be drawing down on money in the bank. Cashflow rules.

    My reasoning to sell was that a hosting company could be here today and basically gone tomorrow, so I cashed in my chips while I was winning, and built the family home. I do regret selling HTTPme, as I reckon I should have just borrowed for the house and kept HTTPme, but we're all experts in hignsight I guess. I played it super safe, and I guess that was the right move back then. I'm never selling again. Cashflow is too important. I learned that one the hard way.
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  21. #21
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    Quote Originally Posted by IHSL View Post
    . . . For me, for example, one of our companies was at the absolute pinnacle of our specific sector; we felt we could do no more with it, idea wise, and finally accepted an offer.
    Hey didn't you get stiffed on the sale? I remember reading they didn't pay you the full selling price and there was legal action or something? I can't remember the details, but I thought you sold to a bunch of crooks, or that's what they turned out to be.

    Sorry, the memory is foggy on this. Medium age setting in.
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  22. #22
    Quote Originally Posted by Aussie Bob View Post
    I sold HTTPme to build the family home, and 12mths after the sale I jumped back into the industry with another brand. I didn't intend this, it was just how it worked out. We were going to be flippers - which means build a house and then flip it for tax free profit, and then build another house. But that didn't transpire, so we decided to stay put for 5 yrs minimum. I missed the cashflow and it's sooooo much better to have cashflow than to be drawing down on money in the bank. Cashflow rules.
    I'm guessing there was no "non-compete" in place or a very short one? How long did it take you to build back up a decent customer base?
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  23. #23
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    Quote Originally Posted by 1Host View Post
    I'm guessing there was no "non-compete" in place or a very short one?
    Yes, 12mths.
    How long did it take you to build back up a decent customer base?
    12 to 18mths. Took longer than I thought but that's ok. I'm not in as much of a rush these days. Quite happy to just plod along.
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  24. #24
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    Sometimes people sell because they are growing too rapidly, not enough time, etc. Some people prefer to be small.
    Can't agree with that personaly...
    I personaly think that some people doing business on it. Some people like to have new job everytime.
    So they create company - promote little bit, create small or middle customer base and sell company. Then again create etc.
    Also thre are other different situations in our life....
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  25. #25
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    Sometimes people sell because they are growing too rapidly, not enough time, etc. Some people prefer to be small.
    Quote Originally Posted by ~ServerPoint~ View Post
    Can't agree with that personaly...
    There's more than one answer to the question, so there's no reason to disagree with it. It's a valid reason for wanting to sell a business. Then once the obligations of the business are someone else's problem, it leave you with plenty of free time to start a new venture.

    We went through a period where we were growing too fast, and had to lay low for a while to slow down new sales. Luckily we were able to get things organized and put things in place to allow for future growth, so it didn't become a problem. Believe it or not, there are many examples of companies that have gone out of business because they were growing too quickly and could not keep up.
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  26. #26
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    Quote Originally Posted by bqinternet View Post
    Believe it or not, there are many examples of companies that have gone out of business because they were growing too quickly and could not keep up.
    Me. We were growing so fast a 30 X 30 cage expansion at colo4dallas vanished before our eyes. Quite simply the capital available and on hand could not sustain the growth.
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  27. #27
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    Quote Originally Posted by Aussie Bob View Post
    Hey didn't you get stiffed on the sale? I remember reading they didn't pay you the full selling price and there was legal action or something? I can't remember the details, but I thought you sold to a bunch of crooks, or that's what they turned out to be.

    Sorry, the memory is foggy on this. Medium age setting in.
    Yep. Got stung for a lot of money, temporarily anyway.


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