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  1. #1

    Buying an established webhost

    I have a few questions about buying established web hosts, to take over for yourself, not to add to your current clients. I am trying to work out how much hosting companies are worth to buy, depending on their income/costs.

    For a small host with say an annual revenue of $30k, what would be a range of "acceptable" offers as I have no idea. Is it considered that the buyer pay over the annual revenue, so for example $50k? Or to buy the business for a half or a quarters year revenue?

    Obviously many things come into play here, like brand names, marketability and customer good will, but I am just researching a range to look for, not exact figures.

    Any help?

  2. #2
    Join Date
    Mar 2008
    Location
    UK.
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    225
    I think the average around here is 9 to 12 months.
    Current Status: Coming up with ideas for a new SaaS.

  3. #3
    Thanks, that was what I was after.

    I was also thinking, if majority (say 90%) of the customers were yearly customers, and we are only 4 months into the year, it would probably be a little less than the 9-12 you suggested correct, as the current owner has already received 90% of the 30k?

  4. #4
    Join Date
    Jul 2006
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    cd /root/Alaska
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    Well basically you want to ask how much they are willing to sell for and give them an offer don't be a **** about it give them a nice offer you have to remember if they are making 30k a year in USD then they must have loyal customers, a good markup, a good solid name.. Think of this if they are making 30k a year you will get what ever you offer them right back within a year or less, maybe even just a few months depending on how much you go and advertise. I would suggest 4 months because its the beginning of the new year 4 months in so he has already made a good amount of money off of this. Basically you want to just give him enough so that by then end of the year he did nothing with web hosting and still made the exact same of what he would of if he didn't sell out. I've never sold my company I'd sell if i was making 20k a year id sell it for say 35k..

    But then again he is selling it so there must be a reason make an offer, see what he says, make another offer.. Just counter offer until you both get what you want... Bring in the fact that hes already made so much for this year and go from this month until the end of the year use that as your base price for your offer.
    Jason

  5. #5
    Thanks for your input Jason.

    Yes he has already made say, $25-7 so far, so I am thinking that even an offer of $7500 might be acceptable, as he is only doing 4 months work and making more than the normal 12 months. 90% of the customers have been there for over 2 years, so there obviously hasn't been much growth, which would explain him selling it, due to lack of interest/motivation.
    Also as you say, your money is made back on it with profit in 8 months.

  6. #6
    Join Date
    Jun 2003
    Location
    London, UK
    Posts
    1,733
    Look at profit as opposed to turnover - this would be my number one tip. "Turnover is vanity, profit is sanity" is a quote I heard recently that rings true.

    Look at likely cost savings, likely costs incurred, decide on percentage of custom that you're likely to lose. You will then need to think about an acceptable ROI and use that as a basis for your maximum purchase price. I would recommend due diligence (under NDA) and getting a solicitor to write up suitable contracts of sale.
    Darren Lingham - UK Webhosting Ltd. - (0800) 024 2931
    Tsohost.co.uk - Quality UK Windows and Linux hosting since 2003
    UK WordPress Hosting - Fast, easy, cloud based WordPress Hosting

  7. #7
    Costs are very low, basically one dedicated server plus the normal things like licenses and outsourced management, also the solicitor tip is a good one, cheers!

    Thanks for your input!

  8. #8
    Join Date
    May 2006
    Location
    The PitLane
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    2,874
    Quote Originally Posted by dazmanultra View Post
    "Turnover is vanity, profit is sanity" is a quote I heard recently that rings true.
    Well I'm going to pinch that expression.

    I would add that, however good/stable the seller is, clients do not like change of any sort, you need to consider keeping them informed and accept some will see this as the right time to move[they percieve that they prefer to be in control of any changes], maybe as much as 25% will at least consider moving, hopefully only 10% or less will bother.
    _____________________________________________________________
    - There are many types of Marmalade -

  9. #9
    I'd follow Brians advice and plan for 25% leaving, if less do than thats great, prepare for the worst, hope for the best.

    Anything from 6 months to 18 months revenue is acceptable, its something you really have to decide on your own as to how valuable that company is to you.

    But If they are customers which have been there for a long time as you say and there aren't going to be any major changes (like different control panels etc) then I'd go for 12 - 14 months revenue.

    Best of luck and let us know how you get on.
    Data Republic - UK Managed Servers - Server Management - Managed Backup/R1Soft
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  10. #10
    No worries, I will let you guys know how I go.

    I have requested more information now like resources used on the server, specs of server, bandwidth used, any ongoing fee's/costs, license fees (like cPanel) and a whole list of other things.

    As far as I know I have a fair bit of competition putting in tenders, but they are all just interested in buying the customers not the whole business, which the guy is more interested in selling.

    Due to the fact that he has already received 90% revenue for this year, I am going to offer 3-4 months revenue and see how I go.

  11. #11
    If he has received 90% of the revenue I am assuming its annually based. That is always a huge risk as your going to have the costs and none of the income. Be very carefuly buying a business with an almost totally annual client base.
    Data Republic - UK Managed Servers - Server Management - Managed Backup/R1Soft
    Follow us on Twitter to get exclusive sales & updates.
    R1Soft Agents Monthly !

  12. #12
    Yes 90% of the customers are annually based. As most of the customers have been their for over 2 years it give me a bit of confidence that it taken over properly, not too many will leave.

    I hope to build upon the business to balance out the annual customers. As I agree, it's not the best situation to be in.

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