In a different spin to my previous post, if you were to sell your hosting business today, how many months of revenue would you have been satisfied with as a selling price? 
If you were to sell your hosting business today...
- Thread starter Artashes
- Start date
I don't have a hosting business, but if I did, I'd love for the buyer to fix the radiator on my Chevy Blazer for starters.
server
Member
Since I doubt any representatives of serious businesses would post here actual figures and some small businesses owners would happily pay only to get rid of such burden themselves, I can presume such businesses price could barely reach annual sales numbers. 6 months would look more realistic.In a different spin to my previous post, if you were to sell your hosting business today, how many months of revenue would you have been satisfied with as a selling price?
You think they would be smart enough for that?
easyhostmedia
Well-known member
So you are saying that all hosts on here don't run serious businesses, which would also include you.
server
Member
Me - absolutely, because my business is way too colorful to try to match some sort of description, like "web hosting" or similar.
But I actually talked about the scale (basically excluding businesses with revenues in thousands) not an ability, considering willingness or know-how to run such business.
easyhostmedia
Well-known member
You will find most who visit forums like this are business owners that are willing to share their experiences and knowledge with others or marketing managers whose job is just to try and attract new business. Businesses with revenue in the thousands are very rarely run by owners, they just sit back and let managers or committees run their businesses and these will not venture into forums.
server
Member
Yes, it might be just my understanding, that "serious" business must have annual revenue of at very least 500k in € or equivalent. If you have tiny business, what is the point for someone to obtain it, unless it's highly unique in some way? Web hosting is no way unique. There is almost no way to make it unique without large budget or extraordinary brain. And such brains and budgets usually find more suitable use in other places.
easyhostmedia
Well-known member
"serious" business means someone that takes their business seriously and not someone just playing at running a business. Even a tiny business can be taken over, it does not need to be due to uniqueness,
1) A competitor could buy you out to remove the competition.
2) Someone setting up in the business could take over a business just for the business name or the clientbase.
3) An established business may want to expand its range of services.
server
Member
Is that possible?
Sure, but that doesn't make sense to me without scale.
When small business buys small business? Would big company bother buying small (if it's not unique)? But with big company it's not competition issue. With small - could be, but usually there are more urgent issues.
Oh, someone, who's starting small web hosting business?
Could count this one. Yet many small web hosts offer less than 0 in ranges, worths and everything else.
Everything that you wrote here can be done and is done, I believe, but if we talk about selling price of a business, then what matters is company assets. What small business can offer if it's not unique? You wrote about name and client base. Good name won't be cheap so one can actually sell client base. Or get rid of clients to say straight. That's the essence of selling small web hosting businesses.
easyhostmedia
Well-known member
Large business will take over small businesses just to remove the competitionIs that possible?
Sure, but that doesn't make sense to me without scale.
When small business buys small business? Would big company bother buying small (if it's not unique)? But with big company it's not competition issue. With small - could be, but usually there are more urgent issues.
Oh, someone, who's starting small web hosting business?
Could count this one. Yet many small web hosts offer less than 0 in ranges, worths and everything else.
Everything that you wrote here can be done and is done, I believe, but if we talk about selling price of a business, then what matters is company assets. What small business can offer if it's not unique? You wrote about name and client base. Good name won't be cheap so one can actually sell client base. Or get rid of clients to say straight. That's the essence of selling small web hosting businesses.
Yes look at eBay and the number of people on their selling unlimited everything hosting for $2 a year, these are just people who bought reseller hosting and now think they are running a web hosting business.
A lot of small businesses are taken over when companies what to expand their own services. i.e. you own a car showroom and decide you want to set up a garage/service department, so do you spend time looking for a suitable location, then having to source equipment and then recruit staff, or do you just look for a garage for sale that has premises already kitted out and already staffed with a clientbase.
this can go for any sort of business looking to expand.
server
Member
Ok @easyhostmedia , so:
1. Would you be rather willing to expand your business and buy another or sell and look for other/more worthy activities in life? Don't lie.
2.
?how many months of revenue would you have been satisfied with as a selling price?
easyhostmedia
Well-known member
As my business is making good money then I would rather expand this if the right opportunity comes along.
Infact I am currently looking at 2 established businesses to see which is the better one to take over. Both would complement my hosting business
server
Member
And you running name server on your hosting server while telling me this?
Since this server is in the US, hope you have another for UK customers. And hope you're doing really well.
easyhostmedia
Well-known member
Yes, servers are in the USA as I get more for my money as UK servers are expensive due to our high utility charges in the UK, all my clients are aware of this. I have tried UK servers in the past, but they were less reliable than servers in the USA, but this has nothing to do with this post.And you running name server on your hosting server while telling me this?
Oh-kay, guys, can we get back on topic?
I'll repeat the question. If you were approached today with an offer to sell your hosting business, how many months worth of revenue would you be considering acceptable in order to part ways with it?
This was a hypothetical question. No need to name any figures. I certainly know that if I ran a large operation, there is no way I'd be even looking at 6 months worth of revenue as an acquisition price, as I'd value the company a lot higher. Obviously things are different for smaller companies that may want to exit the business. My question was designed to understand how different firms derive at that value.
I'll repeat the question. If you were approached today with an offer to sell your hosting business, how many months worth of revenue would you be considering acceptable in order to part ways with it?
This was a hypothetical question. No need to name any figures. I certainly know that if I ran a large operation, there is no way I'd be even looking at 6 months worth of revenue as an acquisition price, as I'd value the company a lot higher. Obviously things are different for smaller companies that may want to exit the business. My question was designed to understand how different firms derive at that value.
easyhostmedia
Well-known member
To me in a hosting business, there is no value on the domain, design, or website, the value is the clientbase as without a clientbase you have no business. The larger your clientbase then the more you can ask for the business.
First I would work out what my annual revenue is, let's say $5000 a year, I would then multiply that by 2 and a half which will give your $12,500 and this would be my asking price.
Why 2 and half you may ask?
I did a business course and the normal rule of thumb is if you purchase something wholesale then multiply that by 2.5 to give you the retail charge.
Thank you. See, now we are seeing some concrete ways to look at a valuation.
Applying 2.5x annual revenue would largely depend on the ROI on that investment. The ROI on that purchase has to be interesting enough for someone to take the plunge. There is a difference between 5% and 25% ROI. Operational businesses are usually sold with a return that's higher.
For the record, when I sold, the value of the clients was one thing, and the purchase of the company (company name, the LLC, domain, website, content and knowledgebase) was broken down into a different amount. Our knowledgebase alone had over 1500 articles and guides on how to do things for both users in cPanel and VPS/Dedicated Servers. We had a TON of Organic Traffic that came through our site, so that was also a factor.
While I agree that pretty much every place you check online will tell you that you can get 2.5 times revenue for most businesses, the web hosting world doesn't hit that mark. Asking and getting are two very different things, and the days of getting 2.5x on a sale are behind us for the most part.
There's also a part in valuations, especially small businesses, where the owners income, even if they were an employee, is not deducted from the cost of operation. So if you had $200k cash flow, and the owner drew $70k, the asking valuation is $270k
Valuations are tricky when you start to look at gross income and net income and then salary of the various staff. We see web design and graphics design companies on a regular basis asking for $1M-$3M+, but much of that revenue is generated by the staff and owners themselves - if the company is sold, that book of revenue often doesn't look like that.
Personal trainers, yoga studios and similar also face the same issue. The individual *IS* the company, and as such, getting multipliers on income is pretty hard to do.
easyhostmedia
Well-known member
When you sell anything (goods, services), once you come to a price you then need to put on a buyer's hat and say to yourself ' Would you pay that price for what you are offering' if the answer is No then chances are no one else would either.
easyhostmedia
Well-known member
yews if you are a sole-trader then yes you are the business, so when you sell then all you are selling is client base and any stock/equipment.
in the n UK the RRP of goods is still worked out using 2.5 x wholesale costs, but sometimes you cannot use 2.5x as it would push goods well over what competitors sell these for
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