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How much is a hosting client worth?

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7:43 pm on Jul 13, 2005 (gmt 0)

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I have the opportunity to buy the assets of a small web development firm. The assets are 11 hosting clients. Some of the clients pay $15 per month... some pay $24 per month... Can anyone offer a rule of thumb as to the worth of a hosting client? Thanks.
4:03 pm on July 14, 2005 (gmt 0)

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The less a client knows and more dependent on you they are the more you can jack up a price. That gets in to the whole ethics/greed philosophical debate and I don't want to get in to that.

With only a few clients you are not advertising like some huge host. So you can continue to price each customer individually. However in order to publicly advertise and get more clients you'd need to make your prices public to attract more customers via the web for example. So if you have higher rates for some (and could not publicly justify them) I'd suggest keeping your hosting a private affair.

Personally I'm against high prices and I favor people over companies. However that does not mean I do not understand that you and I have to have a roof over our heads, food, clothes, transportation, cable, etc (heh cable).

4:05 pm on July 14, 2005 (gmt 0)

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Also...

Many high end plans (large storage and bandwidth allowance) do not always use a greater portion of that allowance. However if you start taking clients that DO you could find yourself in a tight spot. You know your deal at your end though, I'm just trying to give you some ideas to play with and you can tweak them in your head. ;-)

5:21 pm on July 14, 2005 (gmt 0)

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Let me rephrase my question: what is a fair price for me to pay to "buy" the clients from the firm offering them. Rich
9:14 am on July 15, 2005 (gmt 0)

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Let me rephrase my question: what is a fair price for me to pay to "buy" the clients from the firm offering them. Rich

Rich, there's no single yardstick that I know of. Some people talk about valuing a small business by 3 years or so of its profits (see other threads here on ww), but it does depend how stable those profits are - how likely they are to continue in the future.

What are the costs associated with serving these customers? (eg hardware, bandwidth, support)

How easy would it be for them to switch to a different hosting co.?

The truth is it's worth whatever someone will pay for it. I know this isn't the type of answer you're looking for, but it does make a difference whether there are other potential buyers interested.

hth, a.

9:26 am on July 15, 2005 (gmt 0)

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I think these hosting customers sound more like a liability than an asset.

Unless you get these customers set up on some kind of maintenance plan, I'd be tempted to drop the whole bit about hosting them if you do in fact buy out the web development firm.

Some important things you should let us know so we can more accurately gauge your involvement:

Are they hosted on this web development firm's servers, or did they rent space elsewhere? If the sites are on this company's server(s) then I'd say yes, they're going to be a liability. If they're hosted on a server that's being rented elsewhere, and it's managed, and the price being paid is a fraction of the revenue being brought in, then maybe.

All it takes is one screwup or hack or bit of bad luck, and you'll be looking at irate customer(s) and at least a day or two's worth of headaches.

Have you looked at the contracts that were signed with these site owners? Is it possible that the web development company you're considering buying out did not cover themselves in the case of data loss or other problems? That wouldn't be good.

I'm very risk-averse -- just the thought of running a web hosting company gives me high blood pressure. That probably means I'd run a fairly decent hosting company before I died prematurely.

12:19 pm on July 15, 2005 (gmt 0)

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just the thought of running a web hosting company gives me high blood pressure

Two words: you're right.

"what, me worry?" :)

best, a.

1:42 pm on July 15, 2005 (gmt 0)

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Hah! ...already have the high blood pressure. I currently host about 150 of my own clients on my own machine that is managed via timeshared engineers. The hosting accounts I am discussing are from a competitor here in town who just cannot make a go of it with only 11 accounts. He approached us. The things I worry about (other than purchase price) are liabilities. I want to buy assets only. For 11 accounts, the lawyer fees might be too stiff... and you're right... what if we pay a multiple of 2 or 3 for each account and they jump ship.
1:58 pm on July 15, 2005 (gmt 0)

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Treat him/her like an affiliate. Give them $50 per account and tell them you'll give them another $50 for any new accounts they send your way. This will either really piss them off and then you don't need to worry about it, or provide you will a relatively sweet deal now and someone marketing your hosting for you into the future.

Freq---

(Yes I just picked those #s out of the air. Adjust as necessary.)

4:14 pm on July 15, 2005 (gmt 0)

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Sounds like top dollar you can make is maybe $300/month on them, then you may have labor to move them to your servers, so for 11 accounts I might just ask "how much are you paying me to take them off your hands?" as it's probably more trouble than it's worth.

With just a handful of web hosting accounts, I wouldn't offer more than 4 months revenue tops, basically $60 for a $15 account and you make $120 on it if they last the year.

Many hosting customers are fickle, especially if you have to move them to your server, and may jump ship if they're getting moved anyway so beware.

 

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