Giant Forum - $4,000+/mo - ZeldaUniverse.Net -PR7- 250,000+ visits - 305k pages in G!

10-12 months revenue is normally the estimated selling price. There are other factors which change it but thats the general rule.

 

I agree, 40x monthly earnings is a bit excessive. I don't have the patients to wait over three years for a return.

 

That is a bit over the top. Very few businesses evey go for 3 times annual revs. I would put it at a max of 1 times annual rev, with 3-9 months X annual rev being the norm.

 

Anyone who thinks the price is reasonable should prove it by bidding.

 

Will, to be honest, I would need to see a lot more before making any bid. Everything looks good. However, I would like to see the last 2-3 years at least, annual revenue. Some type of P&L statement and or tax returns if possible. All I have to go on is the last few months of rev.

To give you an idea of how we acquire hosting businesses, we look at the last 2-3 years revs, costs/liabilities, customer base, ie., how long have these customers been customers, etc. This and a few other factors allow us to establish a value.

As to purchasing the business, we will typically pay the owners a percentage of the monthly revenue for a period of time, and will also pay a set percentage (monthly) for any new customers that they bring on to us, even after that sale. What we like to do is find a way to establish some type of customer retention. After all, there are no assets in hosting, or a "web site", so there is no real concrete value there. With that in mind, it behooves the seller to do all they can to help us keep the existing customer base, as well as build a new one. Why? Because they can almost guarantee a perpetual flow of recurring income with NO COST to them.

So as far as hosting goes, we have never just BOUGHT something out right. With a commodity like hosting, it's far to risky. We basically take it over, assume the costs, and continue to provide a nearly limitless (recurring) income to the previous owner.

It's not for everyone

 

I agree on that point.

"Average revenue" should not be the average of the last few good months.

 

Someone would have to be extremely desperate to sell to agree to such unfavorable terms as you describe.

 

Agreed...

 

Was following your thread at sitepoint, and it said you baught this site in June for $22,000.

What was the site making at that time.

It seems traffic has remained consistent since June, and revenue has increased... mainly because of adding every ad network's ad there is. I see A LOT of ads on the home page. The main source of income seems to be YPN which is in beta and paying 50 cents for even untargetted clicks. YPN payouts will probably drop like a rock once advertisers notice how poorly this traffic is converting for them. My point is any new owner could have spent a few hours testing all these ad networks and adding YPN code.

Given this, it seems very difficult for me to understand how you justify such a high asking price of 50k?

 

lol extremely nice, but i cant afford $75000 because i only got about $30

 

Deperate? No, not really. Like I said, it is not for everyone. But as for desperate. Far from it.

Think of it this way. Let's say you have a business that makes $5000/mo. Lets also say that $3000/mo. is your cost, and $2000 is your profit (EBITA of course).

So we acquire the business and you continue to receive $2000/mo., with no overhead. We are paying that $3000/mo. now (in a sense).

Now you keep customers coming and continue earning $2000 + , $5000, $10,000 per month, whatever. No headaches for you, no liabilities, no costs, nothing. You just have a perpetual income source that lasts a predetermined amount of time.

This is not the only way we have acquried things. There have been cash deals, but every circumstance you come across is going to differ greatly. For the most part the method I have explained has been the norm for us.

I guess my point here is to express my experience that everything out there is worth only what someone will pay for it. That is it, no more, no less. In the end the huge over blown super buyouts are very few and far between. It is extremely rare that you see something that brings in 10$ sell for 10 million dollars. Things just don't normally happen that way. Not with assetless based commodities anyway....

YMMV

 

The bigger question I always ask is; why are you selling it?

That should always be your first question.

 

That question seldom gets answered truthfully. You usually have to dig for that answer.

 

With a sale this size, there are quite a few questions I would ask.

It's well outside my scope ... is anyone interested?

 

I wouls want to know te reason for selling?

 

Could we contact the previous owner if we start the process? Will you show your stats and income for the lifetime of the site? And why you are selling would be great!

 

Yea, I understand, it's basic seller financing. I like it a lot as a buyer, not at all as a seller. If Lee wanted to sell his site that way, sure I'd buy. lol

 

One thing I have found on digitalpoint is most the people that talk dont buy. All the sites I have sold have been through pm or email.

 

well a site bought for 20 that wants 50-80k ... a possible 400% ROI in 5 months sounds like a good enough reason to me to sell =P

 

Like I said, it's not for everyone. The people that do are rarely desparate. They typically want to do something else and are sick of the headache. They would rather perpetuate the income without the work. Of course I was not suggesting it for this type of business, but rather providing an example of what we do in the hosting business.

Do keep in mind that when we value a hosting business we find that around 25 to 75% of the value disappears when we look at the following factors during the due dilligence:

1. Customer rentention. About 10% of the customers are not customers. About 10% of the customers no one would want as a customer (no pay, etc.) and around 20% or more hate change and will leave if hassled.

2. Time spent on the merging of data, both accounting and the logistics of domains/IPs, moving this and that, setting this up, etc..

3. The money/time spent on making the new customers happy, calling them, mailing them (the old way), etc..

In the end many times someone will not make out as well selling out right. When we do actually purchase something out right we have a customer retention clause built into our contract so that after a pre-determined period we only actually pay for the customers that are actually with us for X amount of time.