What's a Small Hosting company Worth?
 

I was made an offer to buy part of the web hosting business I do a lot of sys admin contract work for.

All the servers (3) are current FreeBSD with stable versions of PHP and MySQL and Apache.

I'd be getting about 128 hosting customers, a few adult but most just business sites.

Monthly income from hosting = $3600

Daily average bandwidth = 90K (T-1 =193k)

The owner wants $36,500 for it, spread out over 5 years.

Hardware I'd get :
Cisco Router I think it's a 2650
3Com 16 port switch 10/100
APC Big ASS Rack Mount UPS (weights 80 pounds)
3 AMD 850 MHZ clones 256MB ram 40GB/40GB hard drives
Belkin Keyboard monitor switch 4 port.
A few odds and ends.

I'd also get the DNS host domain names for the primary and secondary and a couple other domain names.

I'd have to move the hardware and get my own T-1 installed and install the rack and the hardware in our third bedroom.

Am I crazy as a loon If I go for this ?

Let me know what you think about this deal.
Be honest about it.

Well one thing I know for sure is that the hosting market is over saturated and its a tough business to be in

Interesting

Where is it located?

Bobo,

Am I crazy to do this?

Besides being 'Intersting', I'm my own ISP.

IKE,

2 hops from the backbone In Nevada.

Pahrump, Nevada.

Where Art Bell lives.

So not counting your time of 24/7 support and electric and the occasional hardware failure. I'd figure the monthly expense of about 600 (loan) and 1k for the t-1. (guesstimate, i know you can get them much cheaper). If you keep your existing customers or at least keep a consistent drop/add ratio, the you could be free and clear of the load in under 2 years.

That is like 4 lifetimes on the internet :)

btw: If it is profitable, why are they dropping it?

Monthly income from hosting = $3600

128 clients

try to deal with 128 different people and you'll see the good part ;-)

always an excellent question...

Why not just send the servers to a colo facility insted of getting a T1 ? Would be faster for your customers and cheaper for you.

Soul_Rebel,

We get very little bitching from those 128 clients.

They are happy with the services they receive.

36.5K spread out over five years
so you're paying out about 7300 a year, or approx. 600 a month.
at 3600/mth, minus costs, you're making about 2k a month.

then you shouldn't have any problem. Customer support is the no1 problem in v.hosting. If you can deal with it,you're the man :-)

maxcom,

He tells me he's just tired of it.

Wants to do somethimg else.

I don't beleive that for a New York Minute.

My experience with hosting mainstream business sites is that they dont really go away. I would say if you are getting 3600 a month from it, and paying out around 750 a month, its a decent wage, but I would put a clause in there saying that you'll only pay it for as long as the company remains in business, and maybe offer him another 250 bux a month or something for his risk. you never know what could happen.

and the first thing you should do is put your sites in a datacenter, not run off a T-1. you'll save yourself hundreds monthly.

BTW... 36k for a 3.5k monthly profit over 5 years webhost seems low. so either he knows something you dont, or he really does want to get out bad.

Typical account buyout is total sales of customer in 1 month * 12 - 15 months.

Up untill a couple weeks ago I hosted sites for 10 small local companies; for 2 years. and it was such an annoyance having them call me at random times and having to drop everything I was doing to help them. Finally just said fuck it and referred them over to another larger hosting company.

I'd say if you want to make that your primary business and spend the majority of your time working on it, then go for it. But if you plan on working on lots of other projects on the side, be prepared to get interrupted alot!

Sin_Vraal,

Thanks for your advice.

I'm still thinking about this,

I would not recommend you do any kind of hosting out of your bedroom. T1 lines are a thing of the past and local loops add another point of failure between you and the carrier. Uninterrupted power and proper air conditioning systems are very important as well. I would recommend you find a host that can manage your servers. The bandwidth will probably be cheaper, no local loop charges, redundant internet connection, power, ac, and most importantly someone will keep an eye out on your servers 24.7. :2 cents:

Thanks everyone for your input and advice.

I guess I'm as crazy as a loon 'cause I'm going to do it.

Nothing ventured, nothing Gained.

The good point is I know all the customers and they know who I am because I've been their point of contact for a couple years so I probably won't lose any during the transition.

I've never changed my mainstream host. Also I don't think I've ever emailed them or called them, unless it was something billing related.

Mainstream sites don't use as much bandwidth as adult sites, or at least it's a lot more consistent...so one host doesn't really make that much of a difference than another host..