Success in Selling your Web Hosting Company


Steps owners of web hosting companies can take to increase the probability of selling their company for the highest price and under the most favorable terms.


There are a number of reasons to sell. For most business owners their wealth is tied up in the business. People sell their companies or even divisions when they want to move on with life, want to focus on another venture, or they believe the market value is high for what they have.

Businesses are not liquid A share of Exxon stock can be sold in 5 seconds, while many businesses are not even sellable. Any interest expressed by a company in the acquisition mode is worth listening to. The only time owners are 100% ready to sell is when the business is in decline and rest assured, they do not like the valuation when that occurs. I know too many people who regret not selling when they had the opportunity and actually wanted to, but were too tough on price.

Companies seeking growth through acquisitions will almost always find something to buy. Whether it's your company they acquire or not, it's sometimes actually up to you. Many times sellers do their best to run buyers off, and do not even realize it. Buyers will acquire a company they believe is a good strategic fit. You can not control this aspect. However, with organized, timely, honest and decay communication sellers can create a much more appealing deal.

Seller communication

o It's OK to tell someone, "Yes, I would entertain for my company." This simply implies that it would be a good use of their time and money to explore your company further. It's not a sign of despair.

o Playing "hard to get" usually informs the buyer the opposite.

o Be realistic with yourself regarding price. Potential buyers can be lost forever to unrealistic expectations of "home run" offers.

o Bottom line … Buyers will not beg you to sell your company. There are simply too many other companies out there which are for sale.


Business plans and business sales books There should not be a significant difference between a business plan used for internal management, raising money and planning, and a business sales book used to sell a business. Both of these documents should be 90% complete at all times. They give a wonderful first impression to a buyer. Never forget the buyer is the one with the cash and who is taking most of the risk. He is looking for any reason at all to walk away from the deal. Being organized and having the ability to give the buyer information in a timely manner is the MOST IMPORTANT and EASYEST thing you can do to increase the chance of selling your company for the highest price. Ideally, every time the buyer requests for information, it should be delivered in a timely manner, in electronic form, accurate and up to date. Try to refuse from providing 1990's dreamy type pro-formas. They're not in vogue anymore. One final point; Buyers do realize that the last piece of due diligence information received is usually what the seller does not want anyone to focus on.

Preparing the company for sale: Run your business like you plan to keep it for the long term. When sellers attempt to prepare their company for sale, many times they avoid making needed investments in the company. If you invest cash into a project that has yet to pay off, then get credit for it in the valuation.

Other thoughts:

o Would you be willing to sell parts of the company or just the whole?

o Do you want to stay on with the buyer or leave after closing? And why?

o It is more attractive to buyers if there is someone at your company who can run the show upon your post closing departure.

o Stock vs. cash for consideration? There are way too many variables relating to stock covered here. However, keep in mind you may prefer $ 900,000 in cash and $ 300,000 in stock, as opposed to just $ 1,000,000 in cash. If treated correctly, stock deals can be beneficial in many ways.


The initial communication with a prospective buyer: In the first or second communication, the seller should determine who the buyer is, what they are looking for, and basically how they value it. Do not pin the buyer down for exact valuations initially, because he does not know what you have. Every business is a little different. There is no harm in telling a prospective buyer what you have in regards to number of sites, domain names, servers, employees, etc … after all it's not your customer list. Inquire about their business and do not forget many times the small fish eats the big fish.

Selecting an attorney: Find an attorney who has industry specific experience in mergers and acquisitions and understands the appropriate tax implications. Ask them how many deals they have done in the industry, how much they charge, etc. Please, do not use your brother in law who is a great divorce attorney. Deals get stolen and even canceled because an inexperienced attorney delays the process. There is a fine line between being thorough, and taking so much time with documents the buyer walks from your deal and seeks another company to acquire.


The letter of intent should be short and sweet. The purpose is not to map out every single issue, rather to come to a gentlemen's agreement on the very basic aspects of the proposed deal … without spending too much time or money. The basics which should be covered are stock vs. asset purchase / merger, valuation, consideration, assets included or not, timelines, etc. If everyone agrees to the letter of intent then each party, at their own expense, should start working on the purchase and sale and other closing items. If both parties can not agree on a 1-3 page letter of intent within a week they typically will never make it through the entire process.

The purchase and sale agreement will spell out every aspect of the deal. If both parties agree on the letter of intent, then they should work on the purchase and sale while all of the other aspects of the due diligence process and pre-closing issues are being handled. Most of these events can and should occur simultaniously. Do not forget, some variables are more important to the seller, while others are more important to the buyer.

Every once in a while there is a real "tough guy" on one side of the table or the other. This guy just has to have every variable to go his way or there's "no deal!". These guys kill mutually beneficial deals all the time and rarely accomplish anything. Hire "tough guys" for the collections department.

On a final note, always be honest and fair. This world is becoming smaller every day.

Source by Eric Furlow


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