If you are a web hosting business owner looking to make a sale and exit from your company, chances are the prospect of finding a willing buyer that agrees on a reasonable price that will treat your customers well may seem like a daunting task. Whether you’re ready to retire, want to pursue other opportunities, or simply want to cash in on years of hard work, selling your web hosting business can be a complex and stressful process. But with proper preparation and an understanding of what buyers are looking for, you can make selling your business efficient, streamlined, and profitable.

Our process at Web Ventures starts with an understanding of the business owner and their vision for their products and customers. Plain and simple, if those two aren’t a fit, no amount of post-acquisition work will rectify the eventual issues. Hop on a call with potential buyers and get a feel for their own organization and vision for your business. If those visions are aligned and you feel like there is a cultural fit there, the rest of the due diligence, negotiation and post-acquisition activities can move forward with good intentions and reliable communication. 

But before you start hopping on with buyers, we recommend you put together a few deliverables that will inevitably come up during discussions with potential buyers or investors.

Financial Statements

First and arguably most pressing, it’s important to understand that buyers will be interested in seeing a variety of historical financial metrics when considering the purchase of your web hosting business. These metrics can be detailed in balance sheets, income statements, and cash flow statements, all of which provide valuable insight into your business’s financial health and stability.

A balance sheet for your business will provide a snapshot of your business’s assets, liabilities, and equity at the time of your conversation. They help buyers understand the value of your business’s assets, such as servers, software, and other equipment, as well as any debts or liabilities that need to be paid off. An income statement will show your business’s revenues, expenses, and profits over a specific period of time, preferably over the lifespan of the business, or at least the last couple of years. This information helps buyers understand your business’s profitability and how it has been performing over time.

The more buttoned up your financial records are, the better. They allow you to present your business in a digestible format and form the canvas for the picture of your business.

 

Technology Stack

Another aspect critical to a web hosting business is its technology stack. This includes the number and types of servers you are using to service customers (owned or rented), data center details, and the software layer running on these servers. These are the foundation of your web hosting business, and provide another layer of crucial information to buyers in terms of compatibility. What types of control panels are your customers using? Are you running Windows or Linux servers? What type of cloud virtualization technology are you using? It’s important to have a clear and up-to-date understanding of your technology stack, as it can significantly impact the value and attractiveness of your business to potential buyers and will be crucial in their ability to successfully onboard and continue to service your web hosting customers post-acquisition. 

 

List of Employees

Outside of financial and technical considerations, buyers will also be interested in the people behind your web hosting business. This includes both employees and contractors who play a role in the day-to-day operations of your business, such as management, engineers, sales and support staff, and more. Include their roles and responsibilities, as well as their skills, experience, and salaries. During the sale, you can have discussions with the potential buyers about keeping the current staff on board to keep business operating as usual for a period of time or formulate a different exit plan that includes integration with the buyer’s current processes.

 

Additional Product Lines and Revenue Streams

Another important factor for buyers is any additional product lines that your web hosting business may offer, beyond its core web hosting offerings. This could include domain registration, managed services, website design and development, SEO services or other related products and services. These product lines can add value and diversity to your business, making it more attractive to potential buyers. Providing the details of these other product lines also brings more clarity to the transaction, saving you weeks of additional due diligence.

 

Subscription Metrics and Customer Insights

As a web hosting business owner, the more you know about your customers, the better. If your internal systems allow for it, providing key subscription metrics such as churn rate and Average Revenue Per Unit (ARPU) can add even more detail to the picture of your business being painted. Churn rate refers to the percentage of customers who cancel their subscriptions or stop using your services over a specific period of time. A high churn rate can be a red flag for buyers, as it suggests that your business may be losing customers at an unsustainable rate. On the other hand, a low churn rate is generally a positive sign, indicating that your business is retaining customers and potentially growing over time.

ARPU refers to the average amount of revenue that the business generates per customer or unit of service. This metric can help buyers understand the potential profitability of your business, as well as the potential for growth. Any other details you can find about your customers and subscribers will also be helpful, such as geographical breakdowns and a list of your top customers by revenue and/or number of products purchased.

 

Ownership Details and Previous Investments

Whether it’s for investment or the acquisition of your web hosting business, buyers will also be interested in the ownership structure and previous investments of your business. This includes any shareholders or partners who may be entitled to a portion of the sale proceeds. This information will be necessary for negotiating the terms of the sale and ensuring that all parties are properly compensated.

Previous investments in your business can also be a key consideration for buyers. This may include funding from venture capital firms, angel investors, or other sources. Providing a clear understanding of the terms of these investments, including any rights or privileges that the investors may have, such as the right to a portion of the sale proceeds or the right to approve the sale of the business are paramount.

Overall, there are many factors that buyers will consider when evaluating the purchase of a web hosting business. By understanding some of these key considerations and preparing accordingly, you can increase the chances of a successful sale and maximize the value of your business.

If you have any questions about any of the deliverables mentioned in this post, please feel free to reach out to us at murade@webventures.io.  We would be happy to provide more clarifying information and chat about the next steps in selling your web hosting business today!

It takes a rare type of entrepreneur to start and successfully build a web hosting business from the ground up. Very few individuals have the unique combination of drive, market knowledge and adaptability to break into, survive and thrive in a market controlled by some big players with global data centers, established systems and brand recognition. But for those who choose to take on the challenge, the payoff can be tremendous.

My name is Sunil Saxena, founder of InMotion Hosting and CEO of Web Ventures, the mergers and acquisitions arm of InMotion Hosting. Fifteen years ago, I found myself in the exact situation mentioned above, and hopefully I can share some insights from the experiences I had growing my own web hosting company as well as facilitating the sale and purchase of multiple third party hosting companies.

If you own a small to midsize web hosting company, chances are you are beginning to encounter some of the challenges of scaling, whether that be server load, data center space, support volume, marketing or a slew of other challenges that face all growing companies, but seem underlined when dealing with the moving technical pieces and margins of the web hosting space. This is often the time that entrepreneurs and founders look to sell or bring in some outside help from a third party who has done this before.

And while selling a company isn’t really a walk in the park, oftentimes there are ways to make the process smoother, or at the very least, less stressful. Nobody wants to labor their way through a negotiation process that ends in feeling shortchanged, and there are a number of ways to make sure you are accurately conveying the value of your business when looking to sell. Ultimately when you, the business owner, decide that moving on from the company is the best decision for you, there are a couple of things you should consider before embarking on the journey.

Getting Organized

The first mistake I often see when someone decides they are ready to sell their business is a lack of preparedness. While you may think an acquisition is as simple as a quote, a conversation and a purchase, the process will certainly require preparation and organization. As the value of your business appreciates, buyers will apply more and more scrutiny to your numbers and business practices to make sure they understand all aspects and nuances of your hosting company. Below is a breakdown of some specific areas you will want to focus on having organized when you are ready to begin the negotiation process.

Financials

First things first. If you are selling your business, the initial thing a buyer is going to want to see is almost assuredly your company’s financials. This is often the most involved and time consuming part of the process, especially if managing your financial statements is not something you have experience with or do often.

If you performed the bookkeeping yourself over the last few years and feel confident that your financial statements are in good order, you may not necessarily need to hire an accountant, though I recommend you get one to run information through in a time of need. Keep in mind that there are often tax and employee implications that come with selling your business. Having the expertise of an accountant can help prevent costly issues from arising both during the process and once you ultimately sell your business.

Typically the financial documents that will be requested will include, but are not limited to:

• Income Statements
• Balance Sheets
• Bank Statements
• Tax forms

The more organized you can be with your financials and user and subscription metrics, the better. It will serve for a much more fluid selling process and expedite a lot of the conversations with the seller, making for quicker closes and higher valuations.

Legal

In lockstep with getting organized on your financials, you will also want to start organizing the documentation for the legal side of your business. This entails things such as:

• Company formation documents
• Equipment or office contracts and/or lease agreements
• Any loans or liens you may have against your business
• Employee or independent contractor contracts

This typically comes after a review of the financial documents, and while you often won’t have to present these types of documents until later in the negotiation process, it is important to have ready, as failure to produce these documents will almost assuredly lead to a stalled or blocked sale. No investor or buyer will take the risk of purchase without combing through these documents.

Much like an accountant, I highly recommend having a trusted lawyer on standby when you begin the process of selling your business. You will eventually be presented with various legal documents requiring your authorization and signature, and while you may very well be capable of understanding the document, an experienced lawyer will be able to protect you from potential loopholes that could be placed in the language, saving you from future headaches and the potential devaluation of your business. 

 

Operations

The final area of your business to focus on before listing your business for sale is your operations. The operations section is the nitty gritty details of how you do business. This includes any internal software insights about customers, subscriptions, product and term blends, revenue breakdown, technologies and equipment utilized, support volume, traffic insights and much more. This will likely be the most tedious part of your organization process, but is necessary to paint the full picture of your business and how it runs.

In addition to having your operational metrics in order, another great thing to have ready is documentation of your day-to-day operations. Oftentimes smaller businesses don’t have documented policies or playbooks that can describe to others how their business works. This is an underrated step in preparing your business for sale, and something that will give the buyer a degree of confidence in your standard operating procedures that could potentially score you more favorable purchase terms. It also lessens your obligation to the buyer after the sale as they will have a much firmer grasp of how to continue operating your business, freeing you up from staying on longer than you want to post-acquisition.

Listing Your Business

Now that you’re organized and ready to present your business on your terms, listing the business is the logical next step, and something that not many people have any experience with. So where do you start? You have several options, depending on the size of your business and what you are most comfortable with. While hosting is a big business globally, there are a limited number of large players, and many of the heads of the bigger companies know each other. This means putting out some simple feelers to contacts you have around the industry to get a word out is a valid starting point.

Another option you have is going through a broker. Brokers have their pros and cons. A broker will likely be able to get you in front of a qualified buyer way quicker than you doing so yourself and generally have familiarity with the whole process, knowing what to expect and how to negotiate. On the flip side, brokers will cost you. Most of the time, brokers want a percentage cut of the total amount your business is sold for. And while the broker is there to represent you, they are also looking to make their money in the deal. It behooves them to close a deal quickly, and they may expedite finding a buyer at the expense of some value at your end.

Selecting a Buyer

Now you are comfortable with the decision of listing your business and looking for the buyer, you will be faced with the most important decision of this process, selecting the correct buyer for your company. Now this doesn’t necessarily mean take the most money and run for the hills. There are other important considerations you will want to make when choosing the appropriate team to sell your company to.

• Align your vision for your company and employees with a buyer who shares that vision. The last thing you want is for your customers to be hit with the tough decision of finding another host if their product or service is disrupted by transition issues or a separate vision for your hosting company.
• Check the buyer’s track record. Have they done a deal like this in the past, and if so to what result? Do they understand the web hosting space? Your initial conversations with the buyer should give you a pretty good indication, but don’t be afraid to ask questions.
• Which deal is the most lucrative or has the best purchase plan for my situation? At the end of the day, it might just come down to a homerun offer. But consider the future when considering deals. While one buyer may be willing to purchase your hosting company for a bit more money in the long term, it may be in installments or come with stipulations based on performance of the company after your exit.
• Do I trust the buyer to be a good steward of my business and brand extending into the future? Have these conversations first. Get a feeling for what they are going to do with your business and make sure you are comfortable with that plan. Then get to talking numbers.

What Web Ventures Offers

I hope this post has helped answer some questions you may have had around selling your web hosting company and has encouraged you to look into next steps if it fits your vision. Web Ventures, the mergers and acquisitions arm of InMotion Hosting, is a great place to start your journey. We closed several similar deals over the last year and a half, and you can expect professionalism, friendliness, and a genuine interest in what’s best for you, the founder. Web Ventures isn’t like any other buyer out there, we make sure you are comfortable with the entire process, outlining plans for your business, your employees, and your customers.

If you are ready to begin the process, please click the link below and give us some general information about yourself and your business and arrange a brief introductory call with us today.

Yoast Acquired by Newfound Digital

In what can be described as a major move in the search engine optimization (SEO) industry, Yoast SEO has announced it will be joining Newfold Digital. On its Yoast Acquisition announcement blog, Yoast cites Newland Digital’s commitment to WordPress as a major factor in why they chose to sell to Newfold Digital. Before we ponder the ripple effect of this strategic acquisition, let’s introduce the parties involved.

What is Yoast SEO?

Founded in 2010 by Joost de Valk, Yoast SEO is one of the most popular SEO plugins available for WordPress. Yoast boasts over 12 million users and is considered a staple of the WordPress community, going hand in hand with targeted content creation. Yoast SEO helps those who are unfamiliar with search engine optimization and allows them to update their website via search engine ranking improvements.

It works by scanning your page content and then making recommendations on how to set up your pages to rank for better search engine results. For example, Yoast may detect that you are using too complex of a vocabulary, and recommend you simplify your text. Some other examples are missing external or internal links, target keyword density, and whether or not your word count is too low. All of these recommendations are made with SEO growth in mind.

New users are further benefitted by helpful color indicators. Green meaning it is well-optimized, yellow meaning it needs improvement, and red meaning there are critical errors. This usefulness explains why so many sites, including ours, choose to install it.

Who is Newfold Digital?

Here’s where it gets a little confusing. In 2020, Clearlake Capital Group announced an acquisition of Endurance Capital Group (EIG). At the time, EIG was a publicly traded company specializing in IT services. EIG was well known for its own acquisitions in the web hosting/WordPress space, including BlueHost, HostGator, and Domain.com. When EIG was purchased, its web presence divisions merged with Web.com to form Newfold Digital, which was the entity responsible for the purchase of Yoast SEO.

What Does Yoast SEO’s Acquisition Mean for Me?

It is too early to tell. Oftentimes, after an acquisition, some aspects of a business may change. These generally are positive changes, such as improved services or better access to resources. Per the announcement, the products, the team, and offices will remain the same. This goes a long way in maintaining continuity of the brand. For now, it is easiest to assume the acquisition will help further grow Yoast and add some additional resources which will in turn benefit you, the customers.

To stay up to date with news surrounding industry happenings, web hosting acquisitions, and general business insights be sure to check out WebVentures.io