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Business service offerings and liquidity

Started by Perfect, 2011-05-03 07:24

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digital marketing

Perfect

"Being all things to all people" sounds good, but in most cases reduces the liquidity of a company. liquidity business includes the number of potential buyers, business valuation, and the amount of time needed to market the deal closes.

• The liquid scenario is a network of co-host is the customer base without the data center, offices, or employees, and only one owner / decision maker. This type of business may be under contract for sale within 48 hours. ("Letter of Intent" Post due diligence, contract preparation, integration, etc all plans to take a little time.)

• The less liquid stage is a web hosting company offering design services, with offices, a data center and offers related services such as access, marketing services, etc.

Valuation difference:
Something I've seen many times is the owner / decision maker on the side of the sale have heard of web hosting business valuation formulas and wants to apply that formula to your company. Inevitably, the owner is disappointed that the offer falls short in his mind, and what really happens is a fair price.

Design services:
The personal decision to start offering web design services to complement the work pure recurring income housing is an important decision regarding the effect on business liquidity. Of course design services can be a natural fit with housing clients, helping to reduce churn and to sell existing customers. However, the value of income and cash flow generated from design work at once is not that close to the value of recurring revenue and cash flow property.

Negative design departments at the time of sale:
• From the buyer's perspective, acquiring the entire company and keep going design efforts is risky. Is 50/50 if key people in the design will remain after the close ... no matter what they or the statements of the seller. Also, if you have to replace key personnel, new staff will not have relations with the customer base.
• From the buyer's perspective, acquiring the entire company and then cancel the design effort is usually a risky decision as well. There are offices to address, as well as staff to be let go ... much time and is detrimental to the existing customer base.
• My guess is that every 20 buyers of a pure play hosting company, there are only 1-2 for buyers of property combined design shop.

Internet Data Center:
Investing in an IDC can increase the value of the entire company for a huge amount in time, but it definitely reduces liquidity in the short term. Usually small co-located web host in the beginning, then at a later date to acquire their own data center. In turn, the company will then offer the space to accommodate smaller ones thus creating a new service offering.

Owning an underutilized data center reduces the number of one type of buyer ... the "buyer's cash flow, however, invites a new category of buyer, the" buyer of assets and cash flow. " The buyer is looking to further grow both through acquisitions and exchange their co-location to hold the data center. The lowest remaining capacity data center, over a type of agreement will be cash flow therefore tends to be more liquid.




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