Question for discussion, perhaps wrong place

[kdom]

Perhaps this is in the wrong place but I could not find and appropriate location. Perhaps this is the worng site but I'll ask anyway.

I run a reseller domain registrar (for Godaddy). Another reseller and I are interested in him reselling his reseller business to me. Assuming this is possible, how would the group here suggest we go about valuing such a business?

For example, if he had 1000 domains undermanagement registered by 800 customers, how would I factor that in when valuing the business?

Now, I can do math. But the value depends on things like te probability of renewing, the price of renewal, etc. So basically, I'm asking a very general question abouth whether there are any general rules of thumb for how to value reseller business.

Thanks for any help

 

[dgridley]

Personally I'd just ask him to suggest a price.. if it sounds acceptable based on what you know about his end of the business, then go for it.

 

[Mark]

You need to make sure what prices he is charging ATM .... If he is charging the bare minimum , It may not be worth buying really As his customers will expect the same prices they are paying already.

Also - As a Reseller , Do not forget that YOU are responsible for any Bad Transactions that may occur within these clients. There was a recent case where a friend of mine was stuck with several thousand dollars of debt over a "Client" doing back-charges on domains. It wasn't a WWD/Godaddy reseller .... But I doubt the end result would be any different. The parent company will not absorb the losses - The resellers will.

 

[iNod]

Ask him how much he makes total a month averagely. Not how much he has sold, but what he has made.

Than you need to do some math, general 6-8 months worth is average.

- Steve

 

[kdom]

Also - As a Reseller , Do not forget that YOU are responsible for any Bad Transactions that may occur within these clients. There was a recent case where a friend of mine was stuck with several thousand dollars of debt over a "Client" doing back-charges on domains. It wasn't a WWD/Godaddy reseller .... But I doubt the end result would be any different. The parent company will not absorb the losses - The resellers will.

Can you elaborate? I'm not sure I understand what you mean. Do you mean the clients made purchases then got refunds and your friend was out the transaction fees? Or do you mean clients never paid because of rejected credit cards/etc.? Both of these happen but it seems unlikely they would amount to thousands of dollars unless someone was out to get your friend. If that was the case then your friend was a victim of fraud, and possibly extortion. He should have legal recourses against the client and the parent. The parent cannot enforce a transaction made in the commission of a crime regardless of what their agreement says.

The parent company is in a position similar to a landlord. They are not responsible for losses by the resellers just like a landlord is not responsible for theft from a renter. UNLESS the landlord failed to provide adequate security.

If someone was able to steal thousands of dollars from your friend because of a flaw in the processes used by the parent, your friend should pursue this legally. It wouldn't be worth it for a few $ but if it really was thousands, he should.

I would be curious to hear more about this. PM me if you like.

 

[cache]

If it were a good business, why is he selling it?
If you buy it, do you have anything such as additional customers that he does not have?

 

[stscac]

Stellar advice NP'ers.

:tu:

-Steve

 

[kdom]

Well, it turns out that WWD does not allow resellers to do this kind of thing so the question is moot.

The other party has operated a domain reseller as well as a hosting business for 7-8 years and has X domains registered with him. He is retiring and doesn't want to deal with either anymore. I'm not interested in the hosting business because, though it is fairly successful, it takes a lot more "care and feeding." The current owner says that there are rarely any problems but he has mostly mid-size business customers and they can't tolerate downtime. This has kept him from taking a vacation away from email for several years. I don't want to be in that situation. He has decided simply to shut down the hosting business and the customers are now moving to other providers.

The idea was that I would simply take over his domain reseller business, roll the names over to my own reseller, and that would be it. I would gain the registrations and the likelihood that most would renew. We were trying to figure out whether this was worth anything, that's all. I had figured it would be worth something like $0.50 per registered domain. This is roughly what others have suggested (6-8 months revenue). But since WWD does not allow this, the deal is off. We were not talking about thousands of domains anyway so it was more of a question of principle than big $.

In any case, thanks for the comments.