I'm considering buying a hosting company and I'd like to get a sense of the multiple of earnings that small (100 or so clients), non-public companies tend to go for. I know that EBITDA is not the only thing to consider, that an analysis of the income statements is necessary and that multiples are not necessarily accurate predictors of a company's true value but I need a starting point.
Any help or resources you can point me to would be appreciated.
Customer lifetime value would be the key for me, but it would be hard to estimate accurately if we're talking about a very small business with little history. This higher risk would result in a diminished offer.
Redhot: you do not trust the other company. Write a contract and have legal council advise on it.
Regarding valuation: six months collected revenue is an oft-used valuation tool in the hosting world. Regarding infrastructure purchases, figure in depreciation over three years for servers and you should be all square.
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