Interesting thoughts, hosthop. Non-compete is a good idea but anyway he says he wants to get out of web work altogether and do non-web design and art. I will add a non-compete anyway in the contract. Truth is that I think were he to get a web job, he would send them to me for hosting. That's the kind of person he appears to be.
As far as the server, SoftLayer is the provider and owner of the hardware. They provide limited upkeep apparently however. So this is a good question.
As far as new customers, I don't expect to get much. His site is dismally ugly and I don't think that's how he got his clients. But I am paying 1 year's profit (meaning income minus server costs minus WHMCS costs) so as long as things stay more or less the same for 2 years, then I'm fine.
I understand the basic numbers just fine and he has also explained what part of the income was design work and what is not. I'm not 100% clear how to see that in WHMCS but I asked him about that now.
I also run my own hosting business but I don't really have any books to show anyone. When I get a new client, I purchase an account from my supplier for $X and charge the client my client X times three. They pay me first and then I pay one third of that to my supplier. Works quite well and is so simple I don't have any "books."
He says his income is X from hosting, and his costs are Y and Z for server and WHMCS. Seems to me he has a more simple approach than a proper business like you guys have with books etc.
He says he gets around one support request a week, which I think is reasonable for simple sites.
Hostigation, hi. I suggested to pay half up front and the other half in income and he said he wants it all now and explained why--he wants to invest in a studio. I can understand that as well. I think most sales are a one-time fee--that's certainly how Flippa works and how corporate takeovers work AFAIK.
Of course a customer may leave, but in my experience, most won't because it's a big headache for a non-techie to move a site and change DNS and recreate emails etc. For example, he has clients who have restaurants or a hand-made game manufacturer or a Kung-Fu school etc. Most of these people don't want nor know how to change hosts. Many don't even know how to create an email account on cPanel, he says, and they ask him.
Thank you for your replies!