I thought it might be helpful to those interested in selling their small WordPress website hosting company to talk a little bit about what that process looks like. Having acquired two other hosts before, I know what it actually takes to establish terms of an agreement and actually proceed with the transfer of ownership and migration of clients.
Note that the process can differ quite a bit depending on the business in question. Your company is no doubt unique, and so the exact steps it will take can vary quite a bit. The below outline is an overview of what our acquisitions have tended to look like.
Steps to a successful WordPress Host Acquisition Deal
- Seller reaches out
This is the initial contact, when the seller reaches out to us with an interest in selling their business and/or client services. Typically this is a short call to determine preliminary feasibility.
- Initial meeting/call and introductions to determine if it’s a good fit
In this step, we meet with the potential seller and get introductions out of the way. Then we talk a little bit more about our respective businesses, values, clients, and processes. The goal is to determine if we would be a good fit for your clients and if a transfer of ownership makes sense.
- Seller shares detailed reports and information about business and clients
After the signing of a non-disclosure agreement (NDA), information is shared. This information might include a full or partial client list, information about technologies used and current hardware, billing information and status, and more.
- Review of reports and documentation
In this step, we parse through all of the data that has been given to us and verify everything that has been said and that this will, indeed, be a good fit. We may look into specific clients and their websites to determine that they would be good potential clients for our services.
- Discussion of general agreement terms
We would typically start the negotiations with an example of one of our previous agreements. After review of that, we would typically discuss specifics of a new agreement and do our best to encapsulate everything and make sure both parties are comfortable with the general terms.
- Draft of agreement proposed
Using our discussions, we put together a potential draft of an agreement for review. This includes a potential rate for the acquisition.
- Draft revisions
After review, we can further discuss and fine-tune the agreement until it is something that both parties are satisfied with.
- Due diligence
In this step, we do our due diligence and investigate deeply into all information. Typically, by this point we would have access to most documents and information regarding the company so that we can make an informed decision. If everything looks good and is as expected, we can proceed to the signing.
- Signing of the agreement
If both parties agree to the final terms and the stars align, the agreement is signed and the acquisition proceeds as planned.
At his point, the deal is all set and it’s time to actually begin the process of transferring ownership. What this looks like, exactly, can vary quite a bit depending on the type of business being acquired and how it is set up. However, most acquisitions will like look a bit like the following.
It’s worth noting that many of the following steps may take place concurrently.
Steps to Transfer Ownership of WordPress Website Host
- Announcements from seller announcing the impending sale
Up until this point, the seller has likely not spoken with any clients or third-parties regarding the sale. Now is the time to report that an agreement has been struck and that changes will be coming. Typically, we work with the seller on the language and strategy for announcing this process. In this messaging, we make it clear that services will continue but that there will be some changes on the horizon.At this point, we typically have a customized client intake form to verify a. Clients wish to continue services, and b. Contact information and billing info going forward.In this initial messaging, we guide clients towards this intake form and encourage them to fill it out as soon as possible.
- Seller shares logins and other information
At this point, we’ll want access to all systems in use so that we can begin migrations (if applicable) and start consolidating everything into our own systems.
- Clients fill out intake form
As mentioned, this custom intake form will allow clients to give us their preferred contact and billing information and clarify the services that they are utilizing, and finally to declare their intention to continue working with us. This information is crucial to making sure our info is up-to-date and getting them all set up in our systems.
- Clients sites are migrated to the new servers
In most cases, we would want to migrate client websites over to our own servers. This process comprises the bulk of the work for transferring ownership. The exact process can look very different depending on how everything is set up. Ordinarily we would want to migrate everything ourselves, though in our last acquisition, the owner was happy to perform the migrations himself. We paid him for his time and it worked out great.
- Billing set up for new clients
With the intake form information, clients are added to our billing systems and invoicing is set up. Our systems automatically generate hosting invoices and send them to the client in the agreed-upon frequency.
- Finalization of agreement
Once all of the clients have been migrated, billing set up, accounts transferred, and all pending items completed, the agreement is finalized and the seller is free to move on.
I didn’t mention payments in this list, and that’s for good reason. The exact schedule of payments could vary quite a bit from business to business. Typically we have established a schedule that allows for an up-front payment and then additional payments over time as the process completes.
Generally there is one final payment at the end that is variable depending on how many of the anticipated clients actually migrated over.
Example Payment Terms
I thought I’d share some example payment terms with you so that you have an idea of what that might look like.
Historically, we have pegged the sale price to a multiple of the recurring yearly revenue for services provided to clients that fully migrate, pay, and plan to continue with our services.
Because it’s difficult for us to truly know what percentage of the clients are actually active and will become paying clients of ours, this protects us a bit from a seller trying to misrepresent and inflate the true value of their business. Using this method, we are only paying for real value.
The final number may be lower than what a less scrupulous or diligent seller was hoping for, but it shouldn’t have much effect on someone whose business is healthy and books are up-to-date.
Here are our example terms for the total projected sale price:
This figure represents what the combined payment would be if all website assets successfully migrate by the date of the final payment, as defined in section “Final Payment “Migrated Sites” Calculation”.
For purposes of the “Total Site Multiplier”, this is the figure used to calculate what percentage of the maximum value has migrated over.
Stated plainly: it is equal to the recurring annual revenue of all eligible, hosted websites combined. This number has been updated at the time our agreement begins and is: $xxx
To clarify further, the following is an example section that defines our “Price Per Site” calculation:
The final payment made will be based on the actual PPS. This figure is very simply calculated by the actual yearly recurring revenue for a given site and service using current seller rates.
Note that this number may be adjusted for a given site if the client ultimately chooses not to continue with a portion of their services, leading to a loss of revenue.
For example, if a client decides not to continue hosting their website and instead chooses only to utilize email hosting services, the PPS will be adjusted to reflect only the email-hosting portion of that yearly revenue.
In this sense, the spirit of the agreement continues in that buyer will only be paying for the clients and services that are migrated.
In future instances, “PPS” may really refer to “average price per site”, which of course is a reference to the average recurring revenue of sites actually migrated.
And there you have it! Hopefully this provides a glimpse into how the process typically works. If you have unique needs beyond these, as a small business ourselves, we can be flexible and accommodate those. This list is only intended as a general roadmap of what an example acquisition looks like.
If you’re interested in speaking with us about selling your business, please reach out to me (Brian Johnson) directly at firstname.lastname@example.org or give me a call at 952-457-4746.
Looking forward to hearing from you!