"Metrics That Mean Money And How To Track Them" Hillary Stiff, HostingCon 2007 Panel #201
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"Metrics That Mean Money And How To Track Them" Hillary Stiff, HostingCon 2007 Panel #201

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Isabel Wang, David Snead & Hillary Stiff arranged a panel at HostingCon 2007 on the importance of tracking certain metrics for web hosting companies. Hillary Stiff's presentation covered what ...

Isabel Wang, David Snead & Hillary Stiff arranged a panel at HostingCon 2007 on the importance of tracking certain metrics for web hosting companies. Hillary Stiff's presentation covered what information buyers/acquirors needed to see when acquiring hosters. Other presenters included Joe Bardenheier of the Endurance International Group, Jeffrey Stibel of Web.Com, Adam Dillaplain of CaroNet and Brian Shephard of Canada Web Hosting.

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"Metrics That Mean Money And How To Track Them" Hillary Stiff, HostingCon 2007 Panel #201 "Metrics That Mean Money And How To Track Them" Hillary Stiff, HostingCon 2007 Panel #201 Presentation Transcript

  • Metrics That Mean Money And How To Track Them
      • Hillary Stiff
      • July 2007
  • C HEVAL C APITAL , I NC .
    • Who we are
      • Investment bankers active in hosting/ISPs since 1996.
      • Completed over 92 Hosting/ISP acquisitions, 20 in 2006 and 11 YTD in 2007 including Endurance/iPowerWeb.
    • Who we have worked for
      • Endurance Int’l Group, Verio, Rackspace, Nextel, etc.
    • What we do
      • Represent buyers & sellers of hosting, telecom and related companies.
      • Distribute a weekly deal listing with over 30 sellers, creating a deal marketplace small and mid sized companies.
  • Why are some metrics important when selling your business?
    • Consolidators want to know how profitable your customers will be on their systems.
    • Platform buyers want to know how profitable your business is as it stands.
    • All buyers want to know;
      • How fast you are adding and losing customers
      • What you own and what you owe.
    • The profitability and growth rate of your business largely determines how much a buyer can pay. If the buyer does not know or have confidence in your numbers they will not bid or bid at a lower level.
  • Minimum metrics to sell small firms to consolidators
    • Annualized recurring revenues – The revenue your customer base would produce over the next 12 months with no changes.
    • Annualized recurring revenue for each of your business types (e.g. shared, VPS, co-lo, etc.)
    • Number of customers for each of your business types.
    • Method of proving revenues (Paypal, bank statements, etc.)
    • Customer List.
    • Billing Frequency Detail.
  • Annualized recurring revenue calculation
    • Annualized Recurring Revenue is the most commonly used revenue base for valuation purposes.
    • Illustration of how to calculate Annualized Recurring Revenue.
      • 10,000 customers @ $10/mo x 12 pmts = $1,200,000
      • 15,000 customers @ $15/mo x 12 pmts = $2,700,000
      • 25,000 customers @ $25/qtr x 4 pmts = $2,500,000
      • 3,000 customers @ $100/yr x 1 pmt = $ 300,000
      • Total Annualized Revenues = $6,700,000
  • Additional metrics that are often required & can add value
    • Financial Statements
    • Customer growth and attrition figures over the last 12-24 months
    • Detailed customer database (without names)
    • System and network configuration (e.g. number of servers, specs, loading, etc.)
    • Support costs, activity levels, etc.
    • Advertising costs, methods, results (e.g. cost per add)
    • Deferred revenue detail
  • Financial statements
    • Generally necessary for platform and larger deals although some buyers require them on all purchases.
    • Most buyers are interested in the Income Statement (revenues and expenses) fewer need Balance Sheets.
    • Annual for the last two+ years and quarterly for the last four quarters.
    • Can be very basic.
  • Start Now
    • Basic accounting software is inexpensive as is a part-time accountant to do basic bookkeeping.
    • Waiting until you want to sell and can’t or having to re-create several years of financials can cost you a lot more money.