The ideal business

I'm in a bit of a transition phase at the moment. After seven years I've been fortunate to achieve a number of things that most people would be happy with. I've significantly increased my income from my previous 'proper job' and I have managed to reduce the number of hours worked from 60+ to around 27. Not bad!

Now I am happy to maintain my income but I would like to further reduce the hours that I work each week so I am trying to move by business from something that requires less day-to-day work and instead relies on more automation and short bursts of activity on my part. As I do this, I have been thinking about what makes the ideal business and as I spend some of those saved hours, that I no longer have to spend working, walking my dog Bailey, I've been jotting down some of the major ones which I keep in mind every time I think about starting a new project.

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Acquiring a low-end hosting business and making it three times as profitable

One area of my business which I am keen to grow is the hosting side. Hosting is a very easy market to enter as evidenced by the shear number of people doing it. You can set up the business within days and once set up, the profitability can be very high. The difficult part is attracting customers. There are literally thousands of companies offering web hosting, why should anyone pick you?

This is why buying an established hosting company is a good way to instantly increase revenue. I have bought five small hosting companies in the last seven years. My standard practise for this is to buy the company at a low cost and then within two years, triple the income. I have done this a few times already and in April I bought another one so this time I thought it would be useful to document how I do it.

In April I bought an American based company for £900 which had an annual income of around £1,300.

The previous owner had a VPS running, hosting all of his customers' sites. This was an old system and had a monthly cost. Immediately we moved the customers' sites over to my existing infrastructure. I have an unlimited hosting package and so this immediately reduced the hosting costs to, essentially, zero.

I moved each of the customers into my own billing software, away from the existing, aged software package that the previous owner was using. This didn't save any money but will save me a lot of time and effort in the longer term as I will not need to learn a new system.

I also integrated the new business into my existing help desk system. Again, no money saved but time / effort saved by not having to manage another, separate piece of software.

Time cost

  • Two hours to build a new web site (the existing one required too much work)
  • Two hours to transfer the hosting accounts to my systems
  • One hour setting up help desk, e-mail systems etc.
  • Five hours transferring customers to the new finance system

I was interested in buying the business for a number of reasons. Firstly, it being so cheap I knew that I would be able to recoup the initial purchase price by the end of the year (eight months).

The company was based in the US and most customers were American or Canadian. Usually I would merge the business into my existing hosting brand but as this was US-focussed, I decided to create a brand new web site on an existing .com domain that I already owned. Moving US customers over to a UK brand may cause some confusion or worry and that would risk them jumping ship and moving to a different provider. This did cause some additional work but I now have a US branded site which can be used for other international acquisitions in the future.

Improved customer experience

This is the area where I excel and traditionally other hosting companies fail. Their customer support is usually slow, awful or both. As part of the transition I organised a joint e-mail, with the previous owner, to all customers. As well as letting them know about the transfer, I also highlighted some improvements that they would immediately benefit from. These included:

  • A new, faster hosting platform
  • An increase in account limits, giving them a huge increase in disk space allowance and e-mail storage space
  • Spam filter

Moving the customers over to my server from the existing one immediately gave all of their sites a boost in speed. My system also has an excellent e-mail spam filter. The old system did not have any filtering at all so they were constantly bombarded with junk messages. The increase in disk space also meant that they could store more e-mails for longer. The old system only provided e-mail accounts with 100MB of space.

I was keen to highlight these three obvious and demonstrable benefits in a bid to win their trust - a key step in ensuring that they remain customers for the next eight months, allowing me to recoup my initial outlay.

I also mentioned in the e-mail that we had a new web site, were rebranding and that we would be using a new finance system. These do not necessarily provide them with any benefit but it is key to point out so that they recognise our e-mails and invoices when they arrive.

After 12 months

Within the first 12 months I make a concerted effort to ensure that customer service is excellent and fast. I want customers to know that we can be relied on to help them with any issues. This further increases trust and gives them more sticking power - they are less likely to leave for another provider.

Eight months after buying the business I will have recouped what I paid for the business in the first place, after that it is all profit so I am willing to increase the prices and risk losing a few customers.

My plan is to increase each service by just over three times the existing cost. That seems like a big jump but fortunately the existing charges are very low. Combined with the poor service and outdated platform that the customers were used to, they will be so pleased with all of the improvements, the additional cost will be worth it to most. Of course I expect some people to leave but even so, my year two profits should be three times what they would have been otherwise.

Initial feedback

All of the customers are long-standing ones and so are fairly self-sufficient. If I have received more than 10 support queries since I took over, I would be surprised - the business essentially runs itself. Of the interactions that I have had with customers, one was very insightful:

Whilst initially quite grumpy, the customer changed tack after being bombarded with kindness from me and thanked me for all of my help - 

That small comment put a smile on my face and reassured me that I am doing the right thing - buy cheap, significantly improve service and increase profits.

Even though the current income is around £1,300 a year if I can triple that, without a lot of work on my part, that's a good size income for minimal effort. The hunt is now on for other, similar hosting businesses that I can try and turn around!

I always wanted a pager

This morning I woke up in my own bed. Nothing terribly exciting or remarkable there however we've just got back from a long weekend away on a boat on the Norfolk Broads. My partner is pregnant and is finding sleeping difficult. That combined with the size of the beds on a boat meant that I spent time sleeping anywhere but in the bed. After a few nights sleeping on the floor of a boat, you come to appreciate the finer things in life - like a mattress and decent pillows!

With Coronavirus hitting, our planned holiday was cancelled and we hastily rebooked something a little closer to home. We wanted to make sure we did get a holiday this year because we realised that neither of us had stopped working since Christmas - it had been seven months without a proper break.

In my younger years I worked a full time job and then took annual leave to go and work in summer schools. This meant that the only proper time that I had off was at Christmas where I was essentially forced to stop working for two weeks because everything was closed.

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The First 100 Days, Looped

The first 90 days is a concept which seems to be popping up at the moment in the various business / lifestyle podcasts. The idea is that you divide the year into four 90-day blocks and set targets for each. They are short term goals which you would like to achieve, a way of constantly pushing personal or business development.

This is something that I do myself although with a slight variation. What I prefer is a 100 day rule.

I have a huge interest in American politics and something that each new president is aware of is the media's obsession with the first 100 days after the president is inaugurated. This is the period where generally, the new administration has the most energy, enthusiasm and opportunity to make significant changes. It's a chance to show the public that things have changed, for the better.

I prefer 100 day plans in my business too and here is why.

The problem with the 90 day rule is that it doesn't give you a break in between. With four 90 day blocks, that's effectively reviewing your progress every three months then immediately setting new targets and getting started on them. There's no down time, no opportunity for real reflection. With 100 day chunks, you have the opportunity to complete your targets and then sit back for a few weeks, bathing in your glory before starting all over again. This will help avoid burnout and give you the chance to think properly about what you want to do next.

100 days break the year down into three blocks of 100 days, with around 20 days gap in between each period. 

With 100 day blocks if you need a bit of extra time with one of your targets and you're going to miss the deadline, rather than carrying it over into the next period, you have a buffer of a few weeks to get it finished. What you don't want to do is carry the target onto the next period otherwise it will stay on your list forever, continually getting pushed back and delayed.

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