The most liquid Web hosting business scenario, therefore, would be a colocated Web hosting client base with no data center, offices or employees, and only one owner and decision maker. A business of this type can be under contract to be sold within 48 hours. Following that letter of intent, due diligence, contract preparation and integration planning can all take a bit more time.

The least liquid scenario would be a Web hosting company that offers design services, has offices, a data center, and offers related services such as access and marketing services.

I have often seen owners or decision makers on the selling side that have heard Web hosting company valuation formulas and want to apply inappropriate formulas to their companies. Inevitably, such an owner is disappointed when the offer comes up short in their mind. An owner in this situation often passes on what actually is a reasonable offer.

The decision to staff up and start offering Web design services to complement the recurring revenue of pure play hosting can have an enormous effect on business liquidity. Of course design services can be a natural fit with hosting clients, helping to reduce churn and increasing the value of existing clients. However, the value of the revenue and cash flow generated from one-time design jobs is nowhere near the value of the recurring hosting revenue and cash flow.

There are, inevitably, negatives to design departments when it comes time to sell.

From the buyer's perspective, acquiring an entire company and keeping the design efforts going is risky. It's always uncertain whether the key design people will stick around after closing, regardless what they or the seller says. If the buyer has to replace key people, the new staff will not have the relationships with the client base.

Acquiring the entire company then canceling the design efforts is usually a risky decision as well. There are offices to deal with and staff that will have to be let go. Both processes are time consuming and detrimental to the existing client base.

My estimate is for every 20 buyers of a pure-play hosting company, there are only one or two buyers for hosting and design shop combos.

Investing in a data center may increase the value of the entire company by an enormous amount over time, but it definitely reduces liquidity in the short run. Typically, smaller Web hosts begin by collocating their equipment, eventually acquiring their own facilities if they are successful enough. After acquiring its own data center, a company will typically offer space to other smaller hosts, creating another service offering.

Owning an underutilized data center reduces the number of one type of buyer, the "cash flow buyer," but invites a new category of buyer, the "asset and cash flow buyer." The latter is looking to grow through acquisitions and make the swap from colocation to owning the data center. The less remaining capacity in a data center, the more "cash flow" a deal will be, and therefore more more liquid.

M. Eric Furlow is president of Furlow Consulting (furlowconsulting.com), which helps individuals and corporations merge, acquire, divest and value telecommunication and Internet companies.