Say your revenue is $1M per year, but your net income is –$250K. What is that
worth?
Negative amounts. You would probably have to pay someone to buy it.
Another company has revenue of $1M. Net income of +250K year after year. What
is it worth.
At least $1M.
These are income base approaches. There are net asset based/cost approaches.
They attempt to value the fair market value of the assets.
And there are market approaches. What is your book worth.
You really have to look at all three. Back in the day when I was doing lots of
acquisitions I would give you $250-$500 per customer (market approach) and
$1000 per customer if it was a good Canopy network (combination of Market and
Asset approach). But that is because we had some pretty expert knowledge on
what those were worth. The ebidta approach (net income) was somewhat worthless
because many of these guys either milked the companies dry or were simply bad
at business.
But if they do have a nice EBIDTA year after year, you can make an offer based
on that alone believing you can operate as well or better than they did. But
you really need to look at all three methods and analyze the potential changes
in the competition picture etc.
But there is NO valuation method that only looks at revenue. People with
crappy companies will try to tell unsophisticated potential buyers that a 1X or
2X revenue is “the standard way” to value a business. BS.
From: Forrest Christian (List Account)
Sent: Friday, August 21, 2020 7:21 PM
To: AnimalFarm Microwave Users Group
Subject: Re: [AFMUG] Buying and selling ISP’s
The last one we looked at purchasing, the owner wanted "much more than 1x
revenue". We knew from experience with the gear they were using, and the way
that they had it all put together that it was going to require replacing every
bit of gear in the network and in some cases fixing towers themselves. We
walked away from that one. Would have been happy to have their customer base,
but it wasn't worth what the owner was demanding.
On the other hand, if one walked into a network that was using similar gear,
was designed well, and so on, paying a premium would have been worth it.
On Fri, Aug 21, 2020 at 6:26 PM Ryan Ray <ryan...@gmail.com> wrote:
I don't know about your business, but mine is run so nicely that if someone
bought it, you wouldn't have to do shit all other than billing and normal
troubleshooting. That's why anyone who does a generalized "ISP is worth x*
dollars" doesn't make any sense. It's so dependant on the business and the
area.
On Fri, Aug 21, 2020 at 5:02 PM Ken Hohhof <af...@kwisp.com> wrote:
I heard an “expert” once on a radio show advising small business owners how
to prep their business for sale. The advice was to cut costs to inflate EBITDA
because that’s what the sale price would be based on. So if the seller
followed that advice, network upgrades and maintenance would have been
neglected. On the other hand, if you planned to cut redundant staff, some of
that might have already been done.
From: AF <af-boun...@af.afmug.com> On Behalf Of cjwstudios
Sent: Friday, August 21, 2020 6:30 PM
To: AnimalFarm Microwave Users Group <af@af.afmug.com>
Subject: Re: [AFMUG] Buying and selling ISP’s
1x annual revenue and hope the customers stay on
On Fri, Aug 21, 2020 at 5:43 PM Matt Hoppes
<mattli...@rivervalleyinternet.net> wrote:
This is the issue I’ve always had when I’ve looked at buying an ISP. It
always seems like a lot more money I would have to put out to buy then I could
just build and take the customers if something is wrong with the current
network.
> On Aug 21, 2020, at 12:43 PM, Seth Mattinen <se...@rollernet.us> wrote:
>
> On 8/20/20 8:13 PM, Steve Jones wrote:
>> I think you either buy or sell, isp isnt really a flip thing
>
>
> There is/was someone in my part of the country buying up ISPs and
trying to package them all together as a flip. My ISP customers tell me it's
far easier to get the flipper's customers to cancel and switch than buy their
company.
>
> --
> AF mailing list
> AF@af.afmug.com
> http://af.afmug.com/mailman/listinfo/af_af.afmug.com
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