BTW, if you do buy a WISP, make sure the tower leases and colocation agreements are actual paper agreements, not informal agreements, and see if they are transferable.
And watch out for prepaid customer accounts. Like paid quarterly or annual. You will have to provide service for on average 6 months with no revenue to annual prepay customers. If there are a significant percentage of annual prepays, you should expect the seller to get a lower price to account for this. Also realize that a certain percentage of those annual customers may already be ex customers, you just don’t know it yet. They may have not asked for a prorated refund, or the seller may not have offered that. From: AF <af-boun...@af.afmug.com> On Behalf Of Ken Hohhof Sent: Friday, August 21, 2020 9:13 PM To: 'AnimalFarm Microwave Users Group' <af@af.afmug.com> Subject: Re: [AFMUG] Buying and selling ISP’s It seems like JAB popularized the model of x times gross revenue or $x per subscriber. I think their mindset was literally they were buying customers, and when they got to some magic customer count, they could find a buyer, flip the whole thing and cash out. Also I think the JAB guys came out of the cable TV acquisitions of the 1980’s and 1990’s where a few investors gobbled up tons of local cable systems. The magic number seemed to be $2000 per sub. Initially around $1000 but as high as $5000 at the peak of the consolidation frenzy. Which back then was probably a lot more than 1x or 2x revenue. Back in the dialup days (and every dialup ISP owner intended to sell at some point), valuations were very much x many months revenue or x per sub. But I guess costs and infrastructure were no big deal with dialup. Yes you might buy an ISP that used Livingston equipment and you preferred Ascend. In reality, many dialup ISPs used wholesale modem banks and their only expense was advertising, and their only asset was customers. From: AF <af-boun...@af.afmug.com <mailto:af-boun...@af.afmug.com> > On Behalf Of ch...@wbmfg.com <mailto:ch...@wbmfg.com> Sent: Friday, August 21, 2020 8:42 PM To: AnimalFarm Microwave Users Group <af@af.afmug.com <mailto:af@af.afmug.com> > Subject: Re: [AFMUG] Buying and selling ISP’s 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 <mailto: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 <mailto: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 <mailto: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 <mailto: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 <mailto: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 > <mailto: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 <mailto:AF@af.afmug.com> > http://af.afmug.com/mailman/listinfo/af_af.afmug.com -- AF mailing list AF@af.afmug.com <mailto:AF@af.afmug.com> http://af.afmug.com/mailman/listinfo/af_af.afmug.com -- AF mailing list AF@af.afmug.com <mailto:AF@af.afmug.com> http://af.afmug.com/mailman/listinfo/af_af.afmug.com -- AF mailing list AF@af.afmug.com <mailto:AF@af.afmug.com> http://af.afmug.com/mailman/listinfo/af_af.afmug.com -- - Forrest _____ -- AF mailing list AF@af.afmug.com <mailto:AF@af.afmug.com> http://af.afmug.com/mailman/listinfo/af_af.afmug.com
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