Pete,
Great post.
The other thing that gets to be a problem as subscriber base grows is....
You can't be two places at the same time. The average time per sub to
support them may not be very high, and easilly done with one technician
based on total work hours in a day. But failures rarely are courtious
enough to wait for the previous outage to finish getting repaired first. :-)
The staffing needs for support can be much higher than expected, if good
response time is promised or expected by the subs.
Tom DeReggi
RapidDSL & Wireless, Inc
IntAirNet- Fixed Wireless Broadband
----- Original Message -----
From: "Pete Davis" <[EMAIL PROTECTED]>
To: "WISPA General List" <wireless@wispa.org>
Cc: <[EMAIL PROTECTED]>
Sent: Wednesday, May 31, 2006 12:19 AM
Subject: Re: [WISPA] This is HUGE!
Here is an example of a ROI period ending.
I put in a $500/mo T1 and rent a $100/mo tower space. My fixed costs are
$600/mo
I put in a $1000 AP and router, and buy 100 $200 CPE. I am now $21000 in
the hole.
Each customer is paying me $50/mo. ($5000/mo total)
My ROI is 5 months, and my fixed cost per customer is $6 (upstream
bandwidth and tower rent), leaving me $32/mo ($3200) "after ROI" profit.
That's all fine and good if this is your hobby, and you are not trying to
make a living at this.
I just need 5 of these towers/AP's/model to pay for salaries, trucks,
replacement CPE, installers, tools, and trips to conventions and trade
shows.
I also need 3 more of these towers to pay interest on the bank note from
borrowing the original $21,000, which was more like $200,000 by the time
we over-spent, under planned, over estimated the demand, underestimated
the costs, overestimated the employees abilities to work, underestimated
the damage that lighting can cause, and so on and so forth.
I also need 7 more of these towers to offset the cost of not actually
installing 100 clients on day 1, and not getting $100 tower rent, not
getting 100 clients per AP, and not getting $200 CPE, and to offset the
deadbeats who write hot checks, paying the cell phone bill, buy the fender
when an antenna falls off of the roof during an install, buy the insurance
to pay for it next time, buy new PCs, put tires on the trucks, change the
oil, buying a mail server, buying another server to remove the spam from
the first mail server, buying spare servers, routers, tools, and paying
consultants when I cannot figure it out.
Then I need another 14 towers to pay for the psychotherapist when go nuts
trying to manage 2900 subscribers, who are all bitching and moaning
because their PC has a virus, or their kid is downloading porn, or maybe
they are getting spam, or they can't get their bittorrent client to
download more than 500kbps.
I am not there yet. We are still working on getting tower number 7 online,
and installing customer number 350'ish, and I am not on the mood altering
drugs... yet.
Eventually, there is a model there for making money in this business
somewhere between the hobby stage and the looney bin.
The ways to do that should be the same as any other business whether you
are selling internet, real estate, health care, computers, or donuts.
1: Time is money, so don't waste time or money.
2. Don't cut corners.
3. Don't piss off the customers.
Pete Davis
NoDial.net
Travis Johnson wrote:
Tom,
There is no such thing as "average profit per sub after ROI period". Let
me give an example:
I lease all my CPE. It is a recurring monthly debt that will never go
away. Even after 3 years, when I own the CPE, there will be new CPE that
needs purchased... and thus new towers, new AP's, new backhauls, new
routers, new bandwidth, new whatever. Even if I move that paid for CPE to
a new customer on the edges of my network, there are still costs
mentioned above for that customer.
Maybe I'm not thinking the same as you, but I can never see an "after ROI
period". It never happens.
Travis
Microserv
Tom DeReggi wrote:
I agree current profit is irrelevant, when considering company totals
during the early growth period.
But calcualted future Profit clearly is relevant, as far as how much
profit will be made per sub, and how soon.
Profitabilty can be misleading when jsut considering accounting
paperwork (profit loss / balance sheets)
I'll give an example:
Lets say a company gets an ROI in 1 year. And had 4 years of selling
subs. And by the 4th year, profit would be being made from each sub.
But then lets says a company had a 100% growth spurt in the 5th year.
And lets say there is a 1 year ROI, meaning 12 dollars needs to be spent
for ever new dollar that is made. Because the growth rate of the
company is so much higher in the later year, the expendatures are far
greater than the revenue comming in from the samller customer base taken
on the first 4 years. Thus, it appears the company is losing money and
not profiting.
When in actuallity, the company has record high success. All
pre-existing subs ARE 100% profitable, and lot of new growth has been
made to replicate the previous years successful model.
So yes, profitable books may mean a company is not growing and not
making new sales.
However, showing the average profit per sub, after the ROI period is a
VERY relevant bit of information. Its what defines the value of the
business model in my mind.
In other words:
Forcasted Profit margin based on current years proven track record.
Tom DeReggi
RapidDSL & Wireless, Inc
IntAirNet- Fixed Wireless Broadband
----- Original Message ----- From: "Matt Liotta" <[EMAIL PROTECTED]>
To: <[EMAIL PROTECTED]>; "WISPA General List" <wireless@wispa.org>
Sent: Tuesday, May 30, 2006 6:19 PM
Subject: Re: [WISPA] This is HUGE!
Profit is irrelevant for an early stage growth company.
-Matt
Peter R. wrote:
Because number of subs is the measuring stick.
Revenue is more important; but profit is the most important.
Not many can speak to profit, so they measure in subs.
- Peter
Matt Liotta wrote:
Not sure why the number of customers is even important when the
quality of customers can vary so wildly. I run into WISPs regularly
whose ARPU is barely above $100. At 1000 customers an ARPU of $100 is
only $1.2M per year. That's a lot of radios and a lot of customers
for very little revenue. Compare this to CBeyond, which is an
Atlanta-based CLEC that in recent time went public. Today they have
about 17,000 customers, but their ARPU is $761. With just 1000
customers, an ARPU of $761 would be worth $9.1M. Or to look at it a
different way, with 17,000 customers an ARPU of $100 would only be
$20.4M compared with the $155.2M they pull in now.
A WISP would be wise to raise their ARPU as opposed to the number of
customers.
-Matt
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