I agree market size is a factor, but it will not apply to all candidates.
Time in business also matter. Actually longer in business works agaisnt you,
when considering market size..
They ask... If there is so much potential market, after all these years, why
don't you have it yet?
Therefore bringing attention to the sellers weaknesses or worse doubt
regarding market factors which could limit viabilty of business model.
Some one in need gets a lower selling price, than someone that is capable of
materializing market expectations.
I've been argueing for YEARS, that revenue is way over rated as a method to
evaluate a company's worth. There are so many other more important factors
such as how much revenue will your company enable the buyer to obtain
because they have your assets.
The fiber companies do the same thing. They'll try and sell you Dark fiber
alone at a higher price than (Metro GigE) Dark Fiber + Equipment + Managed
Broadband Service.
The reason is the value is perceived as what the most lucrative buyer
prospect could do with the potential of the strand, not the value to you
today specifically.
The fear is that a small provider will buy the dark fiber cheap and resell
it to a big player for a higher margin at still less than market price that
could destroy the market, by selling super cheap.
Even though a DF strand is less expensive to delvier than a Manage GIGE, teh
Dark Fiber is valued at 80GBs or more, not as a peice of cable. Or so the
Fiber sellers try to justify.
WISPs could use the same principle to evaluate their infrastructure. If the
WISP has the abilty to turn the market upside down (say GB Wireless), it
will not be evaluated by just a WISP's revenue that may be under selling
their services to survive in early stages, it may very well be evaluated
based on what it is worth to the provider that could leverage the networks
advatange the best, or more so the damage that could occur to the market if
their biggest competitor got their hands on the asset.
But with that said... You can't argue a WISP to be less valueable than what
one comes up by using revenue as the method of measurement.
If a WISP is vulnerable, it may come down to a revenue evaluation.
A Buyer will start taking away point for everything they identify is a flaw,
and the seller will start adding points for everything they think is a
unique strategic advantage.
If evaluating just equipment similar arguements apply. Standard accounting
methods may render in place equipment worthless if it is depreciated. More
so if it is a less than future generation product line that is in place.
Everyone wants the latest and greatest for maximum potential. But at the
same time, the seller can look at that equipment in place and evaluate it's
worth as the revenue it generates. If I can put a $100 radio in palce and it
generates me $1000 a month, its worth a $1000 amonth, it has nothing to do
with the cost of the equipment. At minimum, its worth the equipment
calcualted value + man hours required to isntall, and man hours to engineer
where it needed to be installed. A lot of costs go into placing an antenna.
Property owner negotiations for example, Site Surveys and engineering. These
are all costs the buyer saves. The question comes up is... Can the buyer
recreate it themselves? Such as if the seller is going bankrupt the buyer
can jsut assume it at little charge, with a property owner eager to transfer
the agreement. Where as if teh seller is well in operation health without
urgency to sell, the only option may be to pay top dollar for the assets.
Wireless operation is worth what someone is willing to pay for it. And how
muchg they are willing to pay for it determines on how confident they are
with the projected revenues they could make from it. The number one factor
to determine a companies worth is your abilty to convey they value it has
towards obtain future revenue, without uncertainty.
Tom DeReggi
RapidDSL & Wireless, Inc
IntAirNet- Fixed Wireless Broadband
----- Original Message -----
From: "Brian Webster" <[EMAIL PROTECTED]>
To: "WISPA General List" <wireless@wispa.org>
Sent: Friday, October 26, 2007 11:59 AM
Subject: RE: [WISPA] Wireless System Valuation
I would think that it might also be good to know the total number of
potential customers that the wireless network footprint covers. A system
that covers a potential of 100,000 customers/households would be worth a
lot
more than one which might only have a maximum of 5,000 households able to
be
reached.
Thank You,
Brian Webster
www.wirelessmapping.com <http://www.wirelessmapping.com>
-----Original Message-----
From: David E. Smith [mailto:[EMAIL PROTECTED]
Sent: Friday, October 26, 2007 11:26 AM
To: WISPA General List
Subject: Re: [WISPA] Wireless System Valuation
Ron Wallace wrote:
What is the best method for determining the value of a "Wireless Internet
System"???
According to my college microeconomics professor, it's worth exactly
what someone else pays for it. :)
Are you looking at just hardware (which is pretty easily quantified), or
at a "system" including active customers (and the obligation to continue
providing service to them)?
If you're buying a complete business (or at least a bunch of customers)
it's normally valued as some multiple of monthly revenue. Depending on
your local market conditions, I've heard WISPs valued anywhere from 5x
to 12x that number. What, exactly, the number should be depends on those
local conditions, what other competition is in the area, whether those
customers are under any long-term contracts, the business' established
reputation, and about a zillion other things.
Sorry to be so very vague.
David Smith
MVN.net
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