Tom, some good points. Blair, a valid point as well--often, getting _too_ caught up in the numbers early on can be way to time consuming relevant to resources.
However, proper accounting doesn't need to be all that time consuming, and, in the end, is the difference between a profitable business and a non-profitable business. Peter from Rad-Info (who does some consulting of these lines) used to relate some stories about accounting practices at NSPs (DSL reseller) who bought circuits at $25, sold for $33, and somehow imagined they were "making money" despite the fact that their costs of sells, management, support, bandwidth, etc.. as about $12 per circuit (meaning they were losing $2 per circuit). Knowing costs is important. Talk to Peter (on a consulting basis) or other similar people or ask around and you can generally get a good idea for what it "typically" costs for support and billing and so forth, items that can be really hard to calculate well on a small scale. Some people do get by with "casual accounting" because they have a good innate sense of costs of doing business. Many--myself included--can really screw themselves over if they aren't careful because if they don't do careful calcuations, they tend to lowball the cost, forget or underestimate a lot of the "hidden" costs of providing services, and so forth. Small business owners also often don't differentiate between "profit" and "what they pay themselves", which puts themselves in a hole for growing and expanding down the road because their cost structure doesn't allow for them to replace their own labor with hired help. Just an observation that Tom touched on: small service providers tend to calculate on a monthly basis (understandable if you're worried about making payroll next month!) and larger providers tend to calculate based on 1,3, and 5 year models (or longer). The latter is _very_ beneficial and helps make a lot better business decisions in terms of equipment, advertising, and so forth. "6 month ROI or 4 month ROI or whatever" is a limiting metric for anything other than ensuring cashflow. I'd say "X% ROI" over 2 years or 1 year or whatever" is far more meaningful in terms of maximizing profit--cash flow problems can be resolved in ways other than going for quick ROI. On Nov 30, 2007 5:24 PM, Blair Davis <[EMAIL PROTECTED]> wrote: > I agree with you to a point.... > > But, as a small company, 2 man shop with a casual laborer on an as > needed basis, we find that considering our 'overhead', (bandwidth, > labor, truck, support, rent, utility's and such) as a fixed cost of > doing business much simpler to keep track of. > > So I figure the install costs as equipment+accessory's+supplies+labor. > I shoot for the install price to cover equipment and accessory's and > figure to recover supplies and labor during the first 3 months of service. > > The marginal cost of adding another user is nil, once the install costs > are covered. The difference between supporting 200 users and 201 users, > as an example, is, IMHO, too small to worry about. As expansion occurs, > we find it necessary to upgrade our bandwidth and such. This increases > our fixed costs per user, but by the time we need to do it, we have the > additional users to support it. And when we need to add a person, we > will be able to do that as well. > > There may, likely are, better ways to do it. But I am reminded of the > story of the accountant and the peanut rack. > > > Marlon K. Schafer wrote: > > In my mind, it all has to be counted. At the end of the day each > > customer has a fixed cost. Breakeven happens when any revenue ABOVE > > those fixed costs has paid back any customer acquisition costs. > > > > I don't think it's honest to say that one breaks even when counting > > 100% of the monthly customer revenue. There are tech support costs, > > bandwidth costs, billing costs etc. that are added with every new > > customer. And, as you say, at some point extra people have to be > > added to the company and that cost gets spread over all subs. > > > > laters, > > marlon > > > > ----- Original Message ----- From: "Jeff Broadwick" > > <[EMAIL PROTECTED]> > > To: "'WISPA General List'" <wireless@wispa.org> > > Sent: Friday, November 30, 2007 5:34 AM > > Subject: RE: [WISPA] What basic ROI do you target? > > > > > >> That's an interesting way of calculating the ROI. > >> > >> You could also take out fixed costs from your calculations and only > >> add in > >> those (variable) costs that relate directly to the new sub. If you > >> aren't > >> adding staff or getting a bigger office, you wouldn't need to factor > >> those > >> costs into the calculation. > >> > >> Jeff > >> > >> > >> > >> -----Original Message----- > >> From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED] On > >> Behalf Of Marlon K. Schafer > >> Sent: Thursday, November 29, 2007 9:47 PM > >> To: WISPA General List > >> Subject: Re: [WISPA] What basic ROI do you target? > >> > >> For AP's it's ok if I pay them off in 3 to 4 years. I try to do 4 year > >> loans for all hardware. > >> > >> For CPE this gets more complicated. Everyone wants to count gross > >> income > >> from that customer to pay off the gear. That's really not right > >> though as > >> every customer has a cost to them. > >> > >> We use NET revenue to figure out payback times. I ran about a 20% > >> margin > >> last year, it'll be higher than that this year but I don't have the > >> numbers > >> yet so I'll stick with the easy number. At an average of $37.5 per > >> sub we > >> figure it out at $8ish per sub per month. We loose $50 to $100 per > >> installation. It's a bit better than that right now as the hardware > has > >> come down a bit but we're holding the installation costs up. > >> > >> So I'm in the 7 to 13 month time frame to go cash flow positive on each > >> customer. > >> > >> Our growth rates are running over 25% per year so this time lag can be > a > >> real issue. In fact, it's probably THE hardest thing for us to manage. > >> laters, > >> marlon > >> > >> ----- Original Message ----- > >> From: "Patrick Leary" <[EMAIL PROTECTED]> > >> To: "WISPA General List" <wireless@wispa.org> > >> Sent: Thursday, November 29, 2007 4:35 PM > >> Subject: [WISPA] What basic ROI do you target? > >> > >> > >> I am curious about how divergent the responses may be. In your answer, > >> include just the cost of the truck roll and CPE measured against any > >> set-up and service initiation fees charged with the monthly > subscription > >> fee. > >> > >> Years ago, it was not uncommon for WISPs to say they need a 24-month > >> basic return per subscriber. These days I suspect most will say under 9 > >> months. > >> > >> Patrick Leary > >> AVP, Market Development > >> Alvarion, Inc. > >> o: 650.314.2628 > >> c: 760.580.0080 > >> [EMAIL PROTECTED] > >> > >> > >> > >> > >> > **************************************************************************** > >> > >> ******** > >> This footnote confirms that this email message has been scanned by > >> PineApp > >> Mail-SeCure for the presence of malicious code, vandals & computer > >> viruses(84). > >> > **************************************************************************** > >> > >> ******** > >> > >> > >> > >> > >> > >> > >> > >> > **************************************************************************** > >> > >> ******** > >> This footnote confirms that this email message has been scanned by > >> PineApp Mail-SeCure for the presence of malicious code, vandals & > >> computer > >> viruses. > >> > **************************************************************************** > >> > >> ******** > >> > >> > >> > >> > >> > >> > ---------------------------------------------------------------------------- > >> > >> ---- > >> WISPA Wants You! Join today! > >> http://signup.wispa.org/ > >> > ---------------------------------------------------------------------------- > >> > >> ---- > >> > >> WISPA Wireless List: wireless@wispa.org > >> > >> Subscribe/Unsubscribe: > >> http://lists.wispa.org/mailman/listinfo/wireless > >> > >> Archives: http://lists.wispa.org/pipermail/wireless/ > >> > >> > >> > >> > ---------------------------------------------------------------------------- > >> > >> ---- > >> WISPA Wants You! Join today! > >> http://signup.wispa.org/ > >> > ---------------------------------------------------------------------------- > >> > >> ---- > >> > >> WISPA Wireless List: wireless@wispa.org > >> > >> Subscribe/Unsubscribe: > >> http://lists.wispa.org/mailman/listinfo/wireless > >> > >> Archives: http://lists.wispa.org/pipermail/wireless/ > >> > >> > >> > >> > -------------------------------------------------------------------------------- > >> > >> WISPA Wants You! Join today! > >> http://signup.wispa.org/ > >> > -------------------------------------------------------------------------------- > >> > >> > >> WISPA Wireless List: wireless@wispa.org > >> > >> Subscribe/Unsubscribe: > >> http://lists.wispa.org/mailman/listinfo/wireless > >> > >> Archives: http://lists.wispa.org/pipermail/wireless/ > > > > > > > > > -------------------------------------------------------------------------------- > > > > WISPA Wants You! 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