Good points... 1. Economy can go bad, and you could end up with a negative cash flow, however this is a lease over 12 months, your subs are putting $20 into your pocket, and $30 to pay a lease. We make people pay $150 for a 2 yr contract, $175 for a 1yr contract, $200 for no contract. This pays for the labor and potential early cancelation. From the start, you are making money. The 100 subs at $150 an install bring in an additional $15,000 in revenue. We would need 2 - 2 person crews (at $12.50/hr) to do 100 installs, which is roughly $8,000 in labor. That put's $7,000 into your pocket to build out. 2. Fork lift upgrade - Let's hope you aren't fork lift upgrading within 12 months... 3. Mass storm = Insurance Claim.
Now, I'm not reaching this model 100%, but I am having troubles finding issues with this gameplan. I have found a few leasing companies that will lease to us at 3-5%. It just kind of makes sense at this rate, while at 5-10% I would question it, and at 10-20% (Agility) I probably would stay away from it. Regards, Chuck Hogg Shelby Broadband 502-722-9292 ch...@shelbybb.com http://www.shelbybb.com -----Original Message----- From: wireless-boun...@wispa.org [mailto:wireless-boun...@wispa.org] On Behalf Of RickG Sent: Sunday, November 08, 2009 11:48 PM To: WISPA General List Subject: Re: [WISPA] CPE - who buys it? Normally, I'd choose door #2. In addition, the lease payment is full tax deduction. I like many aspects of leasing. But, you better have a good business plan because if you lose subs or service pricing goes down you could be caught in an negative cash flow very quickly. Also, what if you need to forklift upgrade before the lease is up? Or you have a mass amount of equipment go bad because of something like a lightning storm? Depending on where things are with the company and the economy debt free may be best at the time. Not arguing, just asking :) -RickG On Sun, Nov 8, 2009 at 10:35 PM, Chuck Hogg <ch...@shelbybb.com> wrote: > Let me ask you this though... > > Would you rather > > 1) Buy $5,000 worth of Canopy equipment per month at 25 installs per > month (new $1,250 in revenue at $50/mth) > > - Or - > > 2) Obtain a lease at $3,000 per month for 100 installs per month ($5,000 > in revenue at $50/mth). Essentially, you are putting $2k in the bank > after paying $3k on the lease for 12 months then $5,000 per month after > that. > > Take this as being done over 2 years. > > Option 1 has 600 customers paying $50 per month at $30k per month and is > debt free. After two years, if you were to attempt to value your > company at $500-600 per sub, your company is worth 360k. > > Option 2 has 2400 customers paying $50 per month at $120k per month and > is in debt (based on a rotating amortization schedule) in debt only > $110k (doing it in my head, it's approximate). After two years, if you > were to attempt to value your company at $500-600 per sub, your company > is worth $1.2 Million with a debt of $110k net $1.1 Million. > > These are based on $50 per month averages, some of you are more, some of > you are less. I learned this lesson from a friend of mine who told me > the local cable co. is leasing every piece of equipment that goes to a > customer. That way they are never operating on negative cashflow while > maximizing available customers. Before I started leasing, I was Option > 1. After leasing, our available cash has increased greatly offering > many company benefits, like increasing our footprint, new vehicles, etc. > We pay for about half our monthly equipment by leasing. > > Regards, > Chuck Hogg > Shelby Broadband > 502-722-9292 > ch...@shelbybb.com > http://www.shelbybb.com > > > -----Original Message----- > From: wireless-boun...@wispa.org [mailto:wireless-boun...@wispa.org] On > Behalf Of Mike > Sent: Sunday, November 08, 2009 10:16 PM > To: WISPA General List > Subject: Re: [WISPA] CPE - who buys it? > > Oh heck no. My balance sheet looks awesome; no debt; positive cash > flow. > > Mike > > At 03:56 PM 11/8/2009, you wrote: > >Do you feel it has a negative affect on your companies value if you > dont own > >the CPE? > > > >On Sun, Nov 8, 2009 at 3:50 PM, Michael Baird <m...@tc3net.com> wrote: > > > > > You don't have to pay property tax on the CPE. You don't have to go > pick > > > up the device if the customer quits. You can charge the customer for > > > replacement radios. You can offer a value add-on product such as > modem > > > insurance. > > > > > > Regards > > > Michael Baird > > > > I've always provided the CPE to the end user and retained > ownership as > > > part > > > > of the service. That was mostly due to the high cost of CPE in the > past. > > > > With the advent of lower CPE cost, I'm considering changing that > to where > > > > the customer buys their own CPE. I'd like to hear the pros and > cons to > > > this > > > > strategy. > > > > -RickG > > > > > > > > > > > > > > > > > > ------------------------------------------------------------------------ > -------- > > > > WISPA Wants You! 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