Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
Yup... us too but now it's "I had to fold my online Poker hand because my connection went down... I lost $1,000." Travis Microserv Charles Wu wrote: Yep, me too. Right out of the starting gates over 10 years ago, straight with S-Corp. Too much stupid s**t too be sued over by being a service provider. For instance... Oh, your child saw porn? Maybe you should be watching over your child instead of trying to screw me out of every penny I own? Or... there were three companies products that YOU could have bought to protect your children from seeing that! Heh...we used to joke that our ISP was responsible for destroying billions of dollars of value in missed stock trades and market timings =) -Charles 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/
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
roflmao I had a guy tell me that he was doing thousands of dollars per day in stock business and needed a rock solid reliable connection. I offered to sell him a t-1. He said he couldn't afford the $500 per month. sheesh Just be honest so I can give you accurate advice! marlon - Original Message - From: Travis Johnson To: WISPA General List Sent: Thursday, June 04, 2009 6:26 AM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Yup... us too but now it's I had to fold my online Poker hand because my connection went down... I lost $1,000. Travis Microserv Charles Wu wrote: Yep, me too. Right out of the starting gates over 10 years ago, straight with S-Corp. Too much stupid s**t too be sued over by being a service provider. For instance... Oh, your child saw porn? Maybe you should be watching over your child instead of trying to screw me out of every penny I own? Or... there were three companies products that YOU could have bought to protect your children from seeing that! Heh...we used to joke that our ISP was responsible for destroying billions of dollars of value in missed stock trades and market timings =) -Charles 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/
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
Obviously doing thousands of dollars per day DOES NOT EQUAL making thousands of dollars per day. I had far too many of these self-important ego maniacs day trading on my system a few years back. Ironically, I'd rather have the crazy beanie baby collectors than the day-traders! -Original Message- From: wireless-boun...@wispa.org [mailto:wireless-boun...@wispa.org] On Behalf Of Marlon K. Schafer Sent: Thursday, June 04, 2009 12:13 PM To: WISPA General List Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability roflmao I had a guy tell me that he was doing thousands of dollars per day in stock business and needed a rock solid reliable connection. I offered to sell him a t-1. He said he couldn't afford the $500 per month. sheesh Just be honest so I can give you accurate advice! marlon - Original Message - From: Travis Johnson To: WISPA General List Sent: Thursday, June 04, 2009 6:26 AM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Yup... us too but now it's I had to fold my online Poker hand because my connection went down... I lost $1,000. Travis Microserv Charles Wu wrote: Yep, me too. Right out of the starting gates over 10 years ago, straight with S-Corp. Too much stupid s**t too be sued over by being a service provider. For instance... Oh, your child saw porn? Maybe you should be watching over your child instead of trying to screw me out of every penny I own? Or... there were three companies products that YOU could have bought to protect your children from seeing that! Heh...we used to joke that our ISP was responsible for destroying billions of dollars of value in missed stock trades and market timings =) -Charles 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! 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/
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
Because they probably aren't legally allowed to practice law in that state :-) Why give the client away :-) Tom DeReggi RapidDSL Wireless, Inc IntAirNet- Fixed Wireless Broadband - Original Message - From: Charles Wyble char...@thewybles.com To: WISPA General List wireless@wispa.org Sent: Thursday, June 04, 2009 1:42 AM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Advice I have heard from lawyers, is NEVER EVER EVER DO THIS (emphasis from them). RickG wrote: Very nice info Larry! So, what is your take on incorporating in a state other than your home state for tax reasons? Is it worth the effort? -RickG On Wed, Jun 3, 2009 at 1:09 PM, Larry Yunker leyun...@wispadvantage.com wrote: What you are referring to is called corporate formalities. These same concepts exist with regards to LLC's. For instance: You must have those officers which the state statute requires (usually president and secretary but some states require others), you must make those filings which the state statute requires, you must properly finance the company, you must reasonably insure the company, you must follow appropriate accounting procedures for the company, you must adhere to your own bylaws - articles of organization or other controlling documents, etc. The bottom line is that the more that you do to treat the company as an independent entity the less likely that someone can pierce the corporate veil. The more often that you treat the company like an empty shell or as something owned and controlled solely for your benefit, the more likely it is that a creditor can reach beyond the company and attach to your assets. Yet, I think the most commonly overlooked liability is the dreaded personal guarantee. Until your company has built up sufficient credit history of its own, it is likely that you will be asked to guarantee the liabilities of your company. When you purchase on credit or if you take out a loan, it is quite likely that you will be asked and/or required to sign a personal guarantee regardless of the structure of your company. If you sign such a document, you may be held personally liable for the underlying debt EVEN IF the company is a limited liability entity (such as a LLC or a S-Corp). Be CAREFUL, some of these guarantees allow the creditor to seek payment from YOU FIRST instead of even chasing the company! So, keep in mind that one of the biggest reasons for going with a limited liability entity early-on is NOT to limit your liability to creditors (they probably will reach you through personal guarantees). The reason to go with limited liability from the start is to limit your liability in tort (meaning when you or someone that works for you causes someone else to be hurt). Also remember that torts happen outside of the company AND inside of the company. I'd say at least half of the calls that I'm fielding these days come from people who have recently been laid-off from their employers and now they are suing their employers for some sort of tort. (wrongful discharge, employment discrimination, sexual harassment, etc.) - Larry -Original Message- From: wireless-boun...@wispa.org [mailto:wireless-boun...@wispa.org] On Behalf Of RickG Sent: Wednesday, June 03, 2009 11:29 AM To: WISPA General List Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Apparently, meeting minutes are one of the differences between an LLC Corporation. I do my minutes for the annual meeting. No biggie, but considering changing over to an LLC. -RickG On Wed, Jun 3, 2009 at 6:06 AM, George Rogato wi...@oregonfast.net wrote: Yeah, my accountant told me a story about one of his un named clients who was previously part of a corp . Turns out there was a lawsuit against a corporation that had filed for bk protection a couple years earlier. The person filing the lawsuit wanted to see the corporate minutes for the now defunct corporation to see if they were done on a regular basis. What they were after is, was it a real corporation that held directors meetings on a regular basis and kept minutes. if not, then the corporation would in fact be considered an illegal corporation and the shareholders would then be considered sole proprietors and the corporations bk would be over turned, leaving them open to that lawsuit. More so than exposing the share holders to that type of liability, the share holders, now sole proprietor or partners would have also filed false tax returns and would be subject to all those unpaid taxes and penalties interest etc. A can of worms indeed, when not done right. Travis Johnson wrote: I understand the corporate structure and how it works. I also know that if you follow all the proper corporate bylaws, they can NOT break the corporate barrier. Yes, they will try and list each person individually
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
I knew Tom would provide a full list (thanks!) I'm interested in minimizing taxes. I'd rather give the money to charity! (Although, the way we;re going, the AMerican Taxpayer will be a charitable organization soon!!!) -RickG On Thu, Jun 4, 2009 at 12:31 AM, Tom DeReggiwirelessn...@rapiddsl.net wrote: Aha... hitting on a complicated topic. That depends on what you are trying to accomplish by incorporating in another state. There are many potential reasons... 1) To be governed by a right to work state, to improve employer rights. (VA) 2) To avoid Property Tax (Delaware), or Sales Tax , in states that might not charge it. 3) To make it harder to be sued, meaning making it harder for the prospective opposition to travel to file claim. 4) To Take advantage of other complicated Tax law, that might benefit profits. 5) To gain incentives from the local government in the area that you newly locate to. 6) To take advantage of a specific State Corporate Law that may benefit your business model. (For example, in one state a non-profit director may take a larger salary than allowed in another state.) 7) To have less State Income Tax. 8) To take advantage of states with fewer anoying laws. (For example, a state that has less permit and licensing requirements). One of the factors is to determine whether where you incorporate has any effect. Sometimes it matters where you conduct business (where clients are located), or where offices and employees reside, or where property is located. It should also be noted that it is much easier to find good professional services in your state, when incorporated in your state, as they are likely licensed in your state. This has a convenience benefit. To not take advantage of that, there should be a clear reason why the alternative will be more beneficial. Tom DeReggi RapidDSL Wireless, Inc IntAirNet- Fixed Wireless Broadband - Original Message - From: RickG rgunder...@gmail.com To: leyun...@wispadvantage.com; WISPA General List wireless@wispa.org Sent: Thursday, June 04, 2009 12:01 AM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Very nice info Larry! So, what is your take on incorporating in a state other than your home state for tax reasons? Is it worth the effort? -RickG On Wed, Jun 3, 2009 at 1:09 PM, Larry Yunker leyun...@wispadvantage.com wrote: What you are referring to is called corporate formalities. These same concepts exist with regards to LLC's. For instance: You must have those officers which the state statute requires (usually president and secretary but some states require others), you must make those filings which the state statute requires, you must properly finance the company, you must reasonably insure the company, you must follow appropriate accounting procedures for the company, you must adhere to your own bylaws - articles of organization or other controlling documents, etc. The bottom line is that the more that you do to treat the company as an independent entity the less likely that someone can pierce the corporate veil. The more often that you treat the company like an empty shell or as something owned and controlled solely for your benefit, the more likely it is that a creditor can reach beyond the company and attach to your assets. Yet, I think the most commonly overlooked liability is the dreaded personal guarantee. Until your company has built up sufficient credit history of its own, it is likely that you will be asked to guarantee the liabilities of your company. When you purchase on credit or if you take out a loan, it is quite likely that you will be asked and/or required to sign a personal guarantee regardless of the structure of your company. If you sign such a document, you may be held personally liable for the underlying debt EVEN IF the company is a limited liability entity (such as a LLC or a S-Corp). Be CAREFUL, some of these guarantees allow the creditor to seek payment from YOU FIRST instead of even chasing the company! So, keep in mind that one of the biggest reasons for going with a limited liability entity early-on is NOT to limit your liability to creditors (they probably will reach you through personal guarantees). The reason to go with limited liability from the start is to limit your liability in tort (meaning when you or someone that works for you causes someone else to be hurt). Also remember that torts happen outside of the company AND inside of the company. I'd say at least half of the calls that I'm fielding these days come from people who have recently been laid-off from their employers and now they are suing their employers for some sort of tort. (wrongful discharge, employment discrimination, sexual harassment, etc.) - Larry -Original Message- From: wireless-boun...@wispa.org [mailto:wireless-boun...@wispa.org] On Behalf Of RickG Sent: Wednesday, June 03, 2009 11:29 AM
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
Yep, me too. Right out of the starting gates over 10 years ago, straight with S-Corp. Too much stupid s**t too be sued over by being a service provider. For instance... Oh, your child saw porn? Maybe you should be watching over your child instead of trying to screw me out of every penny I own? Or... there were three companies products that YOU could have bought to protect your children from seeing that! The ISP business and the liability with Insurance companies is what really gets me laughing! Scottie -- Original Message -- From: Travis Johnson t...@ida.net Reply-To: WISPA General List wireless@wispa.org Date: Tue, 02 Jun 2009 21:59:58 -0600 I understand the corporate structure and how it works. I also know that if you follow all the proper corporate bylaws, they can NOT break the corporate barrier. Yes, they will try and list each person individually, but if you have a good attorney, that is a simple motion to get the individuals removed (been there, done that). Travis Microserv Marlon K. Schafer wrote: It can be done a lot cheaper. But we work hard to do it right not cheap these days. And the corporate veil isn't as strong as it used to be. If your company screws up the officers (that's you) will be named on any suit these days too. marlon - Original Message - From: Travis Johnson To: WISPA General List Sent: Monday, May 25, 2009 9:53 AM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Huh? We incorporated in 1997 and I think total cost was less than $500. How do you ever expect to get away from having to do personal guarantees if you don't operate like a real business? Travis Microserv Marlon K. Schafer wrote: One more thing. I don't agree with your definitions per se'. We all have businesses. A proprietorship is a TYPE of business. We are a proprietorship because I'm not incorporated (incorporating is over rated and expensive to do right). I'm still a business though http://en.wikipedia.org/wiki/Business http://en.wikipedia.org/wiki/Sole_proprietorship http://en.wikipedia.org/wiki/Asset marlon - Original Message - From: Charles Wu c...@cticonnect.com To: WISPA General List wireless@wispa.org Sent: Sunday, May 24, 2009 10:03 PM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Hi Marlon, I think it's appropriate to make a few definitions and distinctions on things so everyone is on the same page Specifically, for purposes of making my point, I define Proprietorship: A commercial activity engaged in as a means of livelihood or profit Business: A unique system of processes and procedures that documents and codifies a specific method of proprietorship Asset: cash, inventory, equipment, infrastructure, customer contracts, brand, marketing, etc Grin. Sure it is. That's what a LOT of small business people do. It's also kind of common for doctors, dentists, plumbers etc Sometimes it sucks, Now, everything you stated above is just a method of proprietorship, and in most cases, from a sale perspective, a proprietorships isn't worth anything more than the depreciated value of its assets Say you were buying out the local plumber's office -- what would he have of value? His truck? Some old tools? A customer list / brand perhaps (but the reality of things is that customers do business with him because of him, and if you bought him out and he moved out of town, those customers would probably go back to being on the open market) Now, in comparing the WISP 'proprietorship' vs. the plumber, it's worth noting that the WISP is somewhat unique in that it results in the creation of an independent asset that holds onto a lot of value (e.g., the recurring revenue and everything that goes to support it); in many ways, this is akin to real-estate Not everyone out there even wants to get that big (if I had a nickle for every business owner that's told me the most fun they had and the most money they made was when it was just them, no employees..) But then again, that's one of the really cool things about this buisness, it's big enough and flexible enough to allow many different business models and operator dreams to bear fuit! True...and you have the added benefit of building an asset that has value (be happy we're not plumbers =) -Charles 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
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
Yeah, my accountant told me a story about one of his un named clients who was previously part of a corp . Turns out there was a lawsuit against a corporation that had filed for bk protection a couple years earlier. The person filing the lawsuit wanted to see the corporate minutes for the now defunct corporation to see if they were done on a regular basis. What they were after is, was it a real corporation that held directors meetings on a regular basis and kept minutes. if not, then the corporation would in fact be considered an illegal corporation and the shareholders would then be considered sole proprietors and the corporations bk would be over turned, leaving them open to that lawsuit. More so than exposing the share holders to that type of liability, the share holders, now sole proprietor or partners would have also filed false tax returns and would be subject to all those unpaid taxes and penalties interest etc. A can of worms indeed, when not done right. Travis Johnson wrote: I understand the corporate structure and how it works. I also know that if you follow all the proper corporate bylaws, they can NOT break the corporate barrier. Yes, they will try and list each person individually, but if you have a good attorney, that is a simple motion to get the individuals removed (been there, done that). Travis Microserv Marlon K. Schafer wrote: It can be done a lot cheaper. But we work hard to do it right not cheap these days. And the corporate veil isn't as strong as it used to be. If your company screws up the officers (that's you) will be named on any suit these days too. marlon - Original Message - From: Travis Johnson To: WISPA General List Sent: Monday, May 25, 2009 9:53 AM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Huh? We incorporated in 1997 and I think total cost was less than $500. How do you ever expect to get away from having to do personal guarantees if you don't operate like a real business? Travis Microserv Marlon K. Schafer wrote: One more thing. I don't agree with your definitions per se'. We all have businesses. A proprietorship is a TYPE of business. We are a proprietorship because I'm not incorporated (incorporating is over rated and expensive to do right). I'm still a business though http://en.wikipedia.org/wiki/Business http://en.wikipedia.org/wiki/Sole_proprietorship http://en.wikipedia.org/wiki/Asset marlon - Original Message - From: Charles Wu c...@cticonnect.com To: WISPA General List wireless@wispa.org Sent: Sunday, May 24, 2009 10:03 PM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Hi Marlon, I think it's appropriate to make a few definitions and distinctions on things so everyone is on the same page Specifically, for purposes of making my point, I define Proprietorship: A commercial activity engaged in as a means of livelihood or profit Business: A unique system of processes and procedures that documents and codifies a specific method of proprietorship Asset: cash, inventory, equipment, infrastructure, customer contracts, brand, marketing, etc Grin. Sure it is. That's what a LOT of small business people do. It's also kind of common for doctors, dentists, plumbers etc Sometimes it sucks, Now, everything you stated above is just a method of proprietorship, and in most cases, from a sale perspective, a proprietorships isn't worth anything more than the depreciated value of its assets Say you were buying out the local plumber's office -- what would he have of value? His truck? Some old tools? A customer list / brand perhaps (but the reality of things is that customers do business with him because of him, and if you bought him out and he moved out of town, those customers would probably go back to being on the open market) Now, in comparing the WISP 'proprietorship' vs. the plumber, it's worth noting that the WISP is somewhat unique in that it results in the creation of an independent asset that holds onto a lot of value (e.g., the recurring revenue and everything that goes to support it); in many ways, this is akin to real-estate Not everyone out there even wants to get that big (if I had a nickle for every business owner that's told me the most fun they had and the most money they made was when it was just them, no employees..) But then again, that's one of the really cool things about this buisness, it's big enough and flexible enough to allow many different business models and operator dreams to bear fuit! True...and you have the added benefit of building an asset that has value (be happy we're not plumbers =) -Charles WISPA Wants You! Join today! http://signup.wispa.org
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
Scottie, What made you go S-Corp over LLC? -RickG On Wed, Jun 3, 2009 at 2:44 AM, Scottie Arnett sarn...@info-ed.com wrote: Yep, me too. Right out of the starting gates over 10 years ago, straight with S-Corp. Too much stupid s**t too be sued over by being a service provider. For instance... Oh, your child saw porn? Maybe you should be watching over your child instead of trying to screw me out of every penny I own? Or... there were three companies products that YOU could have bought to protect your children from seeing that! The ISP business and the liability with Insurance companies is what really gets me laughing! Scottie -- Original Message -- From: Travis Johnson t...@ida.net Reply-To: WISPA General List wireless@wispa.org Date: Tue, 02 Jun 2009 21:59:58 -0600 I understand the corporate structure and how it works. I also know that if you follow all the proper corporate bylaws, they can NOT break the corporate barrier. Yes, they will try and list each person individually, but if you have a good attorney, that is a simple motion to get the individuals removed (been there, done that). Travis Microserv Marlon K. Schafer wrote: It can be done a lot cheaper. But we work hard to do it right not cheap these days. And the corporate veil isn't as strong as it used to be. If your company screws up the officers (that's you) will be named on any suit these days too. marlon - Original Message - From: Travis Johnson To: WISPA General List Sent: Monday, May 25, 2009 9:53 AM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Huh? We incorporated in 1997 and I think total cost was less than $500. How do you ever expect to get away from having to do personal guarantees if you don't operate like a real business? Travis Microserv Marlon K. Schafer wrote: One more thing. I don't agree with your definitions per se'. We all have businesses. A proprietorship is a TYPE of business. We are a proprietorship because I'm not incorporated (incorporating is over rated and expensive to do right). I'm still a business though http://en.wikipedia.org/wiki/Business http://en.wikipedia.org/wiki/Sole_proprietorship http://en.wikipedia.org/wiki/Asset marlon - Original Message - From: Charles Wu c...@cticonnect.com To: WISPA General List wireless@wispa.org Sent: Sunday, May 24, 2009 10:03 PM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Hi Marlon, I think it's appropriate to make a few definitions and distinctions on things so everyone is on the same page Specifically, for purposes of making my point, I define Proprietorship: A commercial activity engaged in as a means of livelihood or profit Business: A unique system of processes and procedures that documents and codifies a specific method of proprietorship Asset: cash, inventory, equipment, infrastructure, customer contracts, brand, marketing, etc Grin. Sure it is. That's what a LOT of small business people do. It's also kind of common for doctors, dentists, plumbers etc Sometimes it sucks, Now, everything you stated above is just a method of proprietorship, and in most cases, from a sale perspective, a proprietorships isn't worth anything more than the depreciated value of its assets Say you were buying out the local plumber's office -- what would he have of value? His truck? Some old tools? A customer list / brand perhaps (but the reality of things is that customers do business with him because of him, and if you bought him out and he moved out of town, those customers would probably go back to being on the open market) Now, in comparing the WISP 'proprietorship' vs. the plumber, it's worth noting that the WISP is somewhat unique in that it results in the creation of an independent asset that holds onto a lot of value (e.g., the recurring revenue and everything that goes to support it); in many ways, this is akin to real-estate Not everyone out there even wants to get that big (if I had a nickle for every business owner that's told me the most fun they had and the most money they made was when it was just them, no employees..) But then again, that's one of the really cool things about this buisness, it's big enough and flexible enough to allow many different business models and operator dreams to bear fuit! True...and you have the added benefit of building an asset that has value (be happy we're not plumbers =) -Charles 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
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
What you are referring to is called corporate formalities. These same concepts exist with regards to LLC's. For instance: You must have those officers which the state statute requires (usually president and secretary but some states require others), you must make those filings which the state statute requires, you must properly finance the company, you must reasonably insure the company, you must follow appropriate accounting procedures for the company, you must adhere to your own bylaws - articles of organization or other controlling documents, etc. The bottom line is that the more that you do to treat the company as an independent entity the less likely that someone can pierce the corporate veil. The more often that you treat the company like an empty shell or as something owned and controlled solely for your benefit, the more likely it is that a creditor can reach beyond the company and attach to your assets. Yet, I think the most commonly overlooked liability is the dreaded personal guarantee. Until your company has built up sufficient credit history of its own, it is likely that you will be asked to guarantee the liabilities of your company. When you purchase on credit or if you take out a loan, it is quite likely that you will be asked and/or required to sign a personal guarantee regardless of the structure of your company. If you sign such a document, you may be held personally liable for the underlying debt EVEN IF the company is a limited liability entity (such as a LLC or a S-Corp). Be CAREFUL, some of these guarantees allow the creditor to seek payment from YOU FIRST instead of even chasing the company! So, keep in mind that one of the biggest reasons for going with a limited liability entity early-on is NOT to limit your liability to creditors (they probably will reach you through personal guarantees). The reason to go with limited liability from the start is to limit your liability in tort (meaning when you or someone that works for you causes someone else to be hurt). Also remember that torts happen outside of the company AND inside of the company. I'd say at least half of the calls that I'm fielding these days come from people who have recently been laid-off from their employers and now they are suing their employers for some sort of tort. (wrongful discharge, employment discrimination, sexual harassment, etc.) - Larry -Original Message- From: wireless-boun...@wispa.org [mailto:wireless-boun...@wispa.org] On Behalf Of RickG Sent: Wednesday, June 03, 2009 11:29 AM To: WISPA General List Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Apparently, meeting minutes are one of the differences between an LLC Corporation. I do my minutes for the annual meeting. No biggie, but considering changing over to an LLC. -RickG On Wed, Jun 3, 2009 at 6:06 AM, George Rogato wi...@oregonfast.net wrote: Yeah, my accountant told me a story about one of his un named clients who was previously part of a corp . Turns out there was a lawsuit against a corporation that had filed for bk protection a couple years earlier. The person filing the lawsuit wanted to see the corporate minutes for the now defunct corporation to see if they were done on a regular basis. What they were after is, was it a real corporation that held directors meetings on a regular basis and kept minutes. if not, then the corporation would in fact be considered an illegal corporation and the shareholders would then be considered sole proprietors and the corporations bk would be over turned, leaving them open to that lawsuit. More so than exposing the share holders to that type of liability, the share holders, now sole proprietor or partners would have also filed false tax returns and would be subject to all those unpaid taxes and penalties interest etc. A can of worms indeed, when not done right. Travis Johnson wrote: I understand the corporate structure and how it works. I also know that if you follow all the proper corporate bylaws, they can NOT break the corporate barrier. Yes, they will try and list each person individually, but if you have a good attorney, that is a simple motion to get the individuals removed (been there, done that). Travis Microserv Marlon K. Schafer wrote: It can be done a lot cheaper. But we work hard to do it right not cheap these days. And the corporate veil isn't as strong as it used to be. If your company screws up the officers (that's you) will be named on any suit these days too. marlon - Original Message - From: Travis Johnson To: WISPA General List Sent: Monday, May 25, 2009 9:53 AM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Huh? We incorporated in 1997 and I think total cost was less than $500. How do you ever expect to get away from having to do personal guarantees if you don't operate like a real business? Travis Microserv Marlon K
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
Very nice info Larry! So, what is your take on incorporating in a state other than your home state for tax reasons? Is it worth the effort? -RickG On Wed, Jun 3, 2009 at 1:09 PM, Larry Yunker leyun...@wispadvantage.com wrote: What you are referring to is called corporate formalities. These same concepts exist with regards to LLC's. For instance: You must have those officers which the state statute requires (usually president and secretary but some states require others), you must make those filings which the state statute requires, you must properly finance the company, you must reasonably insure the company, you must follow appropriate accounting procedures for the company, you must adhere to your own bylaws - articles of organization or other controlling documents, etc. The bottom line is that the more that you do to treat the company as an independent entity the less likely that someone can pierce the corporate veil. The more often that you treat the company like an empty shell or as something owned and controlled solely for your benefit, the more likely it is that a creditor can reach beyond the company and attach to your assets. Yet, I think the most commonly overlooked liability is the dreaded personal guarantee. Until your company has built up sufficient credit history of its own, it is likely that you will be asked to guarantee the liabilities of your company. When you purchase on credit or if you take out a loan, it is quite likely that you will be asked and/or required to sign a personal guarantee regardless of the structure of your company. If you sign such a document, you may be held personally liable for the underlying debt EVEN IF the company is a limited liability entity (such as a LLC or a S-Corp). Be CAREFUL, some of these guarantees allow the creditor to seek payment from YOU FIRST instead of even chasing the company! So, keep in mind that one of the biggest reasons for going with a limited liability entity early-on is NOT to limit your liability to creditors (they probably will reach you through personal guarantees). The reason to go with limited liability from the start is to limit your liability in tort (meaning when you or someone that works for you causes someone else to be hurt). Also remember that torts happen outside of the company AND inside of the company. I'd say at least half of the calls that I'm fielding these days come from people who have recently been laid-off from their employers and now they are suing their employers for some sort of tort. (wrongful discharge, employment discrimination, sexual harassment, etc.) - Larry -Original Message- From: wireless-boun...@wispa.org [mailto:wireless-boun...@wispa.org] On Behalf Of RickG Sent: Wednesday, June 03, 2009 11:29 AM To: WISPA General List Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Apparently, meeting minutes are one of the differences between an LLC Corporation. I do my minutes for the annual meeting. No biggie, but considering changing over to an LLC. -RickG On Wed, Jun 3, 2009 at 6:06 AM, George Rogato wi...@oregonfast.net wrote: Yeah, my accountant told me a story about one of his un named clients who was previously part of a corp . Turns out there was a lawsuit against a corporation that had filed for bk protection a couple years earlier. The person filing the lawsuit wanted to see the corporate minutes for the now defunct corporation to see if they were done on a regular basis. What they were after is, was it a real corporation that held directors meetings on a regular basis and kept minutes. if not, then the corporation would in fact be considered an illegal corporation and the shareholders would then be considered sole proprietors and the corporations bk would be over turned, leaving them open to that lawsuit. More so than exposing the share holders to that type of liability, the share holders, now sole proprietor or partners would have also filed false tax returns and would be subject to all those unpaid taxes and penalties interest etc. A can of worms indeed, when not done right. Travis Johnson wrote: I understand the corporate structure and how it works. I also know that if you follow all the proper corporate bylaws, they can NOT break the corporate barrier. Yes, they will try and list each person individually, but if you have a good attorney, that is a simple motion to get the individuals removed (been there, done that). Travis Microserv Marlon K. Schafer wrote: It can be done a lot cheaper. But we work hard to do it right not cheap these days. And the corporate veil isn't as strong as it used to be. If your company screws up the officers (that's you) will be named on any suit these days too. marlon - Original Message - From: Travis Johnson To: WISPA General List Sent: Monday, May 25, 2009 9:53 AM Subject: Re: [WISPA] Quesiton on Funding
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
Yep, me too. Right out of the starting gates over 10 years ago, straight with S-Corp. Too much stupid s**t too be sued over by being a service provider. For instance... Oh, your child saw porn? Maybe you should be watching over your child instead of trying to screw me out of every penny I own? Or... there were three companies products that YOU could have bought to protect your children from seeing that! Heh...we used to joke that our ISP was responsible for destroying billions of dollars of value in missed stock trades and market timings =) -Charles 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/
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
Advice I have heard from lawyers, is NEVER EVER EVER DO THIS (emphasis from them). RickG wrote: Very nice info Larry! So, what is your take on incorporating in a state other than your home state for tax reasons? Is it worth the effort? -RickG On Wed, Jun 3, 2009 at 1:09 PM, Larry Yunker leyun...@wispadvantage.com wrote: What you are referring to is called corporate formalities. These same concepts exist with regards to LLC's. For instance: You must have those officers which the state statute requires (usually president and secretary but some states require others), you must make those filings which the state statute requires, you must properly finance the company, you must reasonably insure the company, you must follow appropriate accounting procedures for the company, you must adhere to your own bylaws - articles of organization or other controlling documents, etc. The bottom line is that the more that you do to treat the company as an independent entity the less likely that someone can pierce the corporate veil. The more often that you treat the company like an empty shell or as something owned and controlled solely for your benefit, the more likely it is that a creditor can reach beyond the company and attach to your assets. Yet, I think the most commonly overlooked liability is the dreaded personal guarantee. Until your company has built up sufficient credit history of its own, it is likely that you will be asked to guarantee the liabilities of your company. When you purchase on credit or if you take out a loan, it is quite likely that you will be asked and/or required to sign a personal guarantee regardless of the structure of your company. If you sign such a document, you may be held personally liable for the underlying debt EVEN IF the company is a limited liability entity (such as a LLC or a S-Corp). Be CAREFUL, some of these guarantees allow the creditor to seek payment from YOU FIRST instead of even chasing the company! So, keep in mind that one of the biggest reasons for going with a limited liability entity early-on is NOT to limit your liability to creditors (they probably will reach you through personal guarantees). The reason to go with limited liability from the start is to limit your liability in tort (meaning when you or someone that works for you causes someone else to be hurt). Also remember that torts happen outside of the company AND inside of the company. I'd say at least half of the calls that I'm fielding these days come from people who have recently been laid-off from their employers and now they are suing their employers for some sort of tort. (wrongful discharge, employment discrimination, sexual harassment, etc.) - Larry -Original Message- From: wireless-boun...@wispa.org [mailto:wireless-boun...@wispa.org] On Behalf Of RickG Sent: Wednesday, June 03, 2009 11:29 AM To: WISPA General List Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Apparently, meeting minutes are one of the differences between an LLC Corporation. I do my minutes for the annual meeting. No biggie, but considering changing over to an LLC. -RickG On Wed, Jun 3, 2009 at 6:06 AM, George Rogato wi...@oregonfast.net wrote: Yeah, my accountant told me a story about one of his un named clients who was previously part of a corp . Turns out there was a lawsuit against a corporation that had filed for bk protection a couple years earlier. The person filing the lawsuit wanted to see the corporate minutes for the now defunct corporation to see if they were done on a regular basis. What they were after is, was it a real corporation that held directors meetings on a regular basis and kept minutes. if not, then the corporation would in fact be considered an illegal corporation and the shareholders would then be considered sole proprietors and the corporations bk would be over turned, leaving them open to that lawsuit. More so than exposing the share holders to that type of liability, the share holders, now sole proprietor or partners would have also filed false tax returns and would be subject to all those unpaid taxes and penalties interest etc. A can of worms indeed, when not done right. Travis Johnson wrote: I understand the corporate structure and how it works. I also know that if you follow all the proper corporate bylaws, they can NOT break the corporate barrier. Yes, they will try and list each person individually, but if you have a good attorney, that is a simple motion to get the individuals removed (been there, done that). Travis Microserv Marlon K. Schafer wrote: It can be done a lot cheaper. But we work hard to do it right not cheap these days. And the corporate veil isn't as strong as it used to be. If your company screws up the officers (that's you) will be named on any suit these days too. marlon - Original Message - From: Travis Johnson
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
It can be done a lot cheaper. But we work hard to do it right not cheap these days. And the corporate veil isn't as strong as it used to be. If your company screws up the officers (that's you) will be named on any suit these days too. marlon - Original Message - From: Travis Johnson To: WISPA General List Sent: Monday, May 25, 2009 9:53 AM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Huh? We incorporated in 1997 and I think total cost was less than $500. How do you ever expect to get away from having to do personal guarantees if you don't operate like a real business? Travis Microserv Marlon K. Schafer wrote: One more thing. I don't agree with your definitions per se'. We all have businesses. A proprietorship is a TYPE of business. We are a proprietorship because I'm not incorporated (incorporating is over rated and expensive to do right). I'm still a business though http://en.wikipedia.org/wiki/Business http://en.wikipedia.org/wiki/Sole_proprietorship http://en.wikipedia.org/wiki/Asset marlon - Original Message - From: Charles Wu c...@cticonnect.com To: WISPA General List wireless@wispa.org Sent: Sunday, May 24, 2009 10:03 PM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Hi Marlon, I think it's appropriate to make a few definitions and distinctions on things so everyone is on the same page Specifically, for purposes of making my point, I define Proprietorship: A commercial activity engaged in as a means of livelihood or profit Business: A unique system of processes and procedures that documents and codifies a specific method of proprietorship Asset: cash, inventory, equipment, infrastructure, customer contracts, brand, marketing, etc Grin. Sure it is. That's what a LOT of small business people do. It's also kind of common for doctors, dentists, plumbers etc Sometimes it sucks, Now, everything you stated above is just a method of proprietorship, and in most cases, from a sale perspective, a proprietorships isn't worth anything more than the depreciated value of its assets Say you were buying out the local plumber's office -- what would he have of value? His truck? Some old tools? A customer list / brand perhaps (but the reality of things is that customers do business with him because of him, and if you bought him out and he moved out of town, those customers would probably go back to being on the open market) Now, in comparing the WISP 'proprietorship' vs. the plumber, it's worth noting that the WISP is somewhat unique in that it results in the creation of an independent asset that holds onto a lot of value (e.g., the recurring revenue and everything that goes to support it); in many ways, this is akin to real-estate Not everyone out there even wants to get that big (if I had a nickle for every business owner that's told me the most fun they had and the most money they made was when it was just them, no employees..) But then again, that's one of the really cool things about this buisness, it's big enough and flexible enough to allow many different business models and operator dreams to bear fuit! True...and you have the added benefit of building an asset that has value (be happy we're not plumbers =) -Charles 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! Join today! http://signup.wispa.org/ WISPA Wireless List: wireless@wispa.org Subscribe/Unsubscribe: http://lists.wispa.org/mailman/listinfo/wireless Archives: http
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
I read something the other day that indicated that something like 80 to 90% of the businesses out there are 4 people or less. Wish I could remember where that was. I know it was in relation to the recession. In the last recession people working for big companies got hurt, companies with 4 or less people almost all did BETTER. Go figure. marlon - Original Message - From: rea...@muddyfrogwater.us To: WISPA General List wireless@wispa.org Sent: Monday, May 25, 2009 1:48 PM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Charles, you really should investigate the business sizes out there. Without doing any research today, I'd say there were more one man band businesses out there than any other type, unless you're going to lump a lot of types together, like all the 2-100 employee businesses. And there's a lot of 2-10 people businesses, as well. How does a one man band work? Hard. And he often serves people who are engaged in similar enterprise. It isn't suited to all, nor even a majority of people, the small sector ( 1 - 10 people ) is probably the most resilient and dynamic of all business models out there. insert witty tagline here - Original Message - From: Charles Wu c...@cticonnect.com To: WISPA General List wireless@wispa.org Sent: Sunday, May 24, 2009 9:20 PM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Hi Rick, I applaud your effort -- I totally emphasize and understand your perspective, as 8 years ago, I was a one man shop working out of my college dorm room trying to get a business started There is an unfortunate reality that the one-man band is not a sustainable long-term operation -- for example, how will you ever go on a vacation? Or spend quality time with the wife without the ever-present threat / fear that lightening may strike...somewhere 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/
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
I understand the corporate structure and how it works. I also know that if you follow all the proper corporate bylaws, they can NOT break the corporate barrier. Yes, they will try and list each person individually, but if you have a good attorney, that is a simple motion to get the individuals removed (been there, done that). Travis Microserv Marlon K. Schafer wrote: It can be done a lot cheaper. But we work hard to do it right not cheap these days. And the corporate veil isn't as strong as it used to be. If your company screws up the officers (that's you) will be named on any suit these days too. marlon - Original Message - From: Travis Johnson To: WISPA General List Sent: Monday, May 25, 2009 9:53 AM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Huh? We incorporated in 1997 and I think total cost was less than $500. How do you ever expect to get away from having to do personal guarantees if you don't operate like a real business? Travis Microserv Marlon K. Schafer wrote: One more thing. I don't agree with your definitions per se'. We all have businesses. A proprietorship is a TYPE of business. We are a proprietorship because I'm not incorporated (incorporating is over rated and expensive to do right). I'm still a business though http://en.wikipedia.org/wiki/Business http://en.wikipedia.org/wiki/Sole_proprietorship http://en.wikipedia.org/wiki/Asset marlon - Original Message - From: Charles Wu c...@cticonnect.com To: WISPA General List wireless@wispa.org Sent: Sunday, May 24, 2009 10:03 PM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Hi Marlon, I think it's appropriate to make a few definitions and distinctions on things so everyone is on the same page Specifically, for purposes of making my point, I define Proprietorship: A commercial activity engaged in as a means of livelihood or profit Business: A unique system of processes and procedures that documents and codifies a specific method of proprietorship Asset: cash, inventory, equipment, infrastructure, customer contracts, brand, marketing, etc Grin. Sure it is. That's what a LOT of small business people do. It's also kind of common for doctors, dentists, plumbers etc Sometimes it sucks, Now, everything you stated above is just a method of proprietorship, and in most cases, from a sale perspective, a proprietorships isn't worth anything more than the depreciated value of its assets Say you were buying out the local plumber's office -- what would he have of value? His truck? Some old tools? A customer list / brand perhaps (but the reality of things is that customers do business with him because of him, and if you bought him out and he moved out of town, those customers would probably go back to being on the open market) Now, in comparing the WISP 'proprietorship' vs. the plumber, it's worth noting that the WISP is somewhat unique in that it results in the creation of an independent asset that holds onto a lot of value (e.g., the recurring revenue and everything that goes to support it); in many ways, this is akin to real-estate Not everyone out there even wants to get that big (if I had a nickle for every business owner that's told me the most fun they had and the most money they made was when it was just them, no employees..) But then again, that's one of the really cool things about this buisness, it's big enough and flexible enough to allow many different business models and operator dreams to bear fuit! True...and you have the added benefit of building an asset that has value (be happy we're not plumbers =) -Charles 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
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
I have a similar quote I read once that stuck with me. If you're going to go into business, build a business, not a practice. Randy Travis Johnson wrote: Marlon, If you think the WISP business is similar to a doctor or dentist or plumber, you are very mistaken. The best advice I have ever heard actually came from the son of a very wealthy doctor in our area. He sold his son find something that isn't trading your time for money. I heard that about 10 years ago in a meeting, and it has stuck with me forever. A doctor or dentist or plumber all trade their time for money. They bill per hour (even if it's $5,000 per hour) or per job, but they are still trading their time for money. The WISP business is nothing like this. It's actually a very unique business compared to anything else out there. It has recurring monthly income, yet the expenses are pretty much fixed. Other recurring income businesses that are similar would be insurance... however, their expenses vary from month to month depending on number of claims, size of claims, etc. Right now, if I stopped all my growth, my expenses would be exactly the same from month to month... and the income would remain the same as well. Travis Microserv Marlon K. Schafer wrote: - Original Message - From: Charles Wu c...@cticonnect.com To: WISPA General List wireless@wispa.org Sent: Sunday, May 24, 2009 8:56 PM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Marlon, Charles, your numbers are WAY off there. You can't base your numbers on the fact that you're willing to be on call 24x7, work 12 hour days 7 days / week as a function of normal business operations -- it simply isn't sustainable from a long term perspective Grin. Sure it is. That's what a LOT of small business people do. It's also kind of common for doctors, dentists, plumbers etc Sometimes is sucks, but remember that we can also give ourselves time off nearly anytime we really want it. I don't miss very many of the kid's baseball games, dance recitles, field trips or anything else. Eventually, your wife WILL leave you if you keep this up (on a side note, one of the biggest reasons I've seen for small WISPs selling out is the wife factor =) The reasons I've usually seen are that people get in this for a quick buck. When that doesn't happen they burn out/bail out. But that's no different than any other industry I see. And I've seen a lot, I've been doing office equipment repair work since about 1990 or 92. I've always tried to learn from my customers, what works, why etc. Not many bail on a company that's making good money, no matter how much time it's taking. If you were to replace yourself with normal employees that work 8-5 and who make market wages, you'd probably discover that your labor costs will go up $!0-15k / month (I would argue that you probably personally do the work of 3 people in your company) Believe it or not, I do the work of less than one most of the time. It's been a bit more than that lately but only because I'm too cheap to hire help and can't afford to replace all the my POS Tranzeo AP's with MT units all at once. Once I get the network running nicer my service calls will drop off a lot. The difference at the sites that are already done has been nothing short of amazing. The rest of the time I'm screwing around with WISPA stuff or helping local orgs of some kind. I might put in a 40 to 60 hour week, but a lot of the time is non esential. Also, if I get too busy I bring a helper along on my installs. 2 guys can usually knock one out in about 1/3rd the time of one person. Not sure why it goes so much faster, but it does. By the time I hit 600 to 800 subs I'm gonna need some help. Hiring that person will suck big time because I won't have enough work for them right away. That move alone will likely cut my margin down to nearly nothing for a couple of years. After you factor in your time / opportunity cost / resources / overhead / time spent training -- you will spend an additional 2x an employee's salary during the first 6 months of employment trying to get them trained up and productive -- and then, there's a good chance they just don't work out =) Yeah, that's the part that really sucks. Every time we hire a new person the one that's there drops to half time production for x months. It's a hard thing. Saying your numbers were off wasn't quite fair of me. They COULD be right on the money if a person structured the company that way. But not everyone lives in a market that will allow tens of thousands of customers. Not everyone out there even wants to get that big (if I had a nickle for every business owner that's told me the most fun they had and the most money they made was when it was just them, no employees
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
The mistake many make is that they think they should incorporate to protect their personal finance/liabilty from the business. Well, actually, its the opposite. A business needs to be protected from personal finance/liabilty. The government is smart enough to understand why a grant or loan recipient needs to be protected from one's personal finance and liabilty. Thus the need to be a LLC, Corp, or S-Corp. Other than simplicity, a Sole Proprietar does not offer anything a LLC and Scorp cant, and for that reason, I'd agree, that if someone wants to be treated like a safe sound business, from a financier, they should move beyond a Sole Proprietorship. I'm not saying Sole Propritorship does not have its place, jsut saying, the second third party money is needed, the business has evolved beyond the purpose of a SoleProprietor in my opinion. The beauty of it though is A Sole Proprieorship can easilly be converted to one of the other type businesses at any time. Also, Travis, being a Corp is not the only thing necessary to get beyond the personal guarantee. From my experience, lendors have asked that the borrower employ at least 6 employees, and show proof of their payroll in the financial reports, and/or do over 1 million dollars a year in revenue, to be considered large enough to bypass personal guarantee. As well, many times have asked for atleast three unique stockholders or principle in the Corp. Its much harder for a Corp owned in full by a single stockholder/founder to bypass a personal guarantee requirement. I think this is one of the reasons sometimes small WISPs stay a Sole Proprietorship longer than expected. If they know they dont meet the other requirements to bypass personal guarantees, or to secure loans by business financials alone, (revenue, diversity in ownership, # employees), whats the point? They might as well make their accounting life easier. Tom DeReggi RapidDSL Wireless, Inc IntAirNet- Fixed Wireless Broadband - Original Message - From: Marlon K. Schafer o...@odessaoffice.com To: WISPA General List wireless@wispa.org Sent: Monday, May 25, 2009 11:54 AM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability One more thing. I don't agree with your definitions per se'. We all have businesses. A proprietorship is a TYPE of business. We are a proprietorship because I'm not incorporated (incorporating is over rated and expensive to do right). I'm still a business though http://en.wikipedia.org/wiki/Business http://en.wikipedia.org/wiki/Sole_proprietorship http://en.wikipedia.org/wiki/Asset marlon - Original Message - From: Charles Wu c...@cticonnect.com To: WISPA General List wireless@wispa.org Sent: Sunday, May 24, 2009 10:03 PM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Hi Marlon, I think it's appropriate to make a few definitions and distinctions on things so everyone is on the same page Specifically, for purposes of making my point, I define Proprietorship: A commercial activity engaged in as a means of livelihood or profit Business: A unique system of processes and procedures that documents and codifies a specific method of proprietorship Asset: cash, inventory, equipment, infrastructure, customer contracts, brand, marketing, etc Grin. Sure it is. That's what a LOT of small business people do. It's also kind of common for doctors, dentists, plumbers etc Sometimes it sucks, Now, everything you stated above is just a method of proprietorship, and in most cases, from a sale perspective, a proprietorships isn't worth anything more than the depreciated value of its assets Say you were buying out the local plumber's office -- what would he have of value? His truck? Some old tools? A customer list / brand perhaps (but the reality of things is that customers do business with him because of him, and if you bought him out and he moved out of town, those customers would probably go back to being on the open market) Now, in comparing the WISP 'proprietorship' vs. the plumber, it's worth noting that the WISP is somewhat unique in that it results in the creation of an independent asset that holds onto a lot of value (e.g., the recurring revenue and everything that goes to support it); in many ways, this is akin to real-estate Not everyone out there even wants to get that big (if I had a nickle for every business owner that's told me the most fun they had and the most money they made was when it was just them, no employees..) But then again, that's one of the really cool things about this buisness, it's big enough and flexible enough to allow many different business models and operator dreams to bear fuit! True...and you have the added benefit of building an asset that has value (be happy we're not plumbers =) -Charles
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
Because one of the questions on any financial application is "how long have you been incorporated?". If you wait until you decide you may need to be, then yes they are going to want personal guarantees when the answer to the question is "1 year" instead of "5 years". And I didn't say becoming a corporation is the answer to avoiding the PG's... but the other way around, you will never avoid the PG if you are a sole proprietor. ;) Travis Microserv Tom DeReggi wrote: The mistake many make is that they think they should incorporate to protect their personal finance/liabilty from the business. Well, actually, its the opposite. A business needs to be protected from personal finance/liabilty. The government is smart enough to understand why a grant or loan recipient needs to be protected from one's personal finance and liabilty. Thus the need to be a LLC, Corp, or S-Corp. Other than simplicity, a Sole Proprietar does not offer anything a LLC and Scorp cant, and for that reason, I'd agree, that if someone wants to be treated like a safe sound business, from a financier, they should move beyond a Sole Proprietorship. I'm not saying Sole Propritorship does not have its place, jsut saying, the second third party money is needed, the business has evolved beyond the purpose of a SoleProprietor in my opinion. The beauty of it though is A Sole Proprieorship can easilly be converted to one of the other type businesses at any time. Also, Travis, being a Corp is not the only thing necessary to get beyond the personal guarantee. From my experience, lendors have asked that the borrower employ at least 6 employees, and show proof of their payroll in the financial reports, and/or do over 1 million dollars a year in revenue, to be considered large enough to bypass personal guarantee. As well, many times have asked for atleast three unique stockholders or principle in the Corp. Its much harder for a Corp owned in full by a single stockholder/founder to bypass a personal guarantee requirement. I think this is one of the reasons sometimes small WISPs stay a Sole Proprietorship longer than expected. If they know they dont meet the other requirements to bypass personal guarantees, or to secure loans by business financials alone, (revenue, diversity in ownership, # employees), whats the point? They might as well make their accounting life easier. Tom DeReggi RapidDSL Wireless, Inc IntAirNet- Fixed Wireless Broadband - Original Message - From: "Marlon K. Schafer" o...@odessaoffice.com To: "WISPA General List" wireless@wispa.org Sent: Monday, May 25, 2009 11:54 AM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability One more thing. I don't agree with your definitions per se'. We all have businesses. A proprietorship is a TYPE of business. We are a proprietorship because I'm not incorporated (incorporating is over rated and expensive to do right). I'm still a business though http://en.wikipedia.org/wiki/Business http://en.wikipedia.org/wiki/Sole_proprietorship http://en.wikipedia.org/wiki/Asset marlon - Original Message - From: "Charles Wu" c...@cticonnect.com To: "WISPA General List" wireless@wispa.org Sent: Sunday, May 24, 2009 10:03 PM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Hi Marlon, I think it's appropriate to make a few definitions and distinctions on things so everyone is on the same page Specifically, for purposes of making my point, I define Proprietorship: A commercial activity engaged in as a means of livelihood or profit Business: A unique system of processes and procedures that documents and codifies a specific method of proprietorship Asset: cash, inventory, equipment, infrastructure, customer contracts, brand, marketing, etc Grin. Sure it is. That's what a LOT of small business people do. It's also kind of common for doctors, dentists, plumbers etc Sometimes it sucks, Now, everything you stated above is just a method of proprietorship, and in most cases, from a sale perspective, a proprietorships isn't worth anything more than the depreciated value of its assets Say you were buying out the local plumber's office -- what would he have of value? His truck? Some old tools? A customer list / brand perhaps (but the reality of things is that customers do business with him because of him, and if you bought him out and he moved out of town, those customers would probably go back to being on the open market) Now, in comparing the WISP 'proprietorship' vs. the plumber, it's worth noting that the WISP is somewhat unique in that it results in the creation of an independent asset that holds onto a lot of value (e.g., the recurring revenue and everything that goes to support it); in many ways, this is akin to real-estate
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
Travis, I agree, that their is a huge advantage to get the customer now. But its not because its harder for them to switch to you later. Its because you can never go back in time and earn the money you could have earned last year, had you had the client then. For example, If it takes a year to save up the money for the equipment, you lost the revenue for that year, and the revenue for that year would have probably paid for teh equipment. Therefore doubling the time to gain an ROI for equipment. Tom DeReggi RapidDSL Wireless, Inc IntAirNet- Fixed Wireless Broadband - Original Message - From: Travis Johnson To: WISPA General List Sent: Sunday, May 24, 2009 1:22 AM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Charles, I agree with you... but at what point does that happen? If your growth is growing (meaning you are doing more installs every month then the previous month), I don't think you can ever reach the point of paying cash for CPE... without completely strapping the entire business. I just don't see a reason that it makes sense to pay cash for the CPE. Yes, we pay cash for all of our backhauls, AP's, antennas for CPE, accessories (CAT5, mounts, etc.) but when it really costs so little in the long run to finance the CPE and have extra cash flow for other things, it seems the easy solution... especially during heavy growth periods. All I can say is if you are holding back on doing more installs because you can't afford it, you need to find some financing and get installing. Once that customer is installed with something else (DSL, Cable, competitor), it's 10x harder to get them to switch to you. You have to get the customers NOW. Travis Microserv Charles Wu wrote: Hi Scott, Regarding debt...I've found that there's a scale inflection point in running a WISP (or any business for the matter) that needs to be reached -- the main purpose for taking on debt (because due to interest, you end up paying more in the longer term instead of buying cash), is to accelerate growth so one can progress beyond this point e.g., if you can organically fund 30 new installs a month with cash, if you take on debt, you could leverage yourself and now do 100 installs / month Now, from a business perspective -- in looking at the WISP As a stand-alone sustainable business -- it costs a minimum of about $30k / month to operate a small WISP -- now, I'll argue that that $30k/month in operations remains relatively constant and whether it's supporting 300, 800 or 1500 customers -- however, at 300 customers, the business is bleeding cash...at 800 customers the business is just about at a break-even, and at 1500 customers, the business is a cash machine -Charles -Original Message- From: wireless-boun...@wispa.org [mailto:wireless-boun...@wispa.org] On Behalf Of Scott Reed Sent: Saturday, May 23, 2009 4:20 PM To: WISPA General List Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability So I will take option 4 from a previous post since Travis made the point. Up to 60 months with $1 buyout is the same as a 5 year bank loan. I want to run debt free as soon a possible. That being the case I don't lease and have not leased to keep debt down. I do have a start-up loan that is being paid on a little slower than I would like, but we have paid off 1/2 of it in 5 years and based on our payments, we are cash flow positive. Granted, my WISP is a lot smaller than many that post here and our growth rate is small, but some of that is managing growth to stay cash-flow positive. I have seen several companies die because they became cash rich, but still could not cover the debt. Travis Johnson wrote: The banks can sell a car with little effort. They already have relationships with dealers and auctions. And often, if the consumer's credit is questionable, the dealer will guarantee to take the car back if the loan defaults. Who is going to buy a $10,000 radio that has been repo'd? Even for $5k, I wouldn't touch it. I'd buy a new radio with warranty, that I know is good and hasn't been fried or broken. The banks will never loan on the equipment alone. There is no security there... but again, why do you need a bank loan for equipment when you can just lease it and get the same results? Up to 60 months with $1 buyout is the same as a 5 year bank loan. What's the difference? Travis Microserv Tom DeReggi wrote: Maybe when talking about CPE. But what about when one is talking about a $10,000 Part101 radio? Just like a car, all that the lender should need is to hold the title of the radio until paid off, and get a down payment of $2000 to cover the cost of tower climber/repo man, and a signed letter of authorization from lanlord stating the location of the tower gear is installed on and they acknowledge that the gear is not abandoned equipment. (So it does not automatically become
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
Travis said When you have 20+ current leases totalling over $1,000,000 having that show up on your personal credit reports makes it very hard to re-finance your house, or buy a car, etc. Yes, it can be done (because I have done it), it just creates 10x the work... and there is no benefit (tax wise, equipment wise, company wise, etc.) so we take the easy way. ;) Good point. I'd also argue the reverse can happen as well. When someone is required to get a personal guarantee, it can make getting a business lease harder, when they look at personal credit and income that may be already extended. For example, if a WISP takes just enopugh income to pay their expenses, and reinvests all the rest of the money back into the company. The business financials may look very good, if a WISP stops expanding, but the individual can incorrectly look stressed. I guess, I'm agreeing with you. Once a WISP can reach the stage where they can gain funding just on business credit alone, they reach a critical stage in survivabilty. The more they lease, the more revenue proportionally added to the books, the more credit worthy the boprrow becomes, and easier it becomes to borrow, I'd presume. The problem for small companies is getting to that stage. Its one of the reasons I think small providers need grants. A grant can really excellerate the rate at which a provider can reach that stage. Tom DeReggi RapidDSL Wireless, Inc IntAirNet- Fixed Wireless Broadband - Original Message - From: Travis Johnson t...@ida.net To: WISPA General List wireless@wispa.org Sent: Saturday, May 23, 2009 6:49 PM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability The biggest difference I have seen with a loan or line of credit, even for us (a corporation in business for 13 years and profitable since the first year) is that the banks want personal guarantees... and we haven't done a personal guarantee on leasing equipment for 5+ years. When you have 20+ current leases totalling over $1,000,000 having that show up on your personal credit reports makes it very hard to re-finance your house, or buy a car, etc. Yes, it can be done (because I have done it), it just creates 10x the work... and there is no benefit (tax wise, equipment wise, company wise, etc.) so we take the easy way. ;) We lease, it stays corporate (as it should), and everything is good. :) Travis Microserv Tom DeReggi wrote: Travis, I'd agree, except, I'm finding a loan or Line of Credit is as easy to get as a lease. When the leasor considers a radio, the opposite of a car, non-liquidatable, does the lender really benefit by leasing it instead of lending for it? Tom DeReggi RapidDSL Wireless, Inc IntAirNet- Fixed Wireless Broadband - Original Message - From: Travis Johnson To: WISPA General List Sent: Friday, May 22, 2009 6:04 PM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability The banks can sell a car with little effort. They already have relationships with dealers and auctions. And often, if the consumer's credit is questionable, the dealer will guarantee to take the car back if the loan defaults. Who is going to buy a $10,000 radio that has been repo'd? Even for $5k, I wouldn't touch it. I'd buy a new radio with warranty, that I know is good and hasn't been fried or broken. The banks will never loan on the equipment alone. There is no security there... but again, why do you need a bank loan for equipment when you can just lease it and get the same results? Up to 60 months with $1 buyout is the same as a 5 year bank loan. What's the difference? Travis Microserv Tom DeReggi wrote: Maybe when talking about CPE. But what about when one is talking about a $10,000 Part101 radio? Just like a car, all that the lender should need is to hold the title of the radio until paid off, and get a down payment of $2000 to cover the cost of tower climber/repo man, and a signed letter of authorization from lanlord stating the location of the tower gear is installed on and they acknowledge that the gear is not abandoned equipment. (So it does not automatically become property of landlord in 4 months, and teh landlord knows the equipment owner has first rights to the gear). Think about it... Wouldn't repo costs be reduced when the repo man knows exactly where to find the radio? A car can easilly be relocated and hard-to-find, when the owner skips town. Plus the home likely has an owner with a shot gun or a big dog, which the tower/MTU likely does not. The MTU building might even have a security guard to escort teh lender safely to the roof :-) Tom DeReggi RapidDSL Wireless, Inc IntAirNet- Fixed Wireless Broadband - Original Message - From: jp j...@saucer.midcoast.com To: WISPA General List wireless@wispa.org Sent: Friday, May 22, 2009 11:13 AM Subject: Re: [WISPA] Quesiton
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
Marlon, If you think the WISP business is similar to a doctor or dentist or plumber, you are very mistaken. The best advice I have ever heard actually came from the son of a very wealthy doctor in our area. He sold his son "find something that isn't trading your time for money". I heard that about 10 years ago in a meeting, and it has stuck with me forever. A doctor or dentist or plumber all trade their time for money. They bill per hour (even if it's $5,000 per hour) or per job, but they are still trading their time for money. The WISP business is nothing like this. It's actually a very unique business compared to anything else out there. It has recurring monthly income, yet the expenses are pretty much fixed. Other recurring income businesses that are similar would be insurance... however, their expenses vary from month to month depending on number of claims, size of claims, etc. Right now, if I stopped all my growth, my expenses would be exactly the same from month to month... and the income would remain the same as well. Travis Microserv Marlon K. Schafer wrote: - Original Message - From: "Charles Wu" c...@cticonnect.com To: "WISPA General List" wireless@wispa.org Sent: Sunday, May 24, 2009 8:56 PM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Marlon, Charles, your numbers are WAY off there. You can't base your numbers on the fact that you're willing to be on call 24x7, work 12 hour days 7 days / week as a function of "normal business operations" -- it simply isn't sustainable from a long term perspective Grin. Sure it is. That's what a LOT of small business people do. It's also kind of common for doctors, dentists, plumbers etc Sometimes is sucks, but remember that we can also give ourselves time off nearly anytime we really want it. I don't miss very many of the kid's baseball games, dance recitles, field trips or anything else. Eventually, your wife WILL leave you if you keep this up (on a side note, one of the biggest reasons I've seen for small WISPs selling out is the wife factor =) The reasons I've usually seen are that people get in this for a quick buck. When that doesn't happen they burn out/bail out. But that's no different than any other industry I see. And I've seen a lot, I've been doing office equipment repair work since about 1990 or 92. I've always tried to learn from my customers, what works, why etc. Not many bail on a company that's making good money, no matter how much time it's taking. If you were to replace yourself with normal employees that work 8-5 and who make market wages, you'd probably discover that your labor costs will go up $!0-15k / month (I would argue that you probably personally do the work of 3 people in your company) Believe it or not, I do the work of less than one most of the time. It's been a bit more than that lately but only because I'm too cheap to hire help and can't afford to replace all the my POS Tranzeo AP's with MT units all at once. Once I get the network running nicer my service calls will drop off a lot. The difference at the sites that are already done has been nothing short of amazing. The rest of the time I'm screwing around with WISPA stuff or helping local orgs of some kind. I might put in a 40 to 60 hour week, but a lot of the time is non esential. Also, if I get too busy I bring a helper along on my installs. 2 guys can usually knock one out in about 1/3rd the time of one person. Not sure why it goes so much faster, but it does. By the time I hit 600 to 800 subs I'm gonna need some help. Hiring that person will suck big time because I won't have enough work for them right away. That move alone will likely cut my margin down to nearly nothing for a couple of years. After you factor in your time / opportunity cost / resources / overhead / time spent training -- you will spend an additional 2x an employee's salary during the first 6 months of employment trying to get them trained up and productive -- and then, there's a good chance they just don't work out =) Yeah, that's the part that really sucks. Every time we hire a new person the one that's there drops to half time production for x months. It's a hard thing. Saying your numbers were off wasn't quite fair of me. They COULD be right on the money if a person structured the company that way. But not everyone lives in a market that will allow tens of thousands of customers. Not everyone out there even wants to get that big (if I had a nickle for every business owner that's told me the most fun they had and the most money they made was when it was just them, no employees..) But then again, that's one of the really cool things about this buisness, it's big enough and flexible enough
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
- Original Message - From: Charles Wu c...@cticonnect.com To: WISPA General List wireless@wispa.org Sent: Sunday, May 24, 2009 10:03 PM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Hi Marlon, I think it's appropriate to make a few definitions and distinctions on things so everyone is on the same page Specifically, for purposes of making my point, I define Proprietorship: A commercial activity engaged in as a means of livelihood or profit Business: A unique system of processes and procedures that documents and codifies a specific method of proprietorship Asset: cash, inventory, equipment, infrastructure, customer contracts, brand, marketing, etc Grin. Sure it is. That's what a LOT of small business people do. It's also kind of common for doctors, dentists, plumbers etc Sometimes it sucks, Now, everything you stated above is just a method of proprietorship, and in most cases, from a sale perspective, a proprietorships isn't worth anything more than the depreciated value of its assets Say you were buying out the local plumber's office -- what would he have of value? His truck? Some old tools? A customer list / brand perhaps (but the reality of things is that customers do business with him because of him, and if you bought him out and he moved out of town, those customers would probably go back to being on the open market) Now, in comparing the WISP 'proprietorship' vs. the plumber, it's worth noting that the WISP is somewhat unique in that it results in the creation of an independent asset that holds onto a lot of value (e.g., the recurring revenue and everything that goes to support it); in many ways, this is akin to real-estate Not everyone out there even wants to get that big (if I had a nickle for every business owner that's told me the most fun they had and the most money they made was when it was just them, no employees..) But then again, that's one of the really cool things about this buisness, it's big enough and flexible enough to allow many different business models and operator dreams to bear fuit! True...and you have the added benefit of building an asset that has value (be happy we're not plumbers =) Agreed. grin One of the great things about our business is that we're NOT normally needed for continued operations. Our value comes in the creation of the system and the customer base. But if something happens to the plumber his income stops. If something happens to me, nothing happens. Almost anyone can come into my network and keep it going with a little bit of ourside consulting help. This is still a fairly unique business. I still haven't convinced the bank of that fact though :-). marlon -Charles 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/
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
In that respect you are correct. But I stand by my statement that many successful business people work long hours and don't always take 2 days per week off. Or they are always on some level of stand-by. You are very correct that our income is much more predictable and isn't dependant upon us being there for the generation of every penny. Charles is making the point that people can't and shouldn't work without employees. We shouldn't get ourselves into that spot that we're on call 24/7 or working 12 and 14 hour days 6 days per week. My point is that no really successful people work 8 to 5 Monday thru Friday. At least not in the building stages of what they do. In that regard, big or small, we're no different from many many other professionals. marlon - Original Message - From: Travis Johnson To: WISPA General List Sent: Sunday, May 24, 2009 11:01 PM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Marlon, If you think the WISP business is similar to a doctor or dentist or plumber, you are very mistaken. The best advice I have ever heard actually came from the son of a very wealthy doctor in our area. He sold his son find something that isn't trading your time for money. I heard that about 10 years ago in a meeting, and it has stuck with me forever. A doctor or dentist or plumber all trade their time for money. They bill per hour (even if it's $5,000 per hour) or per job, but they are still trading their time for money. The WISP business is nothing like this. It's actually a very unique business compared to anything else out there. It has recurring monthly income, yet the expenses are pretty much fixed. Other recurring income businesses that are similar would be insurance... however, their expenses vary from month to month depending on number of claims, size of claims, etc. Right now, if I stopped all my growth, my expenses would be exactly the same from month to month... and the income would remain the same as well. Travis Microserv Marlon K. Schafer wrote: - Original Message - From: Charles Wu c...@cticonnect.com To: WISPA General List wireless@wispa.org Sent: Sunday, May 24, 2009 8:56 PM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Marlon, Charles, your numbers are WAY off there. You can't base your numbers on the fact that you're willing to be on call 24x7, work 12 hour days 7 days / week as a function of normal business operations -- it simply isn't sustainable from a long term perspective Grin. Sure it is. That's what a LOT of small business people do. It's also kind of common for doctors, dentists, plumbers etc Sometimes is sucks, but remember that we can also give ourselves time off nearly anytime we really want it. I don't miss very many of the kid's baseball games, dance recitles, field trips or anything else. Eventually, your wife WILL leave you if you keep this up (on a side note, one of the biggest reasons I've seen for small WISPs selling out is the wife factor =) The reasons I've usually seen are that people get in this for a quick buck. When that doesn't happen they burn out/bail out. But that's no different than any other industry I see. And I've seen a lot, I've been doing office equipment repair work since about 1990 or 92. I've always tried to learn from my customers, what works, why etc. Not many bail on a company that's making good money, no matter how much time it's taking. If you were to replace yourself with normal employees that work 8-5 and who make market wages, you'd probably discover that your labor costs will go up $!0-15k / month (I would argue that you probably personally do the work of 3 people in your company) Believe it or not, I do the work of less than one most of the time. It's been a bit more than that lately but only because I'm too cheap to hire help and can't afford to replace all the my POS Tranzeo AP's with MT units all at once. Once I get the network running nicer my service calls will drop off a lot. The difference at the sites that are already done has been nothing short of amazing. The rest of the time I'm screwing around with WISPA stuff or helping local orgs of some kind. I might put in a 40 to 60 hour week, but a lot of the time is non esential. Also, if I get too busy I bring a helper along on my installs. 2 guys can usually knock one out in about 1/3rd the time of one person. Not sure why it goes so much faster, but it does. By the time I hit 600 to 800 subs I'm gonna need some help. Hiring that person will suck big time because I won't have enough work for them right away. That move alone will likely cut my margin down to nearly nothing for a couple of years. After you factor in your time / opportunity cost / resources / overhead / time spent training -- you will spend an additional 2x an employee's salary during
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
Huh? We incorporated in 1997 and I think total cost was less than $500. How do you ever expect to get away from having to do personal guarantees if you don't operate like a "real" business? Travis Microserv Marlon K. Schafer wrote: One more thing. I don't agree with your definitions per se'. We all have businesses. A proprietorship is a TYPE of business. We are a proprietorship because I'm not incorporated (incorporating is over rated and expensive to do right). I'm still a business though http://en.wikipedia.org/wiki/Business http://en.wikipedia.org/wiki/Sole_proprietorship http://en.wikipedia.org/wiki/Asset marlon - Original Message - From: "Charles Wu" c...@cticonnect.com To: "WISPA General List" wireless@wispa.org Sent: Sunday, May 24, 2009 10:03 PM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Hi Marlon, I think it's appropriate to make a few definitions and distinctions on things so everyone is on the same page Specifically, for purposes of making my point, I define Proprietorship: A commercial activity engaged in as a means of livelihood or profit Business: A unique system of processes and procedures that documents and codifies a specific method of proprietorship Asset: cash, inventory, equipment, infrastructure, customer contracts, brand, marketing, etc Grin. Sure it is. That's what a LOT of small business people do. It's also kind of common for doctors, dentists, plumbers etc Sometimes it sucks, Now, everything you stated above is just a method of proprietorship, and in most cases, from a sale perspective, a proprietorships isn't worth anything more than the depreciated value of its assets Say you were buying out the local plumber's office -- what would he have of value? His truck? Some old tools? A customer list / brand perhaps (but the reality of things is that customers do business with him because of him, and if you bought him out and he moved out of town, those customers would probably go back to being on the open market) Now, in comparing the WISP 'proprietorship' vs. the plumber, it's worth noting that the WISP is somewhat unique in that it results in the creation of an independent asset that holds onto a lot of value (e.g., the recurring revenue and everything that goes to support it); in many ways, this is akin to real-estate Not everyone out there even wants to get that big (if I had a nickle for every business owner that's told me the most fun they had and the most money they made was when it was just them, no employees..) But then again, that's one of the really cool things about this buisness, it's big enough and flexible enough to allow many different business models and operator dreams to bear fuit! True...and you have the added benefit of building an asset that has value (be happy we're not plumbers =) -Charles 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/
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
Charles, I agree with you on these points. In fact, I mentioned them to keep the discussion fair. The main point I was making is that local labor resources with knowledge and experience is difficult if not impossible to find. Of course, that is an age old issue for businesses everywhere. As far as a sell out factor, the wife is as good of a reason as any :) -RickG On Sun, May 24, 2009 at 11:56 PM, Charles Wu c...@cticonnect.com wrote: Marlon, Charles, your numbers are WAY off there. You can't base your numbers on the fact that you're willing to be on call 24x7, work 12 hour days 7 days / week as a function of normal business operations -- it simply isn't sustainable from a long term perspective Eventually, your wife WILL leave you if you keep this up (on a side note, one of the biggest reasons I've seen for small WISPs selling out is the wife factor =) If you were to replace yourself with normal employees that work 8-5 and who make market wages, you'd probably discover that your labor costs will go up $!0-15k / month (I would argue that you probably personally do the work of 3 people in your company) By the time I hit 600 to 800 subs I'm gonna need some help. Hiring that person will suck big time because I won't have enough work for them right away. That move alone will likely cut my margin down to nearly nothing for a couple of years. After you factor in your time / opportunity cost / resources / overhead / time spent training -- you will spend an additional 2x an employee's salary during the first 6 months of employment trying to get them trained up and productive -- and then, there's a good chance they just don't work out =) -Charles - Original Message - From: Charles Wu c...@cticonnect.com To: WISPA General List wireless@wispa.org Sent: Saturday, May 23, 2009 8:07 PM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Hi Scott, Regarding debt...I've found that there's a scale inflection point in running a WISP (or any business for the matter) that needs to be reached -- the main purpose for taking on debt (because due to interest, you end up paying more in the longer term instead of buying cash), is to accelerate growth so one can progress beyond this point e.g., if you can organically fund 30 new installs a month with cash, if you take on debt, you could leverage yourself and now do 100 installs / month Now, from a business perspective -- in looking at the WISP As a stand-alone sustainable business -- it costs a minimum of about $30k / month to operate a small WISP -- now, I'll argue that that $30k/month in operations remains relatively constant and whether it's supporting 300, 800 or 1500 customers -- however, at 300 customers, the business is bleeding cash...at 800 customers the business is just about at a break-even, and at 1500 customers, the business is a cash machine -Charles -Original Message- From: wireless-boun...@wispa.org [mailto:wireless-boun...@wispa.org] On Behalf Of Scott Reed Sent: Saturday, May 23, 2009 4:20 PM To: WISPA General List Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability So I will take option 4 from a previous post since Travis made the point. Up to 60 months with $1 buyout is the same as a 5 year bank loan. I want to run debt free as soon a possible. That being the case I don't lease and have not leased to keep debt down. I do have a start-up loan that is being paid on a little slower than I would like, but we have paid off 1/2 of it in 5 years and based on our payments, we are cash flow positive. Granted, my WISP is a lot smaller than many that post here and our growth rate is small, but some of that is managing growth to stay cash-flow positive. I have seen several companies die because they became cash rich, but still could not cover the debt. Travis Johnson wrote: The banks can sell a car with little effort. They already have relationships with dealers and auctions. And often, if the consumer's credit is questionable, the dealer will guarantee to take the car back if the loan defaults. Who is going to buy a $10,000 radio that has been repo'd? Even for $5k, I wouldn't touch it. I'd buy a new radio with warranty, that I know is good and hasn't been fried or broken. The banks will never loan on the equipment alone. There is no security there... but again, why do you need a bank loan for equipment when you can just lease it and get the same results? Up to 60 months with $1 buyout is the same as a 5 year bank loan. What's the difference? Travis Microserv Tom DeReggi wrote: Maybe when talking about CPE. But what about when one is talking about a $10,000 Part101 radio? Just like a car, all that the lender should need is to hold the title of the radio until paid off, and get a down payment of $2000 to cover the cost of tower climber/repo man, and a signed letter of authorization from
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
Charles, I replied to your previous response so I wont be redundant here. It appears we are in sync in thought. As a previous senior manager at several companies large small, I've hired/fired my share of people. The human factor is huge. One of my favorite books is The eMyth Revisited (http://www.amazon.com/E-Myth-Revisited-Small-Businesses-About/dp/0887307280). I was fully aware of the labor situation going into this business although I underestimated this particular area. Like most businesses, when I created the model for the company I planned for an eventual sale. If I were to take it to the next step, a completely different model would need to be developed. In fact, my original model would have been developed much differently. Which takes me back to the original point of this particular thread. If I had $100k, I'd do it again. But, what works here probably wont work in the LA area for reasons we all know. At any rate, putting a dollar figure on it is the easy part. What people need to be aware of is that it is not without a lot of blood, sweat, tears that cant even be put into words. For me and many others, this is a great business but it is anything but easy or even remotely close to easy. YMMV! Just my .02! -RickG On Mon, May 25, 2009 at 12:20 AM, Charles Wu c...@cticonnect.com wrote: Hi Rick, I applaud your effort -- I totally emphasize and understand your perspective, as 8 years ago, I was a one man shop working out of my college dorm room trying to get a business started There is an unfortunate reality that the one-man band is not a sustainable long-term operation -- for example, how will you ever go on a vacation? Or spend quality time with the wife without the ever-present threat / fear that lightening may strike...somewhere That said, all is not lost -- the good news is that unlike most businesses, the underlying business model of a WISP (e.g., the recurring revenue and ownership of infrastructure) has a lot of intrinsic worth -- so even if you're not able to scale and build an actual business (as I will outline below) -- you've still created an asset that has value and can be sold For me, now as an owner/operator, good labor is the problem. I would argue that this is the challenge faced by every business owner (small or large) in every industry all across the country And as Jack Welch says it, the answer is simple -- just hire good people who are A players There's theory, and then there's reality; and the truth of the matter is that advice is as worthless as the advice my high school track coach would give me to help me win the race -- Just run faster he'd say -- then you'll win no problem Duh Now, back to hiring A players -- and a few cogent points that I've learned with the 40+ employees that I've hired/fired/scared off over the last 8 years 1. We (the business owner/entrepreneur/key guy) are all A players 2. We just need to clone ourselves and then we'll have the perfect employee =) Here's the kicker 3. Since we decided to work for ourselves because we didn't want to be just another employee -- chances are our that if an employee is truly a clone of us (e.g., an A player), they probably wouldn't be working for us but would rather go start their own business venture So, it becomes an interesting conundrum, how does one hire an A player when none of them are willing to be employees =) I have gone through dozens of guys in the past two years but none become long term. It's not the pay because they tell me the pay is fair. The main reasons are the lost work ethic and personal problems, at least in this area. There are a few things that I learned over the years that I think have contributed to my personal and corporate growth...specifically 1. Although there are very few (as in 1 out of 1000) A players for hire out of the box -- with proper bumper rails, B C players can be made to perform as well (if not better than) A players 2. To accomplish 1 requires the creation of business systems / processes / culture 3. To accomplish 2 requires a great deal of overhead that only occurs when an organization has significant scale (50+ employees) That said, to reiterate, there is nothing wrong with going the one-man shop route -- just don't kid yourself into thinking that you're building a business and be happy that the beauty of the WISP business model is that you also currently build an underlying asset (infrastructure and customer contracts) that has a pretty sizeable and appreciable value. And be happy you're not a consultant or a retail store =) -Charles WISPA Wants You! Join today! http://signup.wispa.org/ WISPA Wireless List: wireless@wispa.org Subscribe/Unsubscribe: http://lists.wispa.org/mailman/listinfo/wireless
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
Ah yes, the power if recurring revenue. A benefit of replicating your work with other humans and/or devices (I prefer the later). A better path to making money that trading your time for a direct wage. This is one of the reasons I got into this business. However, at the early stages, your are like a doctor or plumber - you're on call 24x7. In fact, even on Memorial Day, I've got a business customer to call right now! -RickG On Mon, May 25, 2009 at 12:01 PM, Marlon K. Schafer o...@odessaoffice.com wrote: In that respect you are correct. But I stand by my statement that many successful business people work long hours and don't always take 2 days per week off. Or they are always on some level of stand-by. You are very correct that our income is much more predictable and isn't dependant upon us being there for the generation of every penny. Charles is making the point that people can't and shouldn't work without employees. We shouldn't get ourselves into that spot that we're on call 24/7 or working 12 and 14 hour days 6 days per week. My point is that no really successful people work 8 to 5 Monday thru Friday. At least not in the building stages of what they do. In that regard, big or small, we're no different from many many other professionals. marlon - Original Message - From: Travis Johnson To: WISPA General List Sent: Sunday, May 24, 2009 11:01 PM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Marlon, If you think the WISP business is similar to a doctor or dentist or plumber, you are very mistaken. The best advice I have ever heard actually came from the son of a very wealthy doctor in our area. He sold his son find something that isn't trading your time for money. I heard that about 10 years ago in a meeting, and it has stuck with me forever. A doctor or dentist or plumber all trade their time for money. They bill per hour (even if it's $5,000 per hour) or per job, but they are still trading their time for money. The WISP business is nothing like this. It's actually a very unique business compared to anything else out there. It has recurring monthly income, yet the expenses are pretty much fixed. Other recurring income businesses that are similar would be insurance... however, their expenses vary from month to month depending on number of claims, size of claims, etc. Right now, if I stopped all my growth, my expenses would be exactly the same from month to month... and the income would remain the same as well. Travis Microserv Marlon K. Schafer wrote: - Original Message - From: Charles Wu c...@cticonnect.com To: WISPA General List wireless@wispa.org Sent: Sunday, May 24, 2009 8:56 PM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Marlon, Charles, your numbers are WAY off there. You can't base your numbers on the fact that you're willing to be on call 24x7, work 12 hour days 7 days / week as a function of normal business operations -- it simply isn't sustainable from a long term perspective Grin. Sure it is. That's what a LOT of small business people do. It's also kind of common for doctors, dentists, plumbers etc Sometimes is sucks, but remember that we can also give ourselves time off nearly anytime we really want it. I don't miss very many of the kid's baseball games, dance recitles, field trips or anything else. Eventually, your wife WILL leave you if you keep this up (on a side note, one of the biggest reasons I've seen for small WISPs selling out is the wife factor =) The reasons I've usually seen are that people get in this for a quick buck. When that doesn't happen they burn out/bail out. But that's no different than any other industry I see. And I've seen a lot, I've been doing office equipment repair work since about 1990 or 92. I've always tried to learn from my customers, what works, why etc. Not many bail on a company that's making good money, no matter how much time it's taking. If you were to replace yourself with normal employees that work 8-5 and who make market wages, you'd probably discover that your labor costs will go up $!0-15k / month (I would argue that you probably personally do the work of 3 people in your company) Believe it or not, I do the work of less than one most of the time. It's been a bit more than that lately but only because I'm too cheap to hire help and can't afford to replace all the my POS Tranzeo AP's with MT units all at once. Once I get the network running nicer my service calls will drop off a lot. The difference at the sites that are already done has been nothing short of amazing. The rest of the time I'm screwing around with WISPA stuff or helping local orgs of some kind. I might put in a 40 to 60 hour week, but a lot of the time is non esential. Also, if I get too busy I bring a helper along on my installs. 2 guys can
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
Which is one of the many reasons I incorporated. But, due to the financial industries turmoil, they are now requiring personal guarantees. -RickG On Mon, May 25, 2009 at 12:53 PM, Travis Johnson t...@ida.net wrote: Huh? We incorporated in 1997 and I think total cost was less than $500. How do you ever expect to get away from having to do personal guarantees if you don't operate like a real business? Travis Microserv Marlon K. Schafer wrote: One more thing. I don't agree with your definitions per se'. We all have businesses. A proprietorship is a TYPE of business. We are a proprietorship because I'm not incorporated (incorporating is over rated and expensive to do right). I'm still a business though http://en.wikipedia.org/wiki/Business http://en.wikipedia.org/wiki/Sole_proprietorship http://en.wikipedia.org/wiki/Asset marlon - Original Message - From: Charles Wu c...@cticonnect.com To: WISPA General List wireless@wispa.org Sent: Sunday, May 24, 2009 10:03 PM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Hi Marlon, I think it's appropriate to make a few definitions and distinctions on things so everyone is on the same page Specifically, for purposes of making my point, I define Proprietorship: A commercial activity engaged in as a means of livelihood or profit Business: A unique system of processes and procedures that documents and codifies a specific method of proprietorship Asset: cash, inventory, equipment, infrastructure, customer contracts, brand, marketing, etc Grin. Sure it is. That's what a LOT of small business people do. It's also kind of common for doctors, dentists, plumbers etc Sometimes it sucks, Now, everything you stated above is just a method of proprietorship, and in most cases, from a sale perspective, a proprietorships isn't worth anything more than the depreciated value of its assets Say you were buying out the local plumber's office -- what would he have of value? His truck? Some old tools? A customer list / brand perhaps (but the reality of things is that customers do business with him because of him, and if you bought him out and he moved out of town, those customers would probably go back to being on the open market) Now, in comparing the WISP 'proprietorship' vs. the plumber, it's worth noting that the WISP is somewhat unique in that it results in the creation of an independent asset that holds onto a lot of value (e.g., the recurring revenue and everything that goes to support it); in many ways, this is akin to real-estate Not everyone out there even wants to get that big (if I had a nickle for every business owner that's told me the most fun they had and the most money they made was when it was just them, no employees..) But then again, that's one of the really cool things about this buisness, it's big enough and flexible enough to allow many different business models and operator dreams to bear fuit! True...and you have the added benefit of building an asset that has value (be happy we're not plumbers =) -Charles 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! 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/
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
In Oregon the filing costs is nothing to incorporate. Of course a lawyer will charge what they will to fill out the forms. One thing the sole proprietor is missing out on not being an s or c corp is the tax benefit associated with social security. Of course thee is more work to be a corporation, but there is also a tax savings as well. Travis Johnson wrote: Huh? We incorporated in 1997 and I think total cost was less than $500. How do you ever expect to get away from having to do personal guarantees if you don't operate like a real business? Travis Microserv Marlon K. Schafer wrote: One more thing. I don't agree with your definitions per se'. We all have businesses. A proprietorship is a TYPE of business. We are a proprietorship because I'm not incorporated (incorporating is over rated and expensive to do right). I'm still a business though http://en.wikipedia.org/wiki/Business http://en.wikipedia.org/wiki/Sole_proprietorship http://en.wikipedia.org/wiki/Asset marlon - Original Message - From: Charles Wu c...@cticonnect.com To: WISPA General List wireless@wispa.org Sent: Sunday, May 24, 2009 10:03 PM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Hi Marlon, I think it's appropriate to make a few definitions and distinctions on things so everyone is on the same page Specifically, for purposes of making my point, I define Proprietorship: A commercial activity engaged in as a means of livelihood or profit Business: A unique system of processes and procedures that documents and codifies a specific method of proprietorship Asset: cash, inventory, equipment, infrastructure, customer contracts, brand, marketing, etc Grin. Sure it is. That's what a LOT of small business people do. It's also kind of common for doctors, dentists, plumbers etc Sometimes it sucks, Now, everything you stated above is just a method of proprietorship, and in most cases, from a sale perspective, a proprietorships isn't worth anything more than the depreciated value of its assets Say you were buying out the local plumber's office -- what would he have of value? His truck? Some old tools? A customer list / brand perhaps (but the reality of things is that customers do business with him because of him, and if you bought him out and he moved out of town, those customers would probably go back to being on the open market) Now, in comparing the WISP 'proprietorship' vs. the plumber, it's worth noting that the WISP is somewhat unique in that it results in the creation of an independent asset that holds onto a lot of value (e.g., the recurring revenue and everything that goes to support it); in many ways, this is akin to real-estate Not everyone out there even wants to get that big (if I had a nickle for every business owner that's told me the most fun they had and the most money they made was when it was just them, no employees..) But then again, that's one of the really cool things about this buisness, it's big enough and flexible enough to allow many different business models and operator dreams to bear fuit! True...and you have the added benefit of building an asset that has value (be happy we're not plumbers =) -Charles 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! 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
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
Charles, you really should investigate the business sizes out there. Without doing any research today, I'd say there were more one man band businesses out there than any other type, unless you're going to lump a lot of types together, like all the 2-100 employee businesses. And there's a lot of 2-10 people businesses, as well. How does a one man band work? Hard. And he often serves people who are engaged in similar enterprise. It isn't suited to all, nor even a majority of people, the small sector ( 1 - 10 people ) is probably the most resilient and dynamic of all business models out there. insert witty tagline here - Original Message - From: Charles Wu c...@cticonnect.com To: WISPA General List wireless@wispa.org Sent: Sunday, May 24, 2009 9:20 PM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Hi Rick, I applaud your effort -- I totally emphasize and understand your perspective, as 8 years ago, I was a one man shop working out of my college dorm room trying to get a business started There is an unfortunate reality that the one-man band is not a sustainable long-term operation -- for example, how will you ever go on a vacation? Or spend quality time with the wife without the ever-present threat / fear that lightening may strike...somewhere 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/
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
A sole proprietorship is different than a bland proprietorship My accountant did everything for my incorporation for... $800? - Mike Hammett Intelligent Computing Solutions http://www.ics-il.com -- From: Marlon K. Schafer o...@odessaoffice.com Sent: Monday, May 25, 2009 10:54 AM To: WISPA General List wireless@wispa.org Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability One more thing. I don't agree with your definitions per se'. We all have businesses. A proprietorship is a TYPE of business. We are a proprietorship because I'm not incorporated (incorporating is over rated and expensive to do right). I'm still a business though http://en.wikipedia.org/wiki/Business http://en.wikipedia.org/wiki/Sole_proprietorship http://en.wikipedia.org/wiki/Asset marlon - Original Message - From: Charles Wu c...@cticonnect.com To: WISPA General List wireless@wispa.org Sent: Sunday, May 24, 2009 10:03 PM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Hi Marlon, I think it's appropriate to make a few definitions and distinctions on things so everyone is on the same page Specifically, for purposes of making my point, I define Proprietorship: A commercial activity engaged in as a means of livelihood or profit Business: A unique system of processes and procedures that documents and codifies a specific method of proprietorship Asset: cash, inventory, equipment, infrastructure, customer contracts, brand, marketing, etc Grin. Sure it is. That's what a LOT of small business people do. It's also kind of common for doctors, dentists, plumbers etc Sometimes it sucks, Now, everything you stated above is just a method of proprietorship, and in most cases, from a sale perspective, a proprietorships isn't worth anything more than the depreciated value of its assets Say you were buying out the local plumber's office -- what would he have of value? His truck? Some old tools? A customer list / brand perhaps (but the reality of things is that customers do business with him because of him, and if you bought him out and he moved out of town, those customers would probably go back to being on the open market) Now, in comparing the WISP 'proprietorship' vs. the plumber, it's worth noting that the WISP is somewhat unique in that it results in the creation of an independent asset that holds onto a lot of value (e.g., the recurring revenue and everything that goes to support it); in many ways, this is akin to real-estate Not everyone out there even wants to get that big (if I had a nickle for every business owner that's told me the most fun they had and the most money they made was when it was just them, no employees..) But then again, that's one of the really cool things about this buisness, it's big enough and flexible enough to allow many different business models and operator dreams to bear fuit! True...and you have the added benefit of building an asset that has value (be happy we're not plumbers =) -Charles 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/
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
All I can say is if you are holding back on doing more installs because you can't afford it, you need to find some financing and get installing. Once that customer is installed with something else (DSL, Cable, competitor), it's 10x harder to get them to switch to you. You have to get the customers NOW. Now that's a more interesting discussion What's the business plan for customer acquisition? Do you still keep building out into unserved areas (e.g., first to market)? At this point, I would guess that most areas have competition - so then is the business model based upon arbitraging attrition and moves? e.g., the average American moves every 7 years - so that means 12% of the population is available yearly as a new customer So, say you have 5,000 customers in a market of 100,000 You'll churn 1% / month (50) - but there's a market of new adds of 1,000 customers every month due to just organic moving activity...so assuming 20% market share, market equilibrium would be 20,000 subscribers Not necessarily a bad thing =) That said, I'd be curious to talk about secret sauce methods to convert customers from the competition -Charles Charles Wu wrote: Hi Scott, Regarding debt...I've found that there's a scale inflection point in running a WISP (or any business for the matter) that needs to be reached -- the main purpose for taking on debt (because due to interest, you end up paying more in the longer term instead of buying cash), is to accelerate growth so one can progress beyond this point e.g., if you can organically fund 30 new installs a month with cash, if you take on debt, you could leverage yourself and now do 100 installs / month Now, from a business perspective -- in looking at the WISP As a stand-alone sustainable business -- it costs a minimum of about $30k / month to operate a small WISP -- now, I'll argue that that $30k/month in operations remains relatively constant and whether it's supporting 300, 800 or 1500 customers -- however, at 300 customers, the business is bleeding cash...at 800 customers the business is just about at a break-even, and at 1500 customers, the business is a cash machine -Charles -Original Message- From: wireless-boun...@wispa.orgmailto:wireless-boun...@wispa.org [mailto:wireless-boun...@wispa.org] On Behalf Of Scott Reed Sent: Saturday, May 23, 2009 4:20 PM To: WISPA General List Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability So I will take option 4 from a previous post since Travis made the point. Up to 60 months with $1 buyout is the same as a 5 year bank loan. I want to run debt free as soon a possible. That being the case I don't lease and have not leased to keep debt down. I do have a start-up loan that is being paid on a little slower than I would like, but we have paid off 1/2 of it in 5 years and based on our payments, we are cash flow positive. Granted, my WISP is a lot smaller than many that post here and our growth rate is small, but some of that is managing growth to stay cash-flow positive. I have seen several companies die because they became cash rich, but still could not cover the debt. Travis Johnson wrote: The banks can sell a car with little effort. They already have relationships with dealers and auctions. And often, if the consumer's credit is questionable, the dealer will guarantee to take the car back if the loan defaults. Who is going to buy a $10,000 radio that has been repo'd? Even for $5k, I wouldn't touch it. I'd buy a new radio with warranty, that I know is good and hasn't been fried or broken. The banks will never loan on the equipment alone. There is no security there... but again, why do you need a bank loan for equipment when you can just lease it and get the same results? Up to 60 months with $1 buyout is the same as a 5 year bank loan. What's the difference? Travis Microserv Tom DeReggi wrote: Maybe when talking about CPE. But what about when one is talking about a $10,000 Part101 radio? Just like a car, all that the lender should need is to hold the title of the radio until paid off, and get a down payment of $2000 to cover the cost of tower climber/repo man, and a signed letter of authorization from lanlord stating the location of the tower gear is installed on and they acknowledge that the gear is not abandoned equipment. (So it does not automatically become property of landlord in 4 months, and teh landlord knows the equipment owner has first rights to the gear). Think about it... Wouldn't repo costs be reduced when the repo man knows exactly where to find the radio? A car can easilly be relocated and hard-to-find, when the owner skips town. Plus the home likely has an owner with a shot gun or a big dog, which the tower/MTU likely does not. The MTU building might even have a security guard to escort teh lender safely to the roof :-) Tom DeReggi RapidDSL Wireless, Inc
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
Charles, your numbers are WAY off there. We run about a 20% margin and gross less than $30,000 per month. We're at a bit over 500 subs at an average of $37.50 per month. That's high for our here. Our tax return doesn't show 20% for last year because of the bucket truck and new spectrum analyzer purchases. We probably have 2 to 3 x more tools available to us than 95% of the companies our size. Those purchases have certainly impacted our margins, but they've helped us run a very very good network on a shoe string. Here's an even more important question though. How many people does it take to run a WISP? That too will vary some due to distances traveled by people. But things should be close. Chuck Profito has nearly 1000 subs but he's only got to cover 1100 square miles or so. I have just over 500 but i have over 7000 square miles to deal with. Chuck is still running with 2 people. He does mostly sales, his partner does much of the rest. I do sales (mostly word of mouth) and all tech stuff that happens outside of the office. We have the equivalent of just over 1 full time office person (three people doing the work part time) to handle billing, initial tech support, payables etc. By the time I hit 600 to 800 subs I'm gonna need some help. Hiring that person will suck big time because I won't have enough work for them right away. That move alone will likely cut my margin down to nearly nothing for a couple of years. Laters, marlon - Original Message - From: Charles Wu c...@cticonnect.com To: WISPA General List wireless@wispa.org Sent: Saturday, May 23, 2009 8:07 PM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Hi Scott, Regarding debt...I've found that there's a scale inflection point in running a WISP (or any business for the matter) that needs to be reached -- the main purpose for taking on debt (because due to interest, you end up paying more in the longer term instead of buying cash), is to accelerate growth so one can progress beyond this point e.g., if you can organically fund 30 new installs a month with cash, if you take on debt, you could leverage yourself and now do 100 installs / month Now, from a business perspective -- in looking at the WISP As a stand-alone sustainable business -- it costs a minimum of about $30k / month to operate a small WISP -- now, I'll argue that that $30k/month in operations remains relatively constant and whether it's supporting 300, 800 or 1500 customers -- however, at 300 customers, the business is bleeding cash...at 800 customers the business is just about at a break-even, and at 1500 customers, the business is a cash machine -Charles -Original Message- From: wireless-boun...@wispa.org [mailto:wireless-boun...@wispa.org] On Behalf Of Scott Reed Sent: Saturday, May 23, 2009 4:20 PM To: WISPA General List Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability So I will take option 4 from a previous post since Travis made the point. Up to 60 months with $1 buyout is the same as a 5 year bank loan. I want to run debt free as soon a possible. That being the case I don't lease and have not leased to keep debt down. I do have a start-up loan that is being paid on a little slower than I would like, but we have paid off 1/2 of it in 5 years and based on our payments, we are cash flow positive. Granted, my WISP is a lot smaller than many that post here and our growth rate is small, but some of that is managing growth to stay cash-flow positive. I have seen several companies die because they became cash rich, but still could not cover the debt. Travis Johnson wrote: The banks can sell a car with little effort. They already have relationships with dealers and auctions. And often, if the consumer's credit is questionable, the dealer will guarantee to take the car back if the loan defaults. Who is going to buy a $10,000 radio that has been repo'd? Even for $5k, I wouldn't touch it. I'd buy a new radio with warranty, that I know is good and hasn't been fried or broken. The banks will never loan on the equipment alone. There is no security there... but again, why do you need a bank loan for equipment when you can just lease it and get the same results? Up to 60 months with $1 buyout is the same as a 5 year bank loan. What's the difference? Travis Microserv Tom DeReggi wrote: Maybe when talking about CPE. But what about when one is talking about a $10,000 Part101 radio? Just like a car, all that the lender should need is to hold the title of the radio until paid off, and get a down payment of $2000 to cover the cost of tower climber/repo man, and a signed letter of authorization from lanlord stating the location of the tower gear is installed on and they acknowledge that the gear is not abandoned equipment. (So it does not automatically become property of landlord in 4 months, and teh
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
Charles, In the past, we've discussed WISP financing in much detail including the startup spreadsheet we put together years ago. I've always found it to be a very interesting subject. I've run large ISP's and small ISP's includng both startups and those already operational. When you get down to it, there are a lot of variables. Money, resources (such as tower space and labor), competition, and the demand for the product are some of those. If a WISP can solve those issues then they should be successful. For me, now as an owner/operator, good labor is the problem. I have gone through dozens of guys in the past two years but none become long term. It's not the pay because they tell me the pay is fair. The main reasons are the lost work ethic and personal problems, at least in this area. So, I do it all myself. It's challenging but rewarding. With that said, I continue to grow, albeit at a slow rate because I'm doing all I can handle. My costs to run the WISP are about $6k/month and have nearly that much in gross profit. That is on 300 subs. I have no competition although wireline has expanded some but also very slowly. Our churn rate is 1% which is mostly attributed to people moving out of the area. The interesting part is that I have had the luxury of cherry picking my subs which has built the company on a foundation of quality customers. More specific to this conversation, if I had the labor resources, I'm positive that I'd need financing for both growth and upgrades. At the same time, at some point, I'm also sure that need would go away as income suffices the new capitol cash needs -RickG On Sat, May 23, 2009 at 11:07 PM, Charles Wu c...@cticonnect.com wrote: Hi Scott, Regarding debt...I've found that there's a scale inflection point in running a WISP (or any business for the matter) that needs to be reached -- the main purpose for taking on debt (because due to interest, you end up paying more in the longer term instead of buying cash), is to accelerate growth so one can progress beyond this point e.g., if you can organically fund 30 new installs a month with cash, if you take on debt, you could leverage yourself and now do 100 installs / month Now, from a business perspective -- in looking at the WISP As a stand-alone sustainable business -- it costs a minimum of about $30k / month to operate a small WISP -- now, I'll argue that that $30k/month in operations remains relatively constant and whether it's supporting 300, 800 or 1500 customers -- however, at 300 customers, the business is bleeding cash...at 800 customers the business is just about at a break-even, and at 1500 customers, the business is a cash machine -Charles -Original Message- From: wireless-boun...@wispa.org [mailto:wireless-boun...@wispa.org] On Behalf Of Scott Reed Sent: Saturday, May 23, 2009 4:20 PM To: WISPA General List Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability So I will take option 4 from a previous post since Travis made the point. Up to 60 months with $1 buyout is the same as a 5 year bank loan. I want to run debt free as soon a possible. That being the case I don't lease and have not leased to keep debt down. I do have a start-up loan that is being paid on a little slower than I would like, but we have paid off 1/2 of it in 5 years and based on our payments, we are cash flow positive. Granted, my WISP is a lot smaller than many that post here and our growth rate is small, but some of that is managing growth to stay cash-flow positive. I have seen several companies die because they became cash rich, but still could not cover the debt. Travis Johnson wrote: The banks can sell a car with little effort. They already have relationships with dealers and auctions. And often, if the consumer's credit is questionable, the dealer will guarantee to take the car back if the loan defaults. Who is going to buy a $10,000 radio that has been repo'd? Even for $5k, I wouldn't touch it. I'd buy a new radio with warranty, that I know is good and hasn't been fried or broken. The banks will never loan on the equipment alone. There is no security there... but again, why do you need a bank loan for equipment when you can just lease it and get the same results? Up to 60 months with $1 buyout is the same as a 5 year bank loan. What's the difference? Travis Microserv Tom DeReggi wrote: Maybe when talking about CPE. But what about when one is talking about a $10,000 Part101 radio? Just like a car, all that the lender should need is to hold the title of the radio until paid off, and get a down payment of $2000 to cover the cost of tower climber/repo man, and a signed letter of authorization from lanlord stating the location of the tower gear is installed on and they acknowledge that the gear is not abandoned equipment. (So it does not automatically become property of landlord in 4 months, and teh landlord knows the equipment
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
I find the secret sauce of converting a customer a very interesting subject as well. For the most part nearly every WISP I have run had a monopoly. The ones that didnt had a niche of some kind. My first owner/operator venture was not good because it was in a highly competitive market and I could not overcome the go with the big company mentality. My customers said I gave great service but even they succumbed to price. Therefore, I sold that and went back to the monopoly world (read boondocks). Even here, I eventually expect competition to enter my market. It would be nice to know the secret sauce so I can be better prepared for that day. -RickG On Sun, May 24, 2009 at 9:33 AM, Charles Wu c...@cticonnect.com wrote: All I can say is if you are holding back on doing more installs because you can't afford it, you need to find some financing and get installing. Once that customer is installed with something else (DSL, Cable, competitor), it's 10x harder to get them to switch to you. You have to get the customers NOW. Now that's a more interesting discussion What's the business plan for customer acquisition? Do you still keep building out into unserved areas (e.g., first to market)? At this point, I would guess that most areas have competition - so then is the business model based upon arbitraging attrition and moves? e.g., the average American moves every 7 years - so that means 12% of the population is available yearly as a new customer So, say you have 5,000 customers in a market of 100,000 You'll churn 1% / month (50) - but there's a market of new adds of 1,000 customers every month due to just organic moving activity...so assuming 20% market share, market equilibrium would be 20,000 subscribers Not necessarily a bad thing =) That said, I'd be curious to talk about secret sauce methods to convert customers from the competition -Charles Charles Wu wrote: Hi Scott, Regarding debt...I've found that there's a scale inflection point in running a WISP (or any business for the matter) that needs to be reached -- the main purpose for taking on debt (because due to interest, you end up paying more in the longer term instead of buying cash), is to accelerate growth so one can progress beyond this point e.g., if you can organically fund 30 new installs a month with cash, if you take on debt, you could leverage yourself and now do 100 installs / month Now, from a business perspective -- in looking at the WISP As a stand-alone sustainable business -- it costs a minimum of about $30k / month to operate a small WISP -- now, I'll argue that that $30k/month in operations remains relatively constant and whether it's supporting 300, 800 or 1500 customers -- however, at 300 customers, the business is bleeding cash...at 800 customers the business is just about at a break-even, and at 1500 customers, the business is a cash machine -Charles -Original Message- From: wireless-boun...@wispa.orgmailto:wireless-boun...@wispa.org [mailto:wireless-boun...@wispa.org] On Behalf Of Scott Reed Sent: Saturday, May 23, 2009 4:20 PM To: WISPA General List Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability So I will take option 4 from a previous post since Travis made the point. Up to 60 months with $1 buyout is the same as a 5 year bank loan. I want to run debt free as soon a possible. That being the case I don't lease and have not leased to keep debt down. I do have a start-up loan that is being paid on a little slower than I would like, but we have paid off 1/2 of it in 5 years and based on our payments, we are cash flow positive. Granted, my WISP is a lot smaller than many that post here and our growth rate is small, but some of that is managing growth to stay cash-flow positive. I have seen several companies die because they became cash rich, but still could not cover the debt. Travis Johnson wrote: The banks can sell a car with little effort. They already have relationships with dealers and auctions. And often, if the consumer's credit is questionable, the dealer will guarantee to take the car back if the loan defaults. Who is going to buy a $10,000 radio that has been repo'd? Even for $5k, I wouldn't touch it. I'd buy a new radio with warranty, that I know is good and hasn't been fried or broken. The banks will never loan on the equipment alone. There is no security there... but again, why do you need a bank loan for equipment when you can just lease it and get the same results? Up to 60 months with $1 buyout is the same as a 5 year bank loan. What's the difference? Travis Microserv Tom DeReggi wrote: Maybe when talking about CPE. But what about when one is talking about a $10,000 Part101 radio? Just like a car, all that the lender should need is to hold the title of the radio until paid off, and get a down payment of $2000
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
Yup, just like I said, the big variable is labor. Which dictated by the number of subs and territory covered. To elaborate more, I didnt mention my wife handles the front and back office work. Also, I've leaned on a few local computer techs to take care of customer issues. I take care of the network, customer CPE issues, and coverage expansion. I agree, at about 500-600 subs, I'll have to have help. At some point, I'll have to hire someone to handle the office work as well. As they say, budgets are made to be broken :) -RickG On Sun, May 24, 2009 at 12:16 PM, Marlon K. Schafer o...@odessaoffice.com wrote: Charles, your numbers are WAY off there. We run about a 20% margin and gross less than $30,000 per month. We're at a bit over 500 subs at an average of $37.50 per month. That's high for our here. Our tax return doesn't show 20% for last year because of the bucket truck and new spectrum analyzer purchases. We probably have 2 to 3 x more tools available to us than 95% of the companies our size. Those purchases have certainly impacted our margins, but they've helped us run a very very good network on a shoe string. Here's an even more important question though. How many people does it take to run a WISP? That too will vary some due to distances traveled by people. But things should be close. Chuck Profito has nearly 1000 subs but he's only got to cover 1100 square miles or so. I have just over 500 but i have over 7000 square miles to deal with. Chuck is still running with 2 people. He does mostly sales, his partner does much of the rest. I do sales (mostly word of mouth) and all tech stuff that happens outside of the office. We have the equivalent of just over 1 full time office person (three people doing the work part time) to handle billing, initial tech support, payables etc. By the time I hit 600 to 800 subs I'm gonna need some help. Hiring that person will suck big time because I won't have enough work for them right away. That move alone will likely cut my margin down to nearly nothing for a couple of years. Laters, marlon - Original Message - From: Charles Wu c...@cticonnect.com To: WISPA General List wireless@wispa.org Sent: Saturday, May 23, 2009 8:07 PM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Hi Scott, Regarding debt...I've found that there's a scale inflection point in running a WISP (or any business for the matter) that needs to be reached -- the main purpose for taking on debt (because due to interest, you end up paying more in the longer term instead of buying cash), is to accelerate growth so one can progress beyond this point e.g., if you can organically fund 30 new installs a month with cash, if you take on debt, you could leverage yourself and now do 100 installs / month Now, from a business perspective -- in looking at the WISP As a stand-alone sustainable business -- it costs a minimum of about $30k / month to operate a small WISP -- now, I'll argue that that $30k/month in operations remains relatively constant and whether it's supporting 300, 800 or 1500 customers -- however, at 300 customers, the business is bleeding cash...at 800 customers the business is just about at a break-even, and at 1500 customers, the business is a cash machine -Charles -Original Message- From: wireless-boun...@wispa.org [mailto:wireless-boun...@wispa.org] On Behalf Of Scott Reed Sent: Saturday, May 23, 2009 4:20 PM To: WISPA General List Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability So I will take option 4 from a previous post since Travis made the point. Up to 60 months with $1 buyout is the same as a 5 year bank loan. I want to run debt free as soon a possible. That being the case I don't lease and have not leased to keep debt down. I do have a start-up loan that is being paid on a little slower than I would like, but we have paid off 1/2 of it in 5 years and based on our payments, we are cash flow positive. Granted, my WISP is a lot smaller than many that post here and our growth rate is small, but some of that is managing growth to stay cash-flow positive. I have seen several companies die because they became cash rich, but still could not cover the debt. Travis Johnson wrote: The banks can sell a car with little effort. They already have relationships with dealers and auctions. And often, if the consumer's credit is questionable, the dealer will guarantee to take the car back if the loan defaults. Who is going to buy a $10,000 radio that has been repo'd? Even for $5k, I wouldn't touch it. I'd buy a new radio with warranty, that I know is good and hasn't been fried or broken. The banks will never loan on the equipment alone. There is no security there... but again, why do you need a bank loan for equipment when you can just lease it and get the same results? Up to 60 months with $1 buyout is the same as a 5 year
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
Marlon, Charles, your numbers are WAY off there. You can't base your numbers on the fact that you're willing to be on call 24x7, work 12 hour days 7 days / week as a function of normal business operations -- it simply isn't sustainable from a long term perspective Eventually, your wife WILL leave you if you keep this up (on a side note, one of the biggest reasons I've seen for small WISPs selling out is the wife factor =) If you were to replace yourself with normal employees that work 8-5 and who make market wages, you'd probably discover that your labor costs will go up $!0-15k / month (I would argue that you probably personally do the work of 3 people in your company) By the time I hit 600 to 800 subs I'm gonna need some help. Hiring that person will suck big time because I won't have enough work for them right away. That move alone will likely cut my margin down to nearly nothing for a couple of years. After you factor in your time / opportunity cost / resources / overhead / time spent training -- you will spend an additional 2x an employee's salary during the first 6 months of employment trying to get them trained up and productive -- and then, there's a good chance they just don't work out =) -Charles - Original Message - From: Charles Wu c...@cticonnect.com To: WISPA General List wireless@wispa.org Sent: Saturday, May 23, 2009 8:07 PM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Hi Scott, Regarding debt...I've found that there's a scale inflection point in running a WISP (or any business for the matter) that needs to be reached -- the main purpose for taking on debt (because due to interest, you end up paying more in the longer term instead of buying cash), is to accelerate growth so one can progress beyond this point e.g., if you can organically fund 30 new installs a month with cash, if you take on debt, you could leverage yourself and now do 100 installs / month Now, from a business perspective -- in looking at the WISP As a stand-alone sustainable business -- it costs a minimum of about $30k / month to operate a small WISP -- now, I'll argue that that $30k/month in operations remains relatively constant and whether it's supporting 300, 800 or 1500 customers -- however, at 300 customers, the business is bleeding cash...at 800 customers the business is just about at a break-even, and at 1500 customers, the business is a cash machine -Charles -Original Message- From: wireless-boun...@wispa.org [mailto:wireless-boun...@wispa.org] On Behalf Of Scott Reed Sent: Saturday, May 23, 2009 4:20 PM To: WISPA General List Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability So I will take option 4 from a previous post since Travis made the point. Up to 60 months with $1 buyout is the same as a 5 year bank loan. I want to run debt free as soon a possible. That being the case I don't lease and have not leased to keep debt down. I do have a start-up loan that is being paid on a little slower than I would like, but we have paid off 1/2 of it in 5 years and based on our payments, we are cash flow positive. Granted, my WISP is a lot smaller than many that post here and our growth rate is small, but some of that is managing growth to stay cash-flow positive. I have seen several companies die because they became cash rich, but still could not cover the debt. Travis Johnson wrote: The banks can sell a car with little effort. They already have relationships with dealers and auctions. And often, if the consumer's credit is questionable, the dealer will guarantee to take the car back if the loan defaults. Who is going to buy a $10,000 radio that has been repo'd? Even for $5k, I wouldn't touch it. I'd buy a new radio with warranty, that I know is good and hasn't been fried or broken. The banks will never loan on the equipment alone. There is no security there... but again, why do you need a bank loan for equipment when you can just lease it and get the same results? Up to 60 months with $1 buyout is the same as a 5 year bank loan. What's the difference? Travis Microserv Tom DeReggi wrote: Maybe when talking about CPE. But what about when one is talking about a $10,000 Part101 radio? Just like a car, all that the lender should need is to hold the title of the radio until paid off, and get a down payment of $2000 to cover the cost of tower climber/repo man, and a signed letter of authorization from lanlord stating the location of the tower gear is installed on and they acknowledge that the gear is not abandoned equipment. (So it does not automatically become property of landlord in 4 months, and teh landlord knows the equipment owner has first rights to the gear). Think about it... Wouldn't repo costs be reduced when the repo man knows exactly where to find the radio? A car can easilly be relocated and hard-to-find, when the owner skips town. Plus
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
- Original Message - From: Charles Wu c...@cticonnect.com To: WISPA General List wireless@wispa.org Sent: Sunday, May 24, 2009 8:56 PM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Marlon, Charles, your numbers are WAY off there. You can't base your numbers on the fact that you're willing to be on call 24x7, work 12 hour days 7 days / week as a function of normal business operations -- it simply isn't sustainable from a long term perspective Grin. Sure it is. That's what a LOT of small business people do. It's also kind of common for doctors, dentists, plumbers etc Sometimes is sucks, but remember that we can also give ourselves time off nearly anytime we really want it. I don't miss very many of the kid's baseball games, dance recitles, field trips or anything else. Eventually, your wife WILL leave you if you keep this up (on a side note, one of the biggest reasons I've seen for small WISPs selling out is the wife factor =) The reasons I've usually seen are that people get in this for a quick buck. When that doesn't happen they burn out/bail out. But that's no different than any other industry I see. And I've seen a lot, I've been doing office equipment repair work since about 1990 or 92. I've always tried to learn from my customers, what works, why etc. Not many bail on a company that's making good money, no matter how much time it's taking. If you were to replace yourself with normal employees that work 8-5 and who make market wages, you'd probably discover that your labor costs will go up $!0-15k / month (I would argue that you probably personally do the work of 3 people in your company) Believe it or not, I do the work of less than one most of the time. It's been a bit more than that lately but only because I'm too cheap to hire help and can't afford to replace all the my POS Tranzeo AP's with MT units all at once. Once I get the network running nicer my service calls will drop off a lot. The difference at the sites that are already done has been nothing short of amazing. The rest of the time I'm screwing around with WISPA stuff or helping local orgs of some kind. I might put in a 40 to 60 hour week, but a lot of the time is non esential. Also, if I get too busy I bring a helper along on my installs. 2 guys can usually knock one out in about 1/3rd the time of one person. Not sure why it goes so much faster, but it does. By the time I hit 600 to 800 subs I'm gonna need some help. Hiring that person will suck big time because I won't have enough work for them right away. That move alone will likely cut my margin down to nearly nothing for a couple of years. After you factor in your time / opportunity cost / resources / overhead / time spent training -- you will spend an additional 2x an employee's salary during the first 6 months of employment trying to get them trained up and productive -- and then, there's a good chance they just don't work out =) Yeah, that's the part that really sucks. Every time we hire a new person the one that's there drops to half time production for x months. It's a hard thing. Saying your numbers were off wasn't quite fair of me. They COULD be right on the money if a person structured the company that way. But not everyone lives in a market that will allow tens of thousands of customers. Not everyone out there even wants to get that big (if I had a nickle for every business owner that's told me the most fun they had and the most money they made was when it was just them, no employees..) But then again, that's one of the really cool things about this buisness, it's big enough and flexible enough to allow many different business models and operator dreams to bear fuit! marlon -Charles - Original Message - From: Charles Wu c...@cticonnect.com To: WISPA General List wireless@wispa.org Sent: Saturday, May 23, 2009 8:07 PM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Hi Scott, Regarding debt...I've found that there's a scale inflection point in running a WISP (or any business for the matter) that needs to be reached -- the main purpose for taking on debt (because due to interest, you end up paying more in the longer term instead of buying cash), is to accelerate growth so one can progress beyond this point e.g., if you can organically fund 30 new installs a month with cash, if you take on debt, you could leverage yourself and now do 100 installs / month Now, from a business perspective -- in looking at the WISP As a stand-alone sustainable business -- it costs a minimum of about $30k / month to operate a small WISP -- now, I'll argue that that $30k/month in operations remains relatively constant and whether it's supporting 300, 800 or 1500 customers -- however, at 300 customers, the business is bleeding cash...at 800 customers the business is just about
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
Hi Marlon, I think it's appropriate to make a few definitions and distinctions on things so everyone is on the same page Specifically, for purposes of making my point, I define Proprietorship: A commercial activity engaged in as a means of livelihood or profit Business: A unique system of processes and procedures that documents and codifies a specific method of proprietorship Asset: cash, inventory, equipment, infrastructure, customer contracts, brand, marketing, etc Grin. Sure it is. That's what a LOT of small business people do. It's also kind of common for doctors, dentists, plumbers etc Sometimes it sucks, Now, everything you stated above is just a method of proprietorship, and in most cases, from a sale perspective, a proprietorships isn't worth anything more than the depreciated value of its assets Say you were buying out the local plumber's office -- what would he have of value? His truck? Some old tools? A customer list / brand perhaps (but the reality of things is that customers do business with him because of him, and if you bought him out and he moved out of town, those customers would probably go back to being on the open market) Now, in comparing the WISP 'proprietorship' vs. the plumber, it's worth noting that the WISP is somewhat unique in that it results in the creation of an independent asset that holds onto a lot of value (e.g., the recurring revenue and everything that goes to support it); in many ways, this is akin to real-estate Not everyone out there even wants to get that big (if I had a nickle for every business owner that's told me the most fun they had and the most money they made was when it was just them, no employees..) But then again, that's one of the really cool things about this buisness, it's big enough and flexible enough to allow many different business models and operator dreams to bear fuit! True...and you have the added benefit of building an asset that has value (be happy we're not plumbers =) -Charles 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/
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
Sure do, Cti would have to fly me there Sent from my Motorola Startac... On May 23, 2009, at 12:11 AM, Charles Wu c...@cticonnect.com wrote: Well Gino, it looks you're buying ski tickets next time =) -Charles -Original Message- From: wireless-boun...@wispa.org [mailto:wireless-boun...@wispa.org] On Behalf Of Gino Villarini Sent: Friday, May 22, 2009 3:54 PM To: WISPA General List Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Option 3 Gino A. Villarini g...@aeronetpr.com Aeronet Wireless Broadband Corp. tel 787.273.4143 fax 787.273.4145 -Original Message- From: wireless-boun...@wispa.org [mailto:wireless-boun...@wispa.org] On Behalf Of Charles Wu Sent: Friday, May 22, 2009 4:50 PM To: WISPA General List Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Lease, lease, lease. Agreed that leasing is a great option, but in looking at my numbers these past few months, I've noticed that the amount of leasing that we do is a fraction of what we used to do 12 months ago (if it wasn't for the Motorola 3% program, I don't think we'd be doing any leasing) - part of it is because many of our leasing vendors aren't leasing anymore (e.g., GE Capital), but given that infrastructure sales haven't dropped off that much in this economy (in fact, our March numbers for 2009 were BETTER than our March 2008 numbers), I'm trying to understand why people who may have leased in the past no longer seem to be leasing (obviously, you're still leasing away so this question doesn't apply to you =)... So if you were leasing 12 months ago, but no longer are, Is it because 1. The economy sucks and you're not buying new equipment? 2. The economy is fine, you want to lease equipment but can't get approved? 3. The economy is fine, but you're making so much money that you no longer need to lease equipment? Just curiosity on my side -Charles --- - 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! 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/
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
So I will take option 4 from a previous post since Travis made the point. Up to 60 months with $1 buyout is the same as a 5 year bank loan. I want to run debt free as soon a possible. That being the case I don't lease and have not leased to keep debt down. I do have a start-up loan that is being paid on a little slower than I would like, but we have paid off 1/2 of it in 5 years and based on our payments, we are cash flow positive. Granted, my WISP is a lot smaller than many that post here and our growth rate is small, but some of that is managing growth to stay cash-flow positive. I have seen several companies die because they became cash rich, but still could not cover the debt. Travis Johnson wrote: The banks can sell a car with little effort. They already have relationships with dealers and auctions. And often, if the consumer's credit is questionable, the dealer will guarantee to take the car back if the loan defaults. Who is going to buy a $10,000 radio that has been repo'd? Even for $5k, I wouldn't touch it. I'd buy a new radio with warranty, that I know is good and hasn't been fried or broken. The banks will never loan on the equipment alone. There is no security there... but again, why do you need a bank loan for equipment when you can just lease it and get the same results? Up to 60 months with $1 buyout is the same as a 5 year bank loan. What's the difference? Travis Microserv Tom DeReggi wrote: Maybe when talking about CPE. But what about when one is talking about a $10,000 Part101 radio? Just like a car, all that the lender should need is to hold the title of the radio until paid off, and get a down payment of $2000 to cover the cost of tower climber/repo man, and a signed letter of authorization from lanlord stating the location of the tower gear is installed on and they acknowledge that the gear is not abandoned equipment. (So it does not automatically become property of landlord in 4 months, and teh landlord knows the equipment owner has first rights to the gear). Think about it... Wouldn't repo costs be reduced when the repo man knows exactly where to find the radio? A car can easilly be relocated and hard-to-find, when the owner skips town. Plus the home likely has an owner with a shot gun or a big dog, which the tower/MTU likely does not. The MTU building might even have a security guard to escort teh lender safely to the roof :-) Tom DeReggi RapidDSL Wireless, Inc IntAirNet- Fixed Wireless Broadband - Original Message - From: jp j...@saucer.midcoast.com To: WISPA General List wireless@wispa.org Sent: Friday, May 22, 2009 11:13 AM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability In a worse case scenario, a car is probably considerably easier to repo than the antenna on my roof and radio in my attic. And the car would be worth a magnitude more money. The installed infrastructure is worthless if it costs a huge amount to get to it. On Thu, May 21, 2009 at 07:27:09PM -0400, Tom DeReggi wrote: I've never found a lender willing to lend against using the in-place used equipment as colladeral. It is the biggest double standard. I find it highly ironic that they'll use a car for colladeral that looses 50% of its value the day it leaves the lot, and has a rate of failure and risk of damage higher than just about any product on the market, and it has a huge cash burn (gas :-). but yet lendors won't put equivellent value on wireless gear, that holds its value, Ebay boasting easilly 50% after 3-4 years of use, even after fully depreciated. I'll never understand the lending market. Tom DeReggi RapidDSL Wireless, Inc IntAirNet- Fixed Wireless Broadband - Original Message - From: rea...@muddyfrogwater.us To: WISPA General List wireless@wispa.org Sent: Thursday, May 21, 2009 1:55 PM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Answers in-line. insert witty tagline here - Original Message - From: Charles Wu c...@cticonnect.com To: WISPA General List wireless@wispa.org Sent: Thursday, May 21, 2009 8:49 AM Subject: [WISPA] Quesiton on Funding / Financing / Capital Availability With all the hype being generated by the stimulus bill, we have been approached by a multitude of third party financial organizations that have a renewed interest in potentially financing rural broadband...now, specifically, for WISPs, in the past, equipment leasing has been a very popular option for financing, but in looking at our numbers over the past year, I've noticed a marked decline in the amount of leasing that we do - that said, I have the following questions for the listserv about financing Assuming that WISPs are still need to buy equipment... 1. Are you able to just purchase equipment out of cash-flow organically generated from
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
Travis, I'd agree, except, I'm finding a loan or Line of Credit is as easy to get as a lease. When the leasor considers a radio, the opposite of a car, non-liquidatable, does the lender really benefit by leasing it instead of lending for it? Tom DeReggi RapidDSL Wireless, Inc IntAirNet- Fixed Wireless Broadband - Original Message - From: Travis Johnson To: WISPA General List Sent: Friday, May 22, 2009 6:04 PM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability The banks can sell a car with little effort. They already have relationships with dealers and auctions. And often, if the consumer's credit is questionable, the dealer will guarantee to take the car back if the loan defaults. Who is going to buy a $10,000 radio that has been repo'd? Even for $5k, I wouldn't touch it. I'd buy a new radio with warranty, that I know is good and hasn't been fried or broken. The banks will never loan on the equipment alone. There is no security there... but again, why do you need a bank loan for equipment when you can just lease it and get the same results? Up to 60 months with $1 buyout is the same as a 5 year bank loan. What's the difference? Travis Microserv Tom DeReggi wrote: Maybe when talking about CPE. But what about when one is talking about a $10,000 Part101 radio? Just like a car, all that the lender should need is to hold the title of the radio until paid off, and get a down payment of $2000 to cover the cost of tower climber/repo man, and a signed letter of authorization from lanlord stating the location of the tower gear is installed on and they acknowledge that the gear is not abandoned equipment. (So it does not automatically become property of landlord in 4 months, and teh landlord knows the equipment owner has first rights to the gear). Think about it... Wouldn't repo costs be reduced when the repo man knows exactly where to find the radio? A car can easilly be relocated and hard-to-find, when the owner skips town. Plus the home likely has an owner with a shot gun or a big dog, which the tower/MTU likely does not. The MTU building might even have a security guard to escort teh lender safely to the roof :-) Tom DeReggi RapidDSL Wireless, Inc IntAirNet- Fixed Wireless Broadband - Original Message - From: jp j...@saucer.midcoast.com To: WISPA General List wireless@wispa.org Sent: Friday, May 22, 2009 11:13 AM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability In a worse case scenario, a car is probably considerably easier to repo than the antenna on my roof and radio in my attic. And the car would be worth a magnitude more money. The installed infrastructure is worthless if it costs a huge amount to get to it. On Thu, May 21, 2009 at 07:27:09PM -0400, Tom DeReggi wrote: I've never found a lender willing to lend against using the in-place used equipment as colladeral. It is the biggest double standard. I find it highly ironic that they'll use a car for colladeral that looses 50% of its value the day it leaves the lot, and has a rate of failure and risk of damage higher than just about any product on the market, and it has a huge cash burn (gas :-). but yet lendors won't put equivellent value on wireless gear, that holds its value, Ebay boasting easilly 50% after 3-4 years of use, even after fully depreciated. I'll never understand the lending market. Tom DeReggi RapidDSL Wireless, Inc IntAirNet- Fixed Wireless Broadband - Original Message - From: rea...@muddyfrogwater.us To: WISPA General List wireless@wispa.org Sent: Thursday, May 21, 2009 1:55 PM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Answers in-line. insert witty tagline here - Original Message - From: Charles Wu c...@cticonnect.com To: WISPA General List wireless@wispa.org Sent: Thursday, May 21, 2009 8:49 AM Subject: [WISPA] Quesiton on Funding / Financing / Capital Availability With all the hype being generated by the stimulus bill, we have been approached by a multitude of third party financial organizations that have a renewed interest in potentially financing rural broadband...now, specifically, for WISPs, in the past, equipment leasing has been a very popular option for financing, but in looking at our numbers over the past year, I've noticed a marked decline in the amount of leasing that we do - that said, I have the following questions for the listserv about financing Assuming that WISPs are still need to buy equipment... 1. Are you able to just purchase equipment out of cash-flow organically generated from operations Other than originally starting with our own personal seed money, that's what we've done. 2. Have you gone to more traditional forms of money (e.g., bank / SBA / RUS loans)? I could not qualify for any of them. 3. Are you doing more
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
The biggest difference I have seen with a loan or line of credit, even for us (a corporation in business for 13 years and profitable since the first year) is that the banks want personal guarantees... and we haven't done a personal guarantee on leasing equipment for 5+ years. When you have 20+ current leases totalling over $1,000,000 having that show up on your personal credit reports makes it very hard to re-finance your house, or buy a car, etc. Yes, it can be done (because I have done it), it just creates 10x the work... and there is no benefit (tax wise, equipment wise, company wise, etc.) so we take the easy way. ;) We lease, it stays corporate (as it should), and everything is good. :) Travis Microserv Tom DeReggi wrote: Travis, I'd agree, except, I'm finding a loan or Line of Credit is as easy to get as a lease. When the leasor considers a radio, the opposite of a car, non-liquidatable, does the lender really benefit by leasing it instead of lending for it? Tom DeReggi RapidDSL Wireless, Inc IntAirNet- Fixed Wireless Broadband - Original Message - From: Travis Johnson To: WISPA General List Sent: Friday, May 22, 2009 6:04 PM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability The banks can sell a car with little effort. They already have relationships with dealers and auctions. And often, if the consumer's credit is questionable, the dealer will guarantee to take the car back if the loan defaults. Who is going to buy a $10,000 radio that has been repo'd? Even for $5k, I wouldn't touch it. I'd buy a new radio with warranty, that I know is good and hasn't been fried or broken. The banks will never loan on the equipment alone. There is no security there... but again, why do you need a bank loan for equipment when you can just lease it and get the same results? Up to 60 months with $1 buyout is the same as a 5 year bank loan. What's the difference? Travis Microserv Tom DeReggi wrote: Maybe when talking about CPE. But what about when one is talking about a $10,000 Part101 radio? Just like a car, all that the lender should need is to hold the title of the radio until paid off, and get a down payment of $2000 to cover the cost of tower climber/repo man, and a signed letter of authorization from lanlord stating the location of the tower gear is installed on and they acknowledge that the gear is not abandoned equipment. (So it does not automatically become property of landlord in 4 months, and teh landlord knows the equipment owner has first rights to the gear). Think about it... Wouldn't repo costs be reduced when the repo man knows exactly where to find the radio? A car can easilly be relocated and hard-to-find, when the owner skips town. Plus the home likely has an owner with a shot gun or a big dog, which the tower/MTU likely does not. The MTU building might even have a security guard to escort teh lender safely to the roof :-) Tom DeReggi RapidDSL Wireless, Inc IntAirNet- Fixed Wireless Broadband - Original Message - From: jp j...@saucer.midcoast.com To: WISPA General List wireless@wispa.org Sent: Friday, May 22, 2009 11:13 AM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability In a worse case scenario, a car is probably considerably easier to repo than the antenna on my roof and radio in my attic. And the car would be worth a magnitude more money. The installed infrastructure is worthless if it costs a huge amount to get to it. On Thu, May 21, 2009 at 07:27:09PM -0400, Tom DeReggi wrote: I've never found a lender willing to lend against using the in-place used equipment as colladeral. It is the biggest double standard. I find it highly ironic that they'll use a car for colladeral that looses 50% of its value the day it leaves the lot, and has a rate of failure and risk of damage higher than just about any product on the market, and it has a huge cash burn (gas :-). but yet lendors won't put equivellent value on wireless gear, that holds its value, Ebay boasting easilly 50% after 3-4 years of use, even after fully depreciated. I'll never understand the lending market. Tom DeReggi RapidDSL Wireless, Inc IntAirNet- Fixed Wireless Broadband - Original Message - From: rea...@muddyfrogwater.us To: WISPA General List wireless@wispa.org Sent: Thursday, May 21, 2009 1:55 PM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Answers in-line. insert witty tagline here - Original Message - From: Charles Wu c...@cticonnect.com To: WISPA General List wireless@wispa.org Sent: Thursday, May 21, 2009 8:49 AM Subject: [WISPA] Quesiton on Funding / Financing / Capital Availability With all the hype being generated by the stimulus bill, we have been approached by a multitude
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
Hi Scott, Regarding debt...I've found that there's a scale inflection point in running a WISP (or any business for the matter) that needs to be reached -- the main purpose for taking on debt (because due to interest, you end up paying more in the longer term instead of buying cash), is to accelerate growth so one can progress beyond this point e.g., if you can organically fund 30 new installs a month with cash, if you take on debt, you could leverage yourself and now do 100 installs / month Now, from a business perspective -- in looking at the WISP As a stand-alone sustainable business -- it costs a minimum of about $30k / month to operate a small WISP -- now, I'll argue that that $30k/month in operations remains relatively constant and whether it's supporting 300, 800 or 1500 customers -- however, at 300 customers, the business is bleeding cash...at 800 customers the business is just about at a break-even, and at 1500 customers, the business is a cash machine -Charles -Original Message- From: wireless-boun...@wispa.org [mailto:wireless-boun...@wispa.org] On Behalf Of Scott Reed Sent: Saturday, May 23, 2009 4:20 PM To: WISPA General List Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability So I will take option 4 from a previous post since Travis made the point. Up to 60 months with $1 buyout is the same as a 5 year bank loan. I want to run debt free as soon a possible. That being the case I don't lease and have not leased to keep debt down. I do have a start-up loan that is being paid on a little slower than I would like, but we have paid off 1/2 of it in 5 years and based on our payments, we are cash flow positive. Granted, my WISP is a lot smaller than many that post here and our growth rate is small, but some of that is managing growth to stay cash-flow positive. I have seen several companies die because they became cash rich, but still could not cover the debt. Travis Johnson wrote: The banks can sell a car with little effort. They already have relationships with dealers and auctions. And often, if the consumer's credit is questionable, the dealer will guarantee to take the car back if the loan defaults. Who is going to buy a $10,000 radio that has been repo'd? Even for $5k, I wouldn't touch it. I'd buy a new radio with warranty, that I know is good and hasn't been fried or broken. The banks will never loan on the equipment alone. There is no security there... but again, why do you need a bank loan for equipment when you can just lease it and get the same results? Up to 60 months with $1 buyout is the same as a 5 year bank loan. What's the difference? Travis Microserv Tom DeReggi wrote: Maybe when talking about CPE. But what about when one is talking about a $10,000 Part101 radio? Just like a car, all that the lender should need is to hold the title of the radio until paid off, and get a down payment of $2000 to cover the cost of tower climber/repo man, and a signed letter of authorization from lanlord stating the location of the tower gear is installed on and they acknowledge that the gear is not abandoned equipment. (So it does not automatically become property of landlord in 4 months, and teh landlord knows the equipment owner has first rights to the gear). Think about it... Wouldn't repo costs be reduced when the repo man knows exactly where to find the radio? A car can easilly be relocated and hard-to-find, when the owner skips town. Plus the home likely has an owner with a shot gun or a big dog, which the tower/MTU likely does not. The MTU building might even have a security guard to escort teh lender safely to the roof :-) Tom DeReggi RapidDSL Wireless, Inc IntAirNet- Fixed Wireless Broadband - Original Message - From: jp j...@saucer.midcoast.com To: WISPA General List wireless@wispa.org Sent: Friday, May 22, 2009 11:13 AM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability In a worse case scenario, a car is probably considerably easier to repo than the antenna on my roof and radio in my attic. And the car would be worth a magnitude more money. The installed infrastructure is worthless if it costs a huge amount to get to it. On Thu, May 21, 2009 at 07:27:09PM -0400, Tom DeReggi wrote: I've never found a lender willing to lend against using the in-place used equipment as colladeral. It is the biggest double standard. I find it highly ironic that they'll use a car for colladeral that looses 50% of its value the day it leaves the lot, and has a rate of failure and risk of damage higher than just about any product on the market, and it has a huge cash burn (gas :-). but yet lendors won't put equivellent value on wireless gear, that holds its value, Ebay boasting easilly 50% after 3-4 years of use, even after fully depreciated. I'll never understand the lending market. Tom DeReggi RapidDSL Wireless, Inc
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
Charles, I agree with you... but at what point does that happen? If your growth is growing (meaning you are doing more installs every month then the previous month), I don't think you can ever reach the point of paying cash for CPE... without completely strapping the entire business. I just don't see a reason that it makes sense to pay cash for the CPE. Yes, we pay cash for all of our backhauls, AP's, antennas for CPE, accessories (CAT5, mounts, etc.) but when it really costs so little in the long run to finance the CPE and have extra cash flow for other things, it seems the easy solution... especially during heavy growth periods. All I can say is if you are "holding back" on doing more installs because you can't afford it, you need to find some financing and get installing. Once that customer is installed with something else (DSL, Cable, competitor), it's 10x harder to get them to switch to you. You have to get the customers NOW. Travis Microserv Charles Wu wrote: Hi Scott, Regarding debt...I've found that there's a "scale inflection point" in running a WISP (or any business for the matter) that needs to be reached -- the main purpose for taking on debt (because due to interest, you end up paying more in the longer term instead of buying cash), is to accelerate growth so one can progress beyond this point e.g., if you can organically fund 30 new installs a month with cash, if you take on debt, you could leverage yourself and now do 100 installs / month Now, from a business perspective -- in looking at the WISP As a stand-alone sustainable business -- it costs a minimum of about $30k / month to operate a small WISP -- now, I'll argue that that $30k/month in operations remains relatively constant and whether it's supporting 300, 800 or 1500 customers -- however, at 300 customers, the business is bleeding cash...at 800 customers the business is just about at a break-even, and at 1500 customers, the business is a cash machine -Charles -Original Message- From: wireless-boun...@wispa.org [mailto:wireless-boun...@wispa.org] On Behalf Of Scott Reed Sent: Saturday, May 23, 2009 4:20 PM To: WISPA General List Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability So I will take option 4 from a previous post since Travis made the point. "Up to 60 months with $1 buyout is the same as a 5 year bank loan." I want to run debt free as soon a possible. That being the case I don't lease and have not leased to keep debt down. I do have a start-up loan that is being paid on a little slower than I would like, but we have paid off 1/2 of it in 5 years and based on our payments, we are cash flow positive. Granted, my WISP is a lot smaller than many that post here and our growth rate is small, but some of that is managing growth to stay cash-flow positive. I have seen several companies die because they became cash rich, but still could not cover the debt. Travis Johnson wrote: The banks can sell a car with little effort. They already have relationships with dealers and auctions. And often, if the consumer's credit is questionable, the dealer will guarantee to take the car back if the loan defaults. Who is going to buy a $10,000 radio that has been repo'd? Even for $5k, I wouldn't touch it. I'd buy a new radio with warranty, that I know is good and hasn't been fried or broken. The banks will never loan on the equipment alone. There is no security there... but again, why do you need a bank loan for equipment when you can just lease it and get the same results? Up to 60 months with $1 buyout is the same as a 5 year bank loan. What's the difference? Travis Microserv Tom DeReggi wrote: Maybe when talking about CPE. But what about when one is talking about a $10,000 Part101 radio? Just like a car, all that the lender should need is to "hold the title" of the radio until paid off, and get a down payment of $2000 to cover the cost of tower climber/repo man, and a signed letter of authorization from lanlord stating the location of the tower gear is installed on and they acknowledge that the gear is not abandoned equipment. (So it does not automatically become property of landlord in 4 months, and teh landlord knows the equipment owner has first rights to the gear). Think about it... Wouldn't repo costs be reduced when the repo man knows exactly where to find the radio? A car can easilly be relocated and hard-to-find, when the owner skips town. Plus the home likely has an owner with a shot gun or a big dog, which the tower/MTU likely does not. The MTU building might even have a security guard to escort teh lender safely to the roof :-) Tom DeReggi RapidDSL Wireless, Inc IntAirNet- Fixed Wireless Broadband - Original Message - From: "jp" j...@saucer.midcoast.com To: "WISPA General List" wireless@wispa.org Sent: Friday, May 22, 2009 11:13 AM Subject: Re: [W
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
I've never found a lender willing to lend against using the in-place used equipment as colladeral. It is the biggest double standard. I find it highly ironic that they'll use a car for colladeral that looses 50% of its value the day it leaves the lot, and has a rate of failure and risk of damage higher than just about any product on the market, and it has a huge cash burn (gas :-). but yet lendors won't put equivellent value on wireless gear, that holds its value, Ebay boasting easilly 50% after 3-4 years of use, even after fully depreciated. I'll never understand the lending market. The big difference is that a car loan is tied to your personal credit, just like a credit card, and very few are going to borrow $1 million for a car (while plenty here could easily use $1 million for their network) FWIW, every industry specific vertical (e.g., restaurants, medical devices, manufacturing etc) has the same problem when it comes down to infrastructure financing -- traditional lenders won't finance business-specific machinery -- rather, they only use stuff they know as collateral (e.g., real estate, cash flow) That said, when it comes down to cash flow, it's worth analyzing and understanding that most ISPs (specifically facilities based ones) are probably pretty short on cash flow given the fact that 1. the business is based upon a recurring subscription model where I invest (e.g., in CPE) to earn a residual contract (e.g., $50 / month service) 2. ISPs are generally cash-poor due to the fact that excess cash flow usually gets reinvested into the business (more infrastructure) An argument could be made that the most valuable assets of an ISP are the recurring contracts / revenue / etc -- and that's something that financial institutions understand (e.g., receivables / factoring) and ultimately, that's what an ISP is worth (some multiple of MRC) That said, I wonder if a case be made on financing secured by monthly recurring revenue...thoughts? -Charles 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/
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
In a worse case scenario, a car is probably considerably easier to repo than the antenna on my roof and radio in my attic. And the car would be worth a magnitude more money. The installed infrastructure is worthless if it costs a huge amount to get to it. On Thu, May 21, 2009 at 07:27:09PM -0400, Tom DeReggi wrote: I've never found a lender willing to lend against using the in-place used equipment as colladeral. It is the biggest double standard. I find it highly ironic that they'll use a car for colladeral that looses 50% of its value the day it leaves the lot, and has a rate of failure and risk of damage higher than just about any product on the market, and it has a huge cash burn (gas :-). but yet lendors won't put equivellent value on wireless gear, that holds its value, Ebay boasting easilly 50% after 3-4 years of use, even after fully depreciated. I'll never understand the lending market. Tom DeReggi RapidDSL Wireless, Inc IntAirNet- Fixed Wireless Broadband - Original Message - From: rea...@muddyfrogwater.us To: WISPA General List wireless@wispa.org Sent: Thursday, May 21, 2009 1:55 PM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Answers in-line. insert witty tagline here - Original Message - From: Charles Wu c...@cticonnect.com To: WISPA General List wireless@wispa.org Sent: Thursday, May 21, 2009 8:49 AM Subject: [WISPA] Quesiton on Funding / Financing / Capital Availability With all the hype being generated by the stimulus bill, we have been approached by a multitude of third party financial organizations that have a renewed interest in potentially financing rural broadband...now, specifically, for WISPs, in the past, equipment leasing has been a very popular option for financing, but in looking at our numbers over the past year, I've noticed a marked decline in the amount of leasing that we do - that said, I have the following questions for the listserv about financing Assuming that WISPs are still need to buy equipment... 1. Are you able to just purchase equipment out of cash-flow organically generated from operations Other than originally starting with our own personal seed money, that's what we've done. 2. Have you gone to more traditional forms of money (e.g., bank / SBA / RUS loans)? I could not qualify for any of them. 3. Are you doing more vendor leasing programs (e.g., Motorola 3% financing deal) Never sought any. 4. Have you not been able to borrow money due to the credit crunch (e.g., not deploying as aggressively) My corporation hasn't ever been able to obtain hard money credit.In fact, the credit crunch start last Fall raised my 30+ day past due amount from a piddly $1200 to at one time to almost $13,000 in just four months. That almost put us under, and we're still barely scraping by until our seasonally variable cash flow revives come August, with still several thousand on the books that's very slowly getting chipped away at. 5. Are you holding off on deployments because of the economy No, we're holding off due to lack of cash flow. We have plenty of people waiting for us to build infrastructure out to them. 6. Have you gone to Agility...cough Louie the loanshark =) After much discussion, being some of the first people Agility contacted, we have not done any business with them. In my estimation, they wanted control over our business and day to day decisions, which we concluded was both unwarranted and unwise. Or any other thoughts / comments on this topic? WISP equipment is not really a commodity in that there is almost no market for it outside of the maker-vendor relationship. Other than Ebay, and a couple of people who attempt to do it piecemeal, there is no market which stabilizes the value of used equipment, making them a commodity you can borrow against. Perhaps it would be more useful, if vendors had the ability to get capital and create stable working and short term credit relationships with their buyers, kind of like the used car market. -Charles 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
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
On Thu, May 21, 2009 at 10:49:01AM -0500, Charles Wu wrote: With all the hype being generated by the stimulus bill, we have been approached by a multitude of third party financial organizations that have a renewed interest in potentially financing rural broadband...now, specifically, for WISPs, in the past, equipment leasing has been a very popular option for financing, but in looking at our numbers over the past year, I've noticed a marked decline in the amount of leasing that we do - that said, I have the following questions for the listserv about financing Assuming that WISPs are still need to buy equipment... 1.Are you able to just purchase equipment out of cash-flow organically generated from operations Yes, unless it's a large project on a short time table. We've been buying wireless gear for 11 years now. In the early years, our wireless deployment was funded by dialup revenue, but now it's a self-sustaining major part of our business, and dialup is a very small part. We've had some loans for big deployments in the past, and the amounts of money spent on loan repayment currently are comparable to what we'd be spending on equipment to meet current demands. So as those are paid off, we have more money to spend on gear each month. We'll save our loan tolerance for big projects that require high capex, and buy customer radios and modest project infrastructure out of our pocket every month or a shorter term line of credit. Things like Alvarion's comnet let us get quantity pricing breaks on radios as long as we commit to regular CPE deliveries of certain quantity levels, so that works good for cash-flow focused ISPs. 2.Have you gone to more traditional forms of money (e.g., bank / SBA / RUS loans)? We've had bank loans and SBA backed bank loans in the past. 3.Are you doing more vendor leasing programs (e.g., Motorola 3% financing deal) No. 4.Have you not been able to borrow money due to the credit crunch (e.g., not deploying as aggressively) 5.Are you holding off on deployments because of the economy I could be deploying a lot more if the economy were better and more people were more willing to get nicer Internet services. 6.Have you gone to Agility...cough Louie the loanshark =) I've investigated leasing, and it appears to be a choice for when the bank doesn't want to deal with you. If I had that sort of relationship with the bank, I'd want to fix that before spending more money. Or any other thoughts / comments on this topic? -Charles 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/ -- /* Jason Philbrook | Midcoast Internet Solutions - Wireless and DSL KB1IOJ| Broadband Internet Access, Dialup, and Hosting http://f64.nu/ | for Midcoast Mainehttp://www.midcoast.com/ */ 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/
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
Just as a side note here. For our new building we just moved into about 6mo ago we had to put up our inventory as collateral plus a bunch of other things. Even brand new unused equipment they would only give 10c on the dollar for our inventory based on our cost. Tried to explain until I was blue in the face that not a single piece of the equipment we have is obsolete and stock is being rotated at least for 90% of the inventory every 90 days or less and that if they would let us handle the sale in the case of a failure we would have at least 75% sold at cost or even small markup and be sold within 45 days. Remaining 25% would take probably another 90 days to sell at cost or at slight profit. But no go. Only thing I managed was to convince one of the senior bankers that he would buy the inventory at the 10c on the dollar personally and let me sell it and split the profit with me. Not like that is likely to happen but with that in mind I can see why a bank due to lack of knowled ge etc would use a WISP radio equipment installed all over the place as securement for a loan. After all your talking used equipment at 100's of locations most of the time not directly controlled by the WISP when they will only give 10c on the dollar for brand new equipment in box non which is older then a year and all being at one location in a building they own. /Eje Sent via BlackBerry from T-Mobile -Original Message- From: Jason Hensley jhens...@mozarks.com Date: Fri, 22 May 2009 09:49:07 To: 'WISPA General List'wireless@wispa.org Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Most lenders I've worked with really don't seem to even consider lending against recurring revenue as the recurring revenue is what they will use to justify to themselves, board, investors, and the FDIC that it's a reasonable loan. The recurring revenue is not really considered an asset because if the business goes south, the recurring revenue is gone and their left holding basically nothing but blue sky. Hard assets can be sold and at least recoup a portion of what they loaned the business. There are plenty of places out there that will do Accounts Receivables loans, but most of those seem to be kinda like the payday loan people. Big fee up front, and huge interest rates. -Original Message- From: wireless-boun...@wispa.org [mailto:wireless-boun...@wispa.org] On Behalf Of Charles Wu Sent: Friday, May 22, 2009 8:44 AM To: WISPA General List Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability I've never found a lender willing to lend against using the in-place used equipment as colladeral. It is the biggest double standard. I find it highly ironic that they'll use a car for colladeral that looses 50% of its value the day it leaves the lot, and has a rate of failure and risk of damage higher than just about any product on the market, and it has a huge cash burn (gas :-). but yet lendors won't put equivellent value on wireless gear, that holds its value, Ebay boasting easilly 50% after 3-4 years of use, even after fully depreciated. I'll never understand the lending market. The big difference is that a car loan is tied to your personal credit, just like a credit card, and very few are going to borrow $1 million for a car (while plenty here could easily use $1 million for their network) FWIW, every industry specific vertical (e.g., restaurants, medical devices, manufacturing etc) has the same problem when it comes down to infrastructure financing -- traditional lenders won't finance business-specific machinery -- rather, they only use stuff they know as collateral (e.g., real estate, cash flow) That said, when it comes down to cash flow, it's worth analyzing and understanding that most ISPs (specifically facilities based ones) are probably pretty short on cash flow given the fact that 1. the business is based upon a recurring subscription model where I invest (e.g., in CPE) to earn a residual contract (e.g., $50 / month service) 2. ISPs are generally cash-poor due to the fact that excess cash flow usually gets reinvested into the business (more infrastructure) An argument could be made that the most valuable assets of an ISP are the recurring contracts / revenue / etc -- and that's something that financial institutions understand (e.g., receivables / factoring) and ultimately, that's what an ISP is worth (some multiple of MRC) That said, I wonder if a case be made on financing secured by monthly recurring revenue...thoughts? -Charles 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
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
Just for round representative numbers, lets say you have have a pretty established customer base and you have the staff and the growth potential to install $10k/month worth of new CPE. I would buy $10k/month worth of CPE to get what I need when I need it. When I have more customers, I can spend proportionately more. If you lease enough CPE to cost you $10k/month, you have a big pile of CPE sitting around that's costing you money and isn't making money. You eventually get them installed, and can repeat the less efficient stepwise function again. If you break it down to lower amounts, it's still a stepwise function of outlay versus return. After a while, you'll have reached a certain size where the lease or loan bills will be higher than the cost to continue the same growth rate without borrowing. If something happens where we each have a couple real bad months of business, I can just defer some installs or upgrades, which would not be pleasant. You would be unable to pay the leasing company, which could be less pleasant still. If a loan or lease helps you get better CPE, it's worth it though. I think buying quality gear with a loan or lease is a better plan than suffering with junk you bought because it was all you could afford to scrouge together or because some non-technical manager was too cheap. I'm not at all against loans or leasing. I built a nice datacenter with a loan, as I would not have been able to build it any other way. It's been really useful and worth every penny. I bought a tower site with a mortgage, I have a tenant whose lease pays the majority of the payment, and it's almost paid off. I recently accepted a private loan to put infrastructure in an area that was without broadband; it was simpler and faster than applying for a grant and it got them to the top of the list of our projects, as there is still more demand than any one company's means. On Fri, May 22, 2009 at 10:10:26AM -0600, Travis Johnson wrote: Lease, lease, lease.br br Why spend money each month paying for CPE up front for every customer? Are you doing that with bandwidth? Are you doing that with employees? br br We spend $7 per month per CPE for 36 months. It's just part of doing business... just like insurance, bandwidth, payroll, etc. It's one of those monthly expenses that is just part of operating in this industry. We then use the install fee to cover the truck roll, router, etc.br br So we are making a profit on every single customer we install starting from the day they are installed.br br Travisbr Microservbr br jp wrote: blockquote cite=mid:20090522152952.gb15...@saucer.midcoast.com type=cite pre wrap=On Thu, May 21, 2009 at 10:49:01AM -0500, Charles Wu wrote: /pre blockquote type=cite pre wrap=With all the hype being generated by the stimulus bill, we have been approached by a multitude of third party financial organizations that have a renewed interest in potentially financing rural broadband...now, specifically, for WISPs, in the past, equipment leasing has been a very popular option for financing, but in looking at our numbers over the past year, I've noticed a marked decline in the amount of leasing that we do - that said, I have the following questions for the listserv about financing Assuming that WISPs are still need to buy equipment... 1.Are you able to just purchase equipment out of cash-flow organically generated from operations /pre /blockquote pre wrap=! Yes, unless it's a large project on a short time table. We've been buying wireless gear for 11 years now. In the early years, our wireless deployment was funded by dialup revenue, but now it's a self-sustaining major part of our business, and dialup is a very small part. We've had some loans for big deployments in the past, and the amounts of money spent on loan repayment currently are comparable to what we'd be spending on equipment to meet current demands. So as those are paid off, we have more money to spend on gear each month. We'll save our loan tolerance for big projects that require high capex, and buy customer radios and modest project infrastructure out of our pocket every month or a shorter term line of credit. Things like Alvarion's comnet let us get quantity pricing breaks on radios as long as we commit to regular CPE deliveries of certain quantity levels, so that works good for cash-flow focused ISPs. /pre blockquote type=cite pre wrap=2. Have you gone to more traditional forms of money (e.g., bank / SBA / RUS loans)? /pre /blockquote pre wrap=! We've had bank loans and SBA backed bank loans in the past. /pre blockquote type=cite pre wrap=3. Are you doing more vendor leasing programs (e.g., Motorola 3% financing deal) /pre /blockquote pre wrap=! No. /pre blockquote type=cite pre wrap=4. Have you not been able to borrow money
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
I liked Agility's initial concept. For the buyer to present a BASIC spreadsheet type business plan, showing how they will without a doubt be able to generate enough revenue to pay the lease. All banks should do that, to understand what it is they are lending for. But for everything that followed after that concept, they lost me :-) Tom DeReggi RapidDSL Wireless, Inc IntAirNet- Fixed Wireless Broadband - Original Message - From: RickG rgunder...@gmail.com To: WISPA General List wireless@wispa.org Sent: Thursday, May 21, 2009 11:10 PM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Well, Agility will but what out for the terms! -RickG On Thu, May 21, 2009 at 7:27 PM, Tom DeReggi wirelessn...@rapiddsl.net wrote: I've never found a lender willing to lend against using the in-place used equipment as colladeral. It is the biggest double standard. I find it highly ironic that they'll use a car for colladeral that looses 50% of its value the day it leaves the lot, and has a rate of failure and risk of damage higher than just about any product on the market, and it has a huge cash burn (gas :-). but yet lendors won't put equivellent value on wireless gear, that holds its value, Ebay boasting easilly 50% after 3-4 years of use, even after fully depreciated. I'll never understand the lending market. Tom DeReggi RapidDSL Wireless, Inc IntAirNet- Fixed Wireless Broadband - Original Message - From: rea...@muddyfrogwater.us To: WISPA General List wireless@wispa.org Sent: Thursday, May 21, 2009 1:55 PM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Answers in-line. insert witty tagline here - Original Message - From: Charles Wu c...@cticonnect.com To: WISPA General List wireless@wispa.org Sent: Thursday, May 21, 2009 8:49 AM Subject: [WISPA] Quesiton on Funding / Financing / Capital Availability With all the hype being generated by the stimulus bill, we have been approached by a multitude of third party financial organizations that have a renewed interest in potentially financing rural broadband...now, specifically, for WISPs, in the past, equipment leasing has been a very popular option for financing, but in looking at our numbers over the past year, I've noticed a marked decline in the amount of leasing that we do - that said, I have the following questions for the listserv about financing Assuming that WISPs are still need to buy equipment... 1. Are you able to just purchase equipment out of cash-flow organically generated from operations Other than originally starting with our own personal seed money, that's what we've done. 2. Have you gone to more traditional forms of money (e.g., bank / SBA / RUS loans)? I could not qualify for any of them. 3. Are you doing more vendor leasing programs (e.g., Motorola 3% financing deal) Never sought any. 4. Have you not been able to borrow money due to the credit crunch (e.g., not deploying as aggressively) My corporation hasn't ever been able to obtain hard money credit. In fact, the credit crunch start last Fall raised my 30+ day past due amount from a piddly $1200 to at one time to almost $13,000 in just four months. That almost put us under, and we're still barely scraping by until our seasonally variable cash flow revives come August, with still several thousand on the books that's very slowly getting chipped away at. 5. Are you holding off on deployments because of the economy No, we're holding off due to lack of cash flow. We have plenty of people waiting for us to build infrastructure out to them. 6. Have you gone to Agility...cough Louie the loanshark =) After much discussion, being some of the first people Agility contacted, we have not done any business with them. In my estimation, they wanted control over our business and day to day decisions, which we concluded was both unwarranted and unwise. Or any other thoughts / comments on this topic? WISP equipment is not really a commodity in that there is almost no market for it outside of the maker-vendor relationship. Other than Ebay, and a couple of people who attempt to do it piecemeal, there is no market which stabilizes the value of used equipment, making them a commodity you can borrow against. Perhaps it would be more useful, if vendors had the ability to get capital and create stable working and short term credit relationships with their buyers, kind of like the used car market. -Charles 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
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
Lease, lease, lease. Agreed that leasing is a great option, but in looking at my numbers these past few months, I've noticed that the amount of leasing that we do is a fraction of what we used to do 12 months ago (if it wasn't for the Motorola 3% program, I don't think we'd be doing any leasing) - part of it is because many of our leasing vendors aren't leasing anymore (e.g., GE Capital), but given that infrastructure sales haven't dropped off that much in this economy (in fact, our March numbers for 2009 were BETTER than our March 2008 numbers), I'm trying to understand why people who may have leased in the past no longer seem to be leasing (obviously, you're still leasing away so this question doesn't apply to you =)... So if you were leasing 12 months ago, but no longer are, Is it because 1. The economy sucks and you're not buying new equipment? 2. The economy is fine, you want to lease equipment but can't get approved? 3. The economy is fine, but you're making so much money that you no longer need to lease equipment? Just curiosity on my side -Charles 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/
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
Option 3 Gino A. Villarini g...@aeronetpr.com Aeronet Wireless Broadband Corp. tel 787.273.4143 fax 787.273.4145 -Original Message- From: wireless-boun...@wispa.org [mailto:wireless-boun...@wispa.org] On Behalf Of Charles Wu Sent: Friday, May 22, 2009 4:50 PM To: WISPA General List Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Lease, lease, lease. Agreed that leasing is a great option, but in looking at my numbers these past few months, I've noticed that the amount of leasing that we do is a fraction of what we used to do 12 months ago (if it wasn't for the Motorola 3% program, I don't think we'd be doing any leasing) - part of it is because many of our leasing vendors aren't leasing anymore (e.g., GE Capital), but given that infrastructure sales haven't dropped off that much in this economy (in fact, our March numbers for 2009 were BETTER than our March 2008 numbers), I'm trying to understand why people who may have leased in the past no longer seem to be leasing (obviously, you're still leasing away so this question doesn't apply to you =)... So if you were leasing 12 months ago, but no longer are, Is it because 1. The economy sucks and you're not buying new equipment? 2. The economy is fine, you want to lease equipment but can't get approved? 3. The economy is fine, but you're making so much money that you no longer need to lease equipment? Just curiosity on my side -Charles 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/
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
We are still leasing, but also #3 applies as well... but we are putting the cash flow money into other things... like real estate, that is dirt cheap right now... ;) Travis Microserv Charles Wu wrote: Lease, lease, lease. Agreed that leasing is a great option, but in looking at my numbers these past few months, I've noticed that the amount of leasing that we do is a fraction of what we used to do 12 months ago (if it wasn't for the Motorola 3% program, I don't think we'd be doing any leasing) - part of it is because many of our leasing vendors aren't leasing anymore (e.g., GE Capital), but given that infrastructure sales haven't dropped off that much in this economy (in fact, our March numbers for 2009 were BETTER than our March 2008 numbers), I'm trying to understand why people who may have leased in the past no longer seem to be leasing (obviously, you're still leasing away so this question doesn't apply to you =)... So if you were leasing 12 months ago, but no longer are, Is it because 1. The economy sucks and you're not buying new equipment? 2. The economy is fine, you want to lease equipment but can't get approved? 3. The economy is fine, but you're making so much money that you no longer need to lease equipment? Just curiosity on my side -Charles 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/
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
The big difference is that a car loan is tied to your personal credit, just like a credit card, So are most business loans, when they are made to a small business. I've yet to find a traditional lender willing to consider my business on its own. We just aren't large (signficant) enough, in their minds. So a car loan ONLY had personal colladeral. Wireless Gear has BOTH personal colladeral AND business colladeral and future generated revenue. Clearly that is a step up over a car loan's colladeral. The ONLY advantage a Car Loan adds, is every American is a prospective buyer. But they also forget, that every one is selling, so there is a lot of competition for the liquidation. A Wireless radio is a like a money tree, and the car is the opposite that consumes money off the tree. Clearly the wireless radio is the safer bet. That said, I wonder if a case be made on financing secured by monthly recurring revenue...thoughts? I guess we can argue that they already ask for financials, to look at monthly net profit. But a lender would never really care about revenue, because they'd never want to wait to sell your business to collect on a multiples of revenue. Thats what investors do. All leasors care about is how the payment is going to be made. What I will say is... Is I had successfully gotten a loan, by bringing in and showing the bank new signed long term monthly revenue contracts. Showing the new money that would be earned, if the loan was given. That worked. The side effect was 1) when they saw how much profit there was for the borrower, they raised the interest to try to get a higher piece of the action. 2) They wanted the contract term (length) to match the loan term (payback schedule). But for the borrower, the risk was significantly increased and growth potential significantly compromised, being forced to do a 1 yr loan for a 1 yr broadband contracts. Meaning, almost 100% of revenue went to pay the loan payment. This didn't meet the need of the bank or borrower based on risk. The secret was getting long term contracts (3yr), from customers. But its hard to get 3yr contracts from new subs that never tried a new wireless technology before. They always want to try it before they commit to it long term. So a catch 22 from the start. The other problem was... they then asked, what if the customer cancels, because you don;t provide your SLA. It was just to complicated for the average lendor, as average lenders generally re-sell the loans, and need to be able to easily justify the loan. But lending by monthly revenue does make sense, if the borrower can find a lender they can really talk to. The trick to prove is that there is a replicatable profit from every dollar of revenue, even if it is not shown on the books because it typically is reinvested by choice. Once a lender understands that, reporting and measuring revenue growth is one of the easiest things to provide and prove to a lender. For example, if your lender is your bank, they have the bank records to prove and see your deposits. There are programs already based around this for high risk borrowers. They look at your monthly credit card transaction or monthly bank deposits, and then give credit limit based on how much that is, and do auto payments from that source. Meaning the have a mechanism to take fro mthe revenue first. The only problem is they ONLY look at revenue, not at your business, and therefore label you high risk, and charge loan shark rates. I've seen it offered as high as 35-40% interest. I still think the only thing they'll ever consider is cash flow, and what has to be done is to get a lender willing to seperate what costs on your balance sheet didn;t have to be costs. Meaning what could be the company cash flow, IF the monthly profit was not re-invested? A lender has to understand your business to understand that. Which again is the problem. My personal opinion is there is no answer to the problem. The only answer is to be patient, and chip away at the problem every day, until the company can emerge to the stage that has healthy cash flow, and is worthy in the eyes of the traditional lendor. The only other answer is to find private lendors. That have fewer otpions to get a return on their money. Who are willing to take risk for higher reward. Anyone with any sense can see the high ROI in lending to a WISP with a good business strategy, and ultimately that it is less risk. Tom DeReggi RapidDSL Wireless, Inc IntAirNet- Fixed Wireless Broadband - Original Message - From: Charles Wu c...@cticonnect.com To: WISPA General List wireless@wispa.org Sent: Friday, May 22, 2009 9:43 AM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability I've never found a lender willing to lend against using the in-place used equipment as colladeral. It is the biggest double standard. I find it highly ironic that they'll use a car
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
Travis Johnson wrote: but we are putting the cash flow money into other things... like real estate, that is dirt cheap right now... ;) Thats what we did in Novemeber. Got a 500k property for about 325k . And got the owner to carry 90% @ 6% on an 8 year term. Not much interest to pay, just a heavy monthly payment. But, I hope the market turns around so I can sell, get my profit and principle back so I can plow fiber into my infrastructure. 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/
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
Maybe when talking about CPE. But what about when one is talking about a $10,000 Part101 radio? Just like a car, all that the lender should need is to hold the title of the radio until paid off, and get a down payment of $2000 to cover the cost of tower climber/repo man, and a signed letter of authorization from lanlord stating the location of the tower gear is installed on and they acknowledge that the gear is not abandoned equipment. (So it does not automatically become property of landlord in 4 months, and teh landlord knows the equipment owner has first rights to the gear). Think about it... Wouldn't repo costs be reduced when the repo man knows exactly where to find the radio? A car can easilly be relocated and hard-to-find, when the owner skips town. Plus the home likely has an owner with a shot gun or a big dog, which the tower/MTU likely does not. The MTU building might even have a security guard to escort teh lender safely to the roof :-) Tom DeReggi RapidDSL Wireless, Inc IntAirNet- Fixed Wireless Broadband - Original Message - From: jp j...@saucer.midcoast.com To: WISPA General List wireless@wispa.org Sent: Friday, May 22, 2009 11:13 AM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability In a worse case scenario, a car is probably considerably easier to repo than the antenna on my roof and radio in my attic. And the car would be worth a magnitude more money. The installed infrastructure is worthless if it costs a huge amount to get to it. On Thu, May 21, 2009 at 07:27:09PM -0400, Tom DeReggi wrote: I've never found a lender willing to lend against using the in-place used equipment as colladeral. It is the biggest double standard. I find it highly ironic that they'll use a car for colladeral that looses 50% of its value the day it leaves the lot, and has a rate of failure and risk of damage higher than just about any product on the market, and it has a huge cash burn (gas :-). but yet lendors won't put equivellent value on wireless gear, that holds its value, Ebay boasting easilly 50% after 3-4 years of use, even after fully depreciated. I'll never understand the lending market. Tom DeReggi RapidDSL Wireless, Inc IntAirNet- Fixed Wireless Broadband - Original Message - From: rea...@muddyfrogwater.us To: WISPA General List wireless@wispa.org Sent: Thursday, May 21, 2009 1:55 PM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Answers in-line. insert witty tagline here - Original Message - From: Charles Wu c...@cticonnect.com To: WISPA General List wireless@wispa.org Sent: Thursday, May 21, 2009 8:49 AM Subject: [WISPA] Quesiton on Funding / Financing / Capital Availability With all the hype being generated by the stimulus bill, we have been approached by a multitude of third party financial organizations that have a renewed interest in potentially financing rural broadband...now, specifically, for WISPs, in the past, equipment leasing has been a very popular option for financing, but in looking at our numbers over the past year, I've noticed a marked decline in the amount of leasing that we do - that said, I have the following questions for the listserv about financing Assuming that WISPs are still need to buy equipment... 1. Are you able to just purchase equipment out of cash-flow organically generated from operations Other than originally starting with our own personal seed money, that's what we've done. 2. Have you gone to more traditional forms of money (e.g., bank / SBA / RUS loans)? I could not qualify for any of them. 3. Are you doing more vendor leasing programs (e.g., Motorola 3% financing deal) Never sought any. 4. Have you not been able to borrow money due to the credit crunch (e.g., not deploying as aggressively) My corporation hasn't ever been able to obtain hard money credit.In fact, the credit crunch start last Fall raised my 30+ day past due amount from a piddly $1200 to at one time to almost $13,000 in just four months. That almost put us under, and we're still barely scraping by until our seasonally variable cash flow revives come August, with still several thousand on the books that's very slowly getting chipped away at. 5. Are you holding off on deployments because of the economy No, we're holding off due to lack of cash flow. We have plenty of people waiting for us to build infrastructure out to them. 6. Have you gone to Agility...cough Louie the loanshark =) After much discussion, being some of the first people Agility contacted, we have not done any business with them. In my estimation, they wanted control over our business and day to day decisions, which we concluded was both unwarranted and unwise. Or any other thoughts / comments
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
The banks can sell a car with little effort. They already have relationships with dealers and auctions. And often, if the consumer's credit is questionable, the dealer will guarantee to take the car back if the loan defaults. Who is going to buy a $10,000 radio that has been repo'd? Even for $5k, I wouldn't touch it. I'd buy a new radio with warranty, that I know is good and hasn't been fried or broken. The banks will never loan on the equipment alone. There is no security there... but again, why do you need a bank loan for equipment when you can just lease it and get the same results? Up to 60 months with $1 buyout is the same as a 5 year bank loan. What's the difference? Travis Microserv Tom DeReggi wrote: Maybe when talking about CPE. But what about when one is talking about a $10,000 Part101 radio? Just like a car, all that the lender should need is to "hold the title" of the radio until paid off, and get a down payment of $2000 to cover the cost of tower climber/repo man, and a signed letter of authorization from lanlord stating the location of the tower gear is installed on and they acknowledge that the gear is not abandoned equipment. (So it does not automatically become property of landlord in 4 months, and teh landlord knows the equipment owner has first rights to the gear). Think about it... Wouldn't repo costs be reduced when the repo man knows exactly where to find the radio? A car can easilly be relocated and hard-to-find, when the owner skips town. Plus the home likely has an owner with a shot gun or a big dog, which the tower/MTU likely does not. The MTU building might even have a security guard to escort teh lender safely to the roof :-) Tom DeReggi RapidDSL Wireless, Inc IntAirNet- Fixed Wireless Broadband - Original Message - From: "jp" j...@saucer.midcoast.com To: "WISPA General List" wireless@wispa.org Sent: Friday, May 22, 2009 11:13 AM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability In a worse case scenario, a car is probably considerably easier to repo than the antenna on my roof and radio in my attic. And the car would be worth a magnitude more money. The installed infrastructure is worthless if it costs a huge amount to get to it. On Thu, May 21, 2009 at 07:27:09PM -0400, Tom DeReggi wrote: I've never found a lender willing to lend against using the in-place used equipment as colladeral. It is the biggest double standard. I find it highly ironic that they'll use a car for colladeral that looses 50% of its value the day it leaves the lot, and has a rate of failure and risk of damage higher than just about any product on the market, and it has a huge cash burn (gas :-). but yet lendors won't put equivellent value on wireless gear, that holds its value, Ebay boasting easilly 50% after 3-4 years of use, even after fully depreciated. I'll never understand the lending market. Tom DeReggi RapidDSL Wireless, Inc IntAirNet- Fixed Wireless Broadband - Original Message - From: rea...@muddyfrogwater.us To: "WISPA General List" wireless@wispa.org Sent: Thursday, May 21, 2009 1:55 PM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Answers in-line. insert witty tagline here - Original Message - From: "Charles Wu" c...@cticonnect.com To: "WISPA General List" wireless@wispa.org Sent: Thursday, May 21, 2009 8:49 AM Subject: [WISPA] Quesiton on Funding / Financing / Capital Availability With all the hype being generated by the stimulus bill, we have been approached by a multitude of third party financial organizations that have a renewed interest in potentially financing rural broadband...now, specifically, for WISPs, in the past, equipment leasing has been a very popular option for financing, but in looking at our numbers over the past year, I've noticed a marked decline in the amount of leasing that we do - that said, I have the following questions for the listserv about financing Assuming that WISPs are still need to buy equipment... 1. Are you able to just purchase equipment out of cash-flow organically generated from operations Other than originally starting with our own personal seed money, that's what we've done. 2. Have you gone to more traditional forms of money (e.g., bank / SBA / RUS loans)? I could not qualify for any of them. 3. Are you doing more vendor leasing programs (e.g., Motorola 3% financing deal) Never sought any. 4. Have you not been able to borrow money due to the credit crunch (e.g., not deploying as aggressively) My corporation hasn't ever been able to obtain hard money credi
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
Well Gino, it looks you're buying ski tickets next time =) -Charles -Original Message- From: wireless-boun...@wispa.org [mailto:wireless-boun...@wispa.org] On Behalf Of Gino Villarini Sent: Friday, May 22, 2009 3:54 PM To: WISPA General List Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Option 3 Gino A. Villarini g...@aeronetpr.com Aeronet Wireless Broadband Corp. tel 787.273.4143 fax 787.273.4145 -Original Message- From: wireless-boun...@wispa.org [mailto:wireless-boun...@wispa.org] On Behalf Of Charles Wu Sent: Friday, May 22, 2009 4:50 PM To: WISPA General List Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Lease, lease, lease. Agreed that leasing is a great option, but in looking at my numbers these past few months, I've noticed that the amount of leasing that we do is a fraction of what we used to do 12 months ago (if it wasn't for the Motorola 3% program, I don't think we'd be doing any leasing) - part of it is because many of our leasing vendors aren't leasing anymore (e.g., GE Capital), but given that infrastructure sales haven't dropped off that much in this economy (in fact, our March numbers for 2009 were BETTER than our March 2008 numbers), I'm trying to understand why people who may have leased in the past no longer seem to be leasing (obviously, you're still leasing away so this question doesn't apply to you =)... So if you were leasing 12 months ago, but no longer are, Is it because 1. The economy sucks and you're not buying new equipment? 2. The economy is fine, you want to lease equipment but can't get approved? 3. The economy is fine, but you're making so much money that you no longer need to lease equipment? Just curiosity on my side -Charles 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/
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
Answers in-line. insert witty tagline here - Original Message - From: Charles Wu c...@cticonnect.com To: WISPA General List wireless@wispa.org Sent: Thursday, May 21, 2009 8:49 AM Subject: [WISPA] Quesiton on Funding / Financing / Capital Availability With all the hype being generated by the stimulus bill, we have been approached by a multitude of third party financial organizations that have a renewed interest in potentially financing rural broadband...now, specifically, for WISPs, in the past, equipment leasing has been a very popular option for financing, but in looking at our numbers over the past year, I've noticed a marked decline in the amount of leasing that we do - that said, I have the following questions for the listserv about financing Assuming that WISPs are still need to buy equipment... 1. Are you able to just purchase equipment out of cash-flow organically generated from operations Other than originally starting with our own personal seed money, that's what we've done. 2. Have you gone to more traditional forms of money (e.g., bank / SBA / RUS loans)? I could not qualify for any of them. 3. Are you doing more vendor leasing programs (e.g., Motorola 3% financing deal) Never sought any. 4. Have you not been able to borrow money due to the credit crunch (e.g., not deploying as aggressively) My corporation hasn't ever been able to obtain hard money credit.In fact, the credit crunch start last Fall raised my 30+ day past due amount from a piddly $1200 to at one time to almost $13,000 in just four months. That almost put us under, and we're still barely scraping by until our seasonally variable cash flow revives come August, with still several thousand on the books that's very slowly getting chipped away at. 5. Are you holding off on deployments because of the economy No, we're holding off due to lack of cash flow. We have plenty of people waiting for us to build infrastructure out to them. 6. Have you gone to Agility...cough Louie the loanshark =) After much discussion, being some of the first people Agility contacted, we have not done any business with them. In my estimation, they wanted control over our business and day to day decisions, which we concluded was both unwarranted and unwise. Or any other thoughts / comments on this topic? WISP equipment is not really a commodity in that there is almost no market for it outside of the maker-vendor relationship. Other than Ebay, and a couple of people who attempt to do it piecemeal, there is no market which stabilizes the value of used equipment, making them a commodity you can borrow against. Perhaps it would be more useful, if vendors had the ability to get capital and create stable working and short term credit relationships with their buyers, kind of like the used car market. -Charles 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/
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
I've never found a lender willing to lend against using the in-place used equipment as colladeral. It is the biggest double standard. I find it highly ironic that they'll use a car for colladeral that looses 50% of its value the day it leaves the lot, and has a rate of failure and risk of damage higher than just about any product on the market, and it has a huge cash burn (gas :-). but yet lendors won't put equivellent value on wireless gear, that holds its value, Ebay boasting easilly 50% after 3-4 years of use, even after fully depreciated. I'll never understand the lending market. Tom DeReggi RapidDSL Wireless, Inc IntAirNet- Fixed Wireless Broadband - Original Message - From: rea...@muddyfrogwater.us To: WISPA General List wireless@wispa.org Sent: Thursday, May 21, 2009 1:55 PM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Answers in-line. insert witty tagline here - Original Message - From: Charles Wu c...@cticonnect.com To: WISPA General List wireless@wispa.org Sent: Thursday, May 21, 2009 8:49 AM Subject: [WISPA] Quesiton on Funding / Financing / Capital Availability With all the hype being generated by the stimulus bill, we have been approached by a multitude of third party financial organizations that have a renewed interest in potentially financing rural broadband...now, specifically, for WISPs, in the past, equipment leasing has been a very popular option for financing, but in looking at our numbers over the past year, I've noticed a marked decline in the amount of leasing that we do - that said, I have the following questions for the listserv about financing Assuming that WISPs are still need to buy equipment... 1. Are you able to just purchase equipment out of cash-flow organically generated from operations Other than originally starting with our own personal seed money, that's what we've done. 2. Have you gone to more traditional forms of money (e.g., bank / SBA / RUS loans)? I could not qualify for any of them. 3. Are you doing more vendor leasing programs (e.g., Motorola 3% financing deal) Never sought any. 4. Have you not been able to borrow money due to the credit crunch (e.g., not deploying as aggressively) My corporation hasn't ever been able to obtain hard money credit.In fact, the credit crunch start last Fall raised my 30+ day past due amount from a piddly $1200 to at one time to almost $13,000 in just four months. That almost put us under, and we're still barely scraping by until our seasonally variable cash flow revives come August, with still several thousand on the books that's very slowly getting chipped away at. 5. Are you holding off on deployments because of the economy No, we're holding off due to lack of cash flow. We have plenty of people waiting for us to build infrastructure out to them. 6. Have you gone to Agility...cough Louie the loanshark =) After much discussion, being some of the first people Agility contacted, we have not done any business with them. In my estimation, they wanted control over our business and day to day decisions, which we concluded was both unwarranted and unwise. Or any other thoughts / comments on this topic? WISP equipment is not really a commodity in that there is almost no market for it outside of the maker-vendor relationship. Other than Ebay, and a couple of people who attempt to do it piecemeal, there is no market which stabilizes the value of used equipment, making them a commodity you can borrow against. Perhaps it would be more useful, if vendors had the ability to get capital and create stable working and short term credit relationships with their buyers, kind of like the used car market. -Charles 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
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
Me either Tom. I got the same reply from my local bank on borrowing against my equipment. It was Can't do it! No resale value on tech equipment. Jeesh! Scott -- Original Message -- From: Tom DeReggi wirelessn...@rapiddsl.net Reply-To: WISPA General List wireless@wispa.org Date: Thu, 21 May 2009 19:27:09 -0400 I've never found a lender willing to lend against using the in-place used equipment as colladeral. It is the biggest double standard. I find it highly ironic that they'll use a car for colladeral that looses 50% of its value the day it leaves the lot, and has a rate of failure and risk of damage higher than just about any product on the market, and it has a huge cash burn (gas :-). but yet lendors won't put equivellent value on wireless gear, that holds its value, Ebay boasting easilly 50% after 3-4 years of use, even after fully depreciated. I'll never understand the lending market. Tom DeReggi RapidDSL Wireless, Inc IntAirNet- Fixed Wireless Broadband - Original Message - From: rea...@muddyfrogwater.us To: WISPA General List wireless@wispa.org Sent: Thursday, May 21, 2009 1:55 PM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Answers in-line. insert witty tagline here - Original Message - From: Charles Wu c...@cticonnect.com To: WISPA General List wireless@wispa.org Sent: Thursday, May 21, 2009 8:49 AM Subject: [WISPA] Quesiton on Funding / Financing / Capital Availability With all the hype being generated by the stimulus bill, we have been approached by a multitude of third party financial organizations that have a renewed interest in potentially financing rural broadband...now, specifically, for WISPs, in the past, equipment leasing has been a very popular option for financing, but in looking at our numbers over the past year, I've noticed a marked decline in the amount of leasing that we do - that said, I have the following questions for the listserv about financing Assuming that WISPs are still need to buy equipment... 1. Are you able to just purchase equipment out of cash-flow organically generated from operations Other than originally starting with our own personal seed money, that's what we've done. 2. Have you gone to more traditional forms of money (e.g., bank / SBA / RUS loans)? I could not qualify for any of them. 3. Are you doing more vendor leasing programs (e.g., Motorola 3% financing deal) Never sought any. 4. Have you not been able to borrow money due to the credit crunch (e.g., not deploying as aggressively) My corporation hasn't ever been able to obtain hard money credit.In fact, the credit crunch start last Fall raised my 30+ day past due amount from a piddly $1200 to at one time to almost $13,000 in just four months. That almost put us under, and we're still barely scraping by until our seasonally variable cash flow revives come August, with still several thousand on the books that's very slowly getting chipped away at. 5. Are you holding off on deployments because of the economy No, we're holding off due to lack of cash flow. We have plenty of people waiting for us to build infrastructure out to them. 6. Have you gone to Agility...cough Louie the loanshark =) After much discussion, being some of the first people Agility contacted, we have not done any business with them. In my estimation, they wanted control over our business and day to day decisions, which we concluded was both unwarranted and unwise. Or any other thoughts / comments on this topic? WISP equipment is not really a commodity in that there is almost no market for it outside of the maker-vendor relationship. Other than Ebay, and a couple of people who attempt to do it piecemeal, there is no market which stabilizes the value of used equipment, making them a commodity you can borrow against. Perhaps it would be more useful, if vendors had the ability to get capital and create stable working and short term credit relationships with their buyers, kind of like the used car market. -Charles 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
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
Well, Agility will but what out for the terms! -RickG On Thu, May 21, 2009 at 7:27 PM, Tom DeReggi wirelessn...@rapiddsl.net wrote: I've never found a lender willing to lend against using the in-place used equipment as colladeral. It is the biggest double standard. I find it highly ironic that they'll use a car for colladeral that looses 50% of its value the day it leaves the lot, and has a rate of failure and risk of damage higher than just about any product on the market, and it has a huge cash burn (gas :-). but yet lendors won't put equivellent value on wireless gear, that holds its value, Ebay boasting easilly 50% after 3-4 years of use, even after fully depreciated. I'll never understand the lending market. Tom DeReggi RapidDSL Wireless, Inc IntAirNet- Fixed Wireless Broadband - Original Message - From: rea...@muddyfrogwater.us To: WISPA General List wireless@wispa.org Sent: Thursday, May 21, 2009 1:55 PM Subject: Re: [WISPA] Quesiton on Funding / Financing / Capital Availability Answers in-line. insert witty tagline here - Original Message - From: Charles Wu c...@cticonnect.com To: WISPA General List wireless@wispa.org Sent: Thursday, May 21, 2009 8:49 AM Subject: [WISPA] Quesiton on Funding / Financing / Capital Availability With all the hype being generated by the stimulus bill, we have been approached by a multitude of third party financial organizations that have a renewed interest in potentially financing rural broadband...now, specifically, for WISPs, in the past, equipment leasing has been a very popular option for financing, but in looking at our numbers over the past year, I've noticed a marked decline in the amount of leasing that we do - that said, I have the following questions for the listserv about financing Assuming that WISPs are still need to buy equipment... 1. Are you able to just purchase equipment out of cash-flow organically generated from operations Other than originally starting with our own personal seed money, that's what we've done. 2. Have you gone to more traditional forms of money (e.g., bank / SBA / RUS loans)? I could not qualify for any of them. 3. Are you doing more vendor leasing programs (e.g., Motorola 3% financing deal) Never sought any. 4. Have you not been able to borrow money due to the credit crunch (e.g., not deploying as aggressively) My corporation hasn't ever been able to obtain hard money credit. In fact, the credit crunch start last Fall raised my 30+ day past due amount from a piddly $1200 to at one time to almost $13,000 in just four months. That almost put us under, and we're still barely scraping by until our seasonally variable cash flow revives come August, with still several thousand on the books that's very slowly getting chipped away at. 5. Are you holding off on deployments because of the economy No, we're holding off due to lack of cash flow. We have plenty of people waiting for us to build infrastructure out to them. 6. Have you gone to Agility...cough Louie the loanshark =) After much discussion, being some of the first people Agility contacted, we have not done any business with them. In my estimation, they wanted control over our business and day to day decisions, which we concluded was both unwarranted and unwise. Or any other thoughts / comments on this topic? WISP equipment is not really a commodity in that there is almost no market for it outside of the maker-vendor relationship. Other than Ebay, and a couple of people who attempt to do it piecemeal, there is no market which stabilizes the value of used equipment, making them a commodity you can borrow against. Perhaps it would be more useful, if vendors had the ability to get capital and create stable working and short term credit relationships with their buyers, kind of like the used car market. -Charles 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
Re: [WISPA] Quesiton on Funding / Financing / Capital Availability
- Original Message - From: Charles Wu c...@cticonnect.com To: WISPA General List wireless@wispa.org Sent: Thursday, May 21, 2009 8:49 AM Subject: [WISPA] Quesiton on Funding / Financing / Capital Availability With all the hype being generated by the stimulus bill, we have been approached by a multitude of third party financial organizations that have a renewed interest in potentially financing rural broadband...now, specifically, for WISPs, in the past, equipment leasing has been a very popular option for financing, but in looking at our numbers over the past year, I've noticed a marked decline in the amount of leasing that we do - that said, I have the following questions for the listserv about financing Assuming that WISPs are still need to buy equipment... 1. Are you able to just purchase equipment out of cash-flow organically generated from operations Much more so than we were able to in the past. 2. Have you gone to more traditional forms of money (e.g., bank / SBA / RUS loans)? We almost always went bank loans instead of leasing. Leasing is a major PITA as far as I'm concerned. I've never had one, well maybe one, that ended the way it was supposed to and without a TON of work on my side. One of the most successful mechanisms I've used is customer loans. They give me the money I need to get to their area and I give them free internet till it's paid back plus 10% interest (not per year, just 10%). They get internet sooner, I get customers sooner. Win win. 3. Are you doing more vendor leasing programs (e.g., Motorola 3% financing deal) Nope. Never have done that. Not yet anyway. 4. Have you not been able to borrow money due to the credit crunch (e.g., not deploying as aggressively) That's always been a problem for us. We started deeply in debt and our hardware sucks for collateral. The up side to that is that I've had to have VERY solid business cases in place to get loans. That's helped keep my from borrowing myself out of business. Something I've seen more than one company do. 5. Are you holding off on deployments because of the economy No way. Out here things are booming! 6. Have you gone to Agility...cough Louie the loanshark =) Not yet. Been tempted though! Or any other thoughts / comments on this topic? Many of the markets I have left to cover don't lend them selves to loans at all well. They are too small and the money can either go into equipment and other overhead or to loan payment. It'll be hard to do both and make any money. marlon -Charles 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/
