I agree current profit is irrelevant, when considering company totals during
the early growth period.
But calcualted future Profit clearly is relevant, as far as how much profit
will be made per sub, and how soon.
Profitabilty can be misleading when jsut considering accounting paperwork
(profit loss / balance sheets)
I'll give an example:
Lets say a company gets an ROI in 1 year. And had 4 years of selling subs.
And by the 4th year, profit would be being made from each sub.
But then lets says a company had a 100% growth spurt in the 5th year. And
lets say there is a 1 year ROI, meaning 12 dollars needs to be spent for
ever new dollar that is made. Because the growth rate of the company is so
much higher in the later year, the expendatures are far greater than the
revenue comming in from the samller customer base taken on the first 4
years. Thus, it appears the company is losing money and not profiting.
When in actuallity, the company has record high success. All pre-existing
subs ARE 100% profitable, and lot of new growth has been made to replicate
the previous years successful model.
So yes, profitable books may mean a company is not growing and not making
new sales.
However, showing the average profit per sub, after the ROI period is a VERY
relevant bit of information. Its what defines the value of the business
model in my mind.
In other words:
Forcasted Profit margin based on current years proven track record.
Tom DeReggi
RapidDSL & Wireless, Inc
IntAirNet- Fixed Wireless Broadband
----- Original Message -----
From: "Matt Liotta" <[EMAIL PROTECTED]>
To: <[EMAIL PROTECTED]>; "WISPA General List" <[email protected]>
Sent: Tuesday, May 30, 2006 6:19 PM
Subject: Re: [WISPA] This is HUGE!
Profit is irrelevant for an early stage growth company.
-Matt
Peter R. wrote:
Because number of subs is the measuring stick.
Revenue is more important; but profit is the most important.
Not many can speak to profit, so they measure in subs.
- Peter
Matt Liotta wrote:
Not sure why the number of customers is even important when the quality
of customers can vary so wildly. I run into WISPs regularly whose ARPU
is barely above $100. At 1000 customers an ARPU of $100 is only $1.2M
per year. That's a lot of radios and a lot of customers for very little
revenue. Compare this to CBeyond, which is an Atlanta-based CLEC that in
recent time went public. Today they have about 17,000 customers, but
their ARPU is $761. With just 1000 customers, an ARPU of $761 would be
worth $9.1M. Or to look at it a different way, with 17,000 customers an
ARPU of $100 would only be $20.4M compared with the $155.2M they pull in
now.
A WISP would be wise to raise their ARPU as opposed to the number of
customers.
-Matt
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