We've been over this before, The cost for a CPE is not $149. I don't
benefit by reducing my CPE cost from $400 to $149, if My installtion costs
go up, and my maintenance costs go up, and I loose prospects because the
gear doesn't get the job done for what ever reasons (interference resilience
/ Cosmetics / Additional mounting hardware / Etc.)
By lowering the CPE cost, I now have less tangible products to secure the
funding for my company. A bank won't lend me money to cover my maintenance,
a cost that has no value or new income associated with the expense. So why
do I want to defer costs that could be leased ($500 quality radios), for
expenses that can't be leased that take valuable cash out of my pocket
(Salaries for maintenance and such).
The fact is I can do an Alvarion CPE isntalltion in two hours, it meets the
cosmetic requirement and signal quality of 99% of my prospects, so why would
I want a $149 CPE, that didn't meet those requirements for 90% of my
prospects?
So the real numbers that are needed are business models that consider a $500
per CPE cost (whats required to get the job done) to finance through the
leases. Its a tough call for $500 at residential prices. The $149 CPE
lease model is flawed, because the $149 CPE has to many hidden costs that
are not apparent to most WISPs until its to late and the costs have been
incurred.
The day the $149/CPE delivers what a WISP needs, the day I'll join your
campaign of how the $149 CPE saves the Wireless Industry. But what happen
to me is that I bought into the $149 CPE idea, made big plans, and then
cancelled them after the fact because I learned after the fact it was a
loosing business proposition. So what I really lost was 6-9month of time to
market waiting for something that never was going to materialize.
Understand that this opinion, is based on my market and geography that may
be considerably different than yours. If you don;t have the same barriers
and the $149 CPE does the job for you, then it may be a winner for you. But
I'm done installing half assed equipment. I'm in the business of selling
quality and maintenance free solutions. I'd rather identify the opportunity
that is willing to pay for the quality solutions. It takes so long to build
a reputation, and it takes so little time to ruin it.
Trango 2.4ghz CPE = $475 in single quantity
36 month lease on same CPE = $12/month = $432 total cost
So, even though I am paying interest for 36 months, the actual cost of the
radio is less, but I don't have to come up with money for each sub that I
install. Instead I am able to "run" the business from day to day without
having to "get over the next hurdle"
That I fully agree with. If you can finance for less than paying cash,
thats a good thing.
As long as after you bought $250 CPES, you didn;t realize that it was gear
that you didn;t want, and needed another type of gear.
If I bought 250 $149 CPEs 6 months ago, I'd have 250 CPEs still sitting on
the shelf.
Tom DeReggi
RapidDSL & Wireless, Inc
IntAirNet- Fixed Wireless Broadband
----- Original Message -----
From: "Travis Johnson" <[EMAIL PROTECTED]>
To: "WISPA General List" <[email protected]>
Sent: Tuesday, October 17, 2006 7:39 PM
Subject: Re: [WISPA] Are you making money?
Tom,
The idea is that you lease the CPE equipment. It costs you $5 per month
per sub (using $149 CPE), and you are breaking even on the install. So
from day one I am making money on the sub (and generating positive cash
flow). I can then use that money to grow the business (more bandwidth,
bigger routers, more towers, etc) and continue over and over and over.
Also, because I can lease 250 CPE at a time, I am getting a better price.
Let's run some numbers:
Trango 2.4ghz CPE = $475 in single quantity
36 month lease on same CPE = $12/month = $432 total cost
So, even though I am paying interest for 36 months, the actual cost of the
radio is less, but I don't have to come up with money for each sub that I
install. Instead I am able to "run" the business from day to day without
having to "get over the next hurdle". I can pay good salaries, have nice
office space, etc. because the business runs cash flow positive from day
one with EVERY customer.
Plug the numbers into that spreadsheet that started this discussion and
see which business model you would rather own in 2-3 years. There is
nothing wrong with debt... you just have to manage it correctly. Each
lease becomes an "operating expense", just like bandwidth, tower rent,
etc. The best part is in 3 years, you own the CPE. Even if only 80% of
them are still operating, that's 80% new CPE you don't have to buy. ;)
For what it's worth, the "tax write-off thing" always gets me too. People
almost talk like it's free money or something, instead of the 70% expense
it really is. :)
Travis
Microserv
Tom DeReggi wrote:
The problem with Leasing, is that you ahve to keep your clients longer
than your leases.
Historically, WISPs make logrithmic growth with each year having more
growth than the year before.
Usually the profit from old business (subs with paid off leases), rarely
covers costs of growth, as the growth in later years is so much grander.
Sure leasing helps growth and makes the books look good. But what
happens in your last year? The one where you potentially could loose all
your subs?
The year that you just had your largest growth, and largest amount of
dollars on Leases for reoccuring liabilities. Will your business then
last 3 more years to pay off those leases?
The problem with Finance, is it gives people a fake sense of success, and
while deferring payment, it allows upfront moneys to be spent more
wastefully because it is there to spend.
There is always a grand plan of how that money will be used to improve
business, but do things always work the way they are planned, and do you
ghet your money's worth? There is something to be said for the business
man that believes in old fasion values of a dollar earned and a dollar
that can be spent, apposed to spending tommorrows dollar today and
deferring todays liabilties to tommorrow. It order not to loose your
butt leasing, one must predict accurately the date of their end came, so
they know when the leases have to be paid off.
What if you aren't bought, as predicted at the end game? One of the
things I've learned is that when you are eating fat (money available),
people get lazy. When you are hungry and wondering how you are going to
pay tommorrow's bill, all a sudden their is an urgency to succeed that
not only is urgent but essential. Its amazing what a person can
accomplish when they are backed against the wall and have no choice but
to do it. Its amazing how much someone can save when they ahve a tight
budget to conform to, and they know when the money is gone the money is
gone. Wether it makes sense to lease is not the golden question. The
golden question is, how will you spend the money that becomes available
because you leased. That is what will seperate the winners from the
loosers.
One of the most basic concepts there is in accounting is, its much more
beneficial to reduce your costs $100, than to make $100 more income,
because the $100 income have additional costs that grow with it. I think
leasing makes sense if you get good terms, and are short on cash flow,
but if you are not frugal in spending along the way, one is just
deffering their death by leasing.
Whats important is that the money spent, has something tangible and of
value (holds its value on a reoccuring basis). Things like high salaries
that are spent and gone, or technology greater than one's need in a
business with falling prices and rapid advancement, are monies spent that
have little value after the fact.
Disclaimer, this comment does not negate the importance to determine the
amount of capitol (cash) that will be needed and securing it before
progressing with a business plan.
Tom DeReggi
RapidDSL & Wireless, Inc
IntAirNet- Fixed Wireless Broadband
----- Original Message ----- From: "Rick Smith" <[EMAIL PROTECTED]>
To: "'WISPA General List'" <[email protected]>
Sent: Tuesday, October 17, 2006 3:48 PM
Subject: RE: [WISPA] Are you making money?
exactly the mistake my company made. Shoulda, woulda, coulda leased...
'cept in NJ, it's $125 contract labor, and $244 for installation (199
install / 45 first month), oh and no free towers, they're all (16 of
them)
$500 / month / each at LEAST....
No free lunch. So to answer the previous question #3, no you will not
be
making tons of money - you will be eating your shirt :)
-----Original Message-----
From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED] On
Behalf Of Travis Johnson
Sent: Tuesday, October 17, 2006 3:24 PM
To: WISPA General List
Subject: Re: [WISPA] Are you making money?
Hi,
Although he has spent some time and efforts, many of his numbers are WAY
off:
$50 installs (contract labor)
customers paying $360 for installation
$40 per month ARPU (for a startup WISP is not realistic today with $15
DSL)
Just taking the installation numbers away completely changes this
sheet...
we are doing $99 installs and include a free Linksys wireless
firewall/router. So now instead of making $15 per install, he will be
losing
$246. So now after 2 years, the company is making $11,736 per month
profit
but still shows $42,000 in debt (from the first 2 years) and hasn't paid
anything back to the investors, banks, etc.
Now, if you use the same sheet, lease the CPE ($5/mo per customer) and
still
buy the Linksys router for $40, the company is making $18,800 per month
profit and has $98,000 in cash after 2 years. ;)
Travis
Microserv
Brian Rohrbacher wrote:
http://www.dslreports.com/forum/remark,17086669
I have not got to the spreadsheet, but the post was well worth the 5
minute read, and I'm looking forward to getting some numbers down on
the spreadsheet. I think this could help some of us.
Brian
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