Re: [WISPA] What basic ROI do you target?

Fri, 30 Nov 2007 20:51:23 -0800 

I agree with you to a point....
But, as a small company, 2 man shop with a casual laborer on an as needed basis, we find that considering our 'overhead', (bandwidth, labor, truck, support, rent, utility's and such) as a fixed cost of doing business much simpler to keep track of. So I figure the install costs as equipment+accessory's+supplies+labor. I shoot for the install price to cover equipment and accessory's and figure to recover supplies and labor during the first 3 months of service. 


The marginal cost of adding another user is nil, once the install costs 
are covered.  The difference between supporting 200 users and 201 users, 
as an example, is, IMHO, too small to worry about.  As expansion occurs, 
we find it necessary to upgrade our bandwidth and such.  This increases 
our fixed costs per user, but by the time we need to do it, we have the 
additional users to support it.  And when we need to add a person, we 
will be able to do that as well.



There may, likely are, better ways to do it.  But I am reminded of the 
story of the accountant and the peanut rack.



Marlon K. Schafer wrote:

In my mind, it all has to be counted.  At the end of the day each 
customer has a fixed cost.  Breakeven happens when any revenue ABOVE 
those fixed costs has paid back any customer acquisition costs.



I don't think it's honest to say that one breaks even when counting 
100% of the monthly customer revenue.  There are tech support costs, 
bandwidth costs, billing costs etc. that are added with every new 
customer.  And, as you say, at some point extra people have to be 
added to the company and that cost gets spread over all subs.


laters,
marlon


----- Original Message ----- From: "Jeff Broadwick" 
<[EMAIL PROTECTED]>

To: "'WISPA General List'" <wireless@wispa.org>
Sent: Friday, November 30, 2007 5:34 AM
Subject: RE: [WISPA] What basic ROI do you target?



That's an interesting way of calculating the ROI.


You could also take out fixed costs from your calculations and only 
add in
those (variable) costs that relate directly to the new sub.  If you 
aren't
adding staff or getting a bigger office, you wouldn't need to factor 
those

costs into the calculation.

Jeff



-----Original Message-----
From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED] On
Behalf Of Marlon K. Schafer
Sent: Thursday, November 29, 2007 9:47 PM
To: WISPA General List
Subject: Re: [WISPA] What basic ROI do you target?

For AP's it's ok if I pay them off in 3 to 4 years.  I try to do 4 year
loans for all hardware.


For CPE this gets more complicated.  Everyone wants to count gross 
income
from that customer to pay off the gear.  That's really not right 
though as

every customer has a cost to them.


We use NET revenue to figure out payback times.  I ran about a 20% 
margin
last year, it'll be higher than that this year but I don't have the 
numbers
yet so I'll stick with the easy number.  At an average of $37.5 per 
sub we

figure it out at $8ish per sub per month.  We loose $50 to $100 per
installation.  It's a bit better than that right now as the hardware has
come down a bit but we're holding the installation costs up.

So I'm in the 7 to 13 month time frame to go cash flow positive on each
customer.

Our growth rates are running over 25% per year so this time lag can be a
real issue.  In fact, it's probably THE hardest thing for us to manage.
laters,
marlon

----- Original Message -----
From: "Patrick Leary" <[EMAIL PROTECTED]>
To: "WISPA General List" <wireless@wispa.org>
Sent: Thursday, November 29, 2007 4:35 PM
Subject: [WISPA] What basic ROI do you target?


I am curious about how divergent the responses may be. In your answer,
include just the cost of the truck roll and CPE measured against any
set-up and service initiation fees charged with the monthly subscription
fee.

Years ago, it was not uncommon for WISPs to say they need a 24-month
basic return per subscriber. These days I suspect most will say under 9
months.

Patrick Leary
AVP, Market Development
Alvarion, Inc.
o: 650.314.2628
c: 760.580.0080
[EMAIL PROTECTED]





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West Michigan Wireless ISP
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