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" <[email protected]>
To: "WISPA General List" <[email protected]>
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 sooooo 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" <[email protected]>
To: "WISPA General List" <[email protected]>
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: [email protected] [mailto:[email protected]] 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" <[email protected]>
To: "WISPA General List" <[email protected]>
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: <[email protected]>
To: "WISPA General List" <[email protected]>
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" <[email protected]>
To: "WISPA General List" <[email protected]>
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
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