Best of the ISP-Lists

The Brotherhood of ISPs

On the ISP-lists, veterans mix with new businesses, sharing startup advice and lessons learned.

[July 3, 2006]

On the ISP-Investor list in June, where ISPs are bought and sold, Brother Jerry asked list members for startup advice:

Hello to all,

I am currently in the process of building a business plan for a start up ISP/NSP. But am seeking the advice and guidance of some of the more business minded. I know that I will need investments and want to make certain that before I go searching for investments that I have every base covered in the plan.

I want to make certain I have thought of costs, legal issues, incorporating or not, etc etc. I have most of the technical aspects taken care of. And any further assistance can help bring things that much closer to finally seeking the seed/startup monies.

RY replied:

There are numerous key questions that need to be answered. Allow me to pose a few.

1. Who are your customers going to be?
2. What is the compelling value proposition that you offer them?
3. How are the prospective customers going to hear about your service?
4. How are you going to live while your business is getting started?
5. Do you have a table of contents for your business plan? If so, please post it and more comments may be forth coming.
6. Who is your competition and why should a prospective customer buy from you instead of the competition? (Kinda similar to #2 above.)
7. Have you done financial projections?
8. What is your cash burn rate going to be?
9. What are you going to be willing to give up for investment capital?
10. Why should I have any confidence as an investor to think that I am not flushing my money down a black hole?
11. Have you considered the securities laws in the problem with raising money?

This is a very short list off the top of my head. Not bad for 1:18 a.m. The actual number of questions requiring detailed answers is at least 100 or more.

[Brother Jerry replied] "Thank you for the reply. You brought up some areas that I had not thought about but I have provided some answers to some of the questions. I do not know if you were looking for answers on all of them or if they were just questions to ask to ensure I have thought of them. :) But I answered none then less to let you, and anyone else, know about where I stand. THe more information you have at this stage the better you would be able to provide assistance and guidance. So I apologize now about the long email :)

1. Who are your customers going to be?
Target customers will be Churches, Daycare (other child centered businesses), businesses, residential. Pretty much in that order.

2. What is the compelling value proposition that you offer them?
Filtered clean Internet, exceptional support (Target is going to be HDI certification, and ISO 20000)

3. How are the prospective customers going to hear about your service?
Sales force, advertising, and word of mouth. The business and church structure will be more by sales force and building relationships with the religious leaders. Residential more by the advertising and word of mouth through their church, or child organization.

4. How are you going to live while your business is getting started?
Minimalistically. I already know that I will have to spend a great deal of time "at the office" and myself as well as my family understand that.

5. Do you have a table of contents for your business plan? If so, please post it and more comments may be forth coming.

• Executive Summary
• Objectives
• Mission
• Keys to Success
• Company Summary
• Company Ownership
• Start-up Summary
• Services
• Market Analysis Summary
• Market Segmentation
• Target Market Segment Strategy
• Service Business Analysis
• Competition and Buying Patterns
• Strategy and Implementation Summary
• Competitive Edge
• Marketing Strategy
• Sales Strategy
• Milestones
• Management Summary
• Financial Plan
• Projections
• Projected Cash Flow

6. Who is your competition and why should a prospective customer buy from you instead of the competition? (Kinda similar to #2 above.)
Locally there is not much in the way of this service. Some of the big names (AOL, etc) do offer a package but usually most of their filtered services are software installed on local computer. Thus easy to circumvent, customer maintained, and practically useless. This service would be at the provider end and more difficult to navigate around (even blocking proxy). Price will of course be competitive and on some services pricing will be closer to national level which is much better than local level (have seen 1U colo locally run for a couple hundred a month!) And once certs are in there is not another ISP around this region that has a call center certification. And last but not least "if it is good enough for our church to use that service then it must be good for our home too."

7. Have you done financial projections?
As shown in the TOC above yes I have done some financial projections. I took my pricing structures and the costs that I know of currently and built a spreadsheet that would allow me to plug in various customer scenarios (150 DSL, 3 T-1, 45u of colo, etc). I plugged in best case and worse case scenarios, then have built up several more realistic outlines and attempted to average out what they came to. Projections have the first year being more costs than revenues (but then there is a lot of start up equipment). Year 2 is about a break even year, year 3 shows profit. I am very conservative on my figures. I always figure it best to calculate so that if I come in under budget then I am better off than going over :)

8. What is your cash burn rate going to be?
I am not certain what exactly you are referring to....and thank you for bringing this up because that is something to research and find out. But if you are referring to something like initial investment and what is the rate at which burn through that monies. If initial monies were $1 million, then about 50 to 60 percent will be gone due to initial asset purchases, deposits, etc. I projected that by end of first year 30 percent of initial should still be in the bank.

9. What are you going to be willing to give up for investment capital?
Now that is always a good question. And I am honest in this in that I personally do not have a ton of capital for this venture. And that makes it harder for me to stand on anything and lay claim to much. We live in a world where the dollar talks and all else walks. But what I am going to put into this company is truly worth more than the dollar. My heart, soul and least of all my time. By least of all I only refer to it in relation to the other 2. My time will be spent overseeing the network, building business relationships, and getting the product out. I know that does not seem much to an investor in comparisson to their money. But that is one reason I am going into this with prayer and alot of hard work just getting where I am at currrently.

10. Why should I have any confidence as an investor to think that I am not flushing my money down a black hole?
Another great question. Confidence is just trust, because any investment is just a step in faith that the person(s) you are giving your money to is going to be a good steward of that money. So when it comes down to it you have to make a personal judgement on character of the person you are giving/loaning the money too. And I know that I would do whatever it takes that is ethical, honest, and right, to gain that confidence. If that meant allowing one to check the books once a week then that is what would happen.

11. Have you considered the securities laws in the problem with raising money?
Not completely yet. That is an area I am starting to move in as far as my researching and such. Which was another area of assistance I was asking for. What do I look for? Any ideas on people to ask? etc.

And that is not a bad list even for 1:30am :) I do hope that the answers I have provided help. And thank you for those questions, they got me thinking of other things I need to look for. And any further assistance would be great."

[RG wrpte] "www.garage.com is an excellent place to start and I recommend Guy Kawasaki's 'Art of the Start'. Buy a copy of Palo Alto Software's 'Business Plan Pro'. Visit the Small Business Administration's website and glean what you can. Once you are versed in the basics and have your bones, specifics about nuances in the ISP business can be solicited and I am sure many people will be helpful and provide their opinions and advice.

I am not criticizing your zeal or interest or desire to succeed. I don't think anyone would. But this is not a list (from what I've seen over the past few years) where people come to learn the ISP business. There are a great many blogs, websites for ISPs and whatnot that would provide far more detail and 'nuturing' but again, I could be wrong and you might just find someone here who will guide you. But I suggest you look into the links and suggestions above."

Go to page two: others were initially not so supportive