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Fixed Wireless Business

The Value of a WISP

WISP owners, like ISP owners, like to discuss the value of their companies, but disagree in detail on methods and valuation.

[October 12, 2004]

On the ISP-Wireless list in September, TC asked:

Can anyone give me the current value of a traditional ISP client (in real dollars) on a per subscriber basis? Client base includes dial-up, wireless, broadband (cable and DSL). I know this is a very subjective figure; however I'm just interested in ballpark figures, or a link with industry values for this type of information.

Many had numbers ready at hand.

[TI said] "My rule of thumb is 9 to 18 months of revenue depending on profit."

[TJ replied] "Actually, I have heard of buy-outs as low as 6 times and as high as 24 times the monthly. It really depends on many, many things."

[BR added] "We have ad some talking with us a while back, and so far it's assets + 1 1/2 to 2 1/2 years' gross."

[PS enthused] "Sold! Where do I go to get my check? I haven't seen deals like this in a long time. Anyone have a list of recent transactions? The ISP brokers used to post on their websites recent transactions, now they are all kept secret. I would sell for 2 times gross plus assets any day of the week. I just don't see those deals out there anymore. The deals I see are closer to 4-6 times monthly for dialup and 1-2 times annual gross for broadband + assets - liabilities. Granted it's been a long time since I looked because it got too depressing to follow a few years back. Maybe with all the bankruptcies and mergers the value has gone up with fewer companies being left out there to buy?"

FC suggested that different metrics than just number of subscribers should be used:

"From talking to a number of people, I can tell you that a true businessperson looks at your cash flow per year (excluding growth) and multiplies that by something between 5 and 7.5. Expect to get closer to 5 than 7.5.

That makes a lot more sense than $xSub since fixed costs (tower rental, bandwidth, employees) vary greatly between ISPs. All else being equal, an ISP that pays $2,000 per month in tower rent is worth a lot more than one that pays $5,000 per month."

[TJ concluded] "However, you should also keep in mind that when buying another ISP, your thoughts are always going to be "I know what my costs are, so I can make the costs for the new ISP the same".

Thus, if an ISP is paying $5,000/month in tower rents and you are only paying $2,000/month, then my thoughts would be "I can save $3,000/month right to begin with". ;)

There are always cost savings by purchasing another business of the same type. Billing, receptionists, tech support, etc. Having purchased 3 other ISPs (back in the dial-up only days), I can tell you that the only cost we carried over were the additional T-1 lines we needed to support the additional users. You then use the "extra" cash that those "new" customers are making you to pay the purchase price over 12-24 months... :)"

—End