[asterisk-biz] The Value of VoIP subscribers

[Greg Boehnlein]

On Sun, 19 Feb 2006, CC Asterisk wrote:

> Hi,
> Any suggestions how to figure out the value of a subscriber? Say you have  X
> amount of subscribers on monthly contracts on  your VoIP service and they
> produce Y cashflow  with Z gross profit every month - what would be their
> value.
> Thanks
> Mark Lifshitz

Mark,
	Unfortunately, the only correct answer to your questions is 
"Whatever the purchaser is willing to pay for your customer base." When I 
purchase the assets of a business, especially in the current market, I am 
looking at several different metrics to come up with a final number. Some 
of the things that I'll take a look at;

1. Amount of positive cash flow
2. Cost of Good Sold
3. Amount of net / subscriber
4. Historical trend of the revenue
5. Current liquidatable value of the hard assets (I.E. Equipment)
6. Potential liabilities that might be assumed to service the customer 
   base

A savvy business purchaser is going to crawl all over your books w/ a fine 
toothed comb. They are going to whip out the microscope and drill you on 
any and every little quirk of your operation.

Usually, the two parties will enter into a Non Disclosure Agreement, 
followed by some discovery and a non-binding letter of intent. Finally, a 
purchase agreement will be signed between the parties.

When I go after a business, I am very aggressive w/ my valuation tactics. 
Unfortunately, most small business owners have a greatly inflated 
perspective on what the value of their business actually is. If you want 
to get a true perspective on what a purchaser might value your business 
at, hire an accounting firm to do a $2,000 business analysis of your books 
and prepare a valuation report. While these can be interpreted in 
different ways, at least if your prospective purchaser tries the low ball 
approach, you'll have some ammunition to work with.

For me, if I can't make back my original investment in less than 2 years, 
I won't even consider the company. So for me, the metric is 1.5 to 2 times 
positive cash flow as the upper end of the purchase price. There are 
factors to consider, however, such as executive salaries and cost 
consolidation metrics (I.E. what costs can we strip out of the operation?) 
but you get my drift.

Be careful though.. as many people have pointed out in this thread, this 
is a very fluid industry and valuations are going to be all over the 
place. Just know what you are getting into!

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