What is the asset
value of each subscriber I secure, should I wish
to sell my virtual ISP and retire?
This is a very good question.
In addition to the cash flow generated each
month by building a large subscriber base, there
is an opportunity for a second windfall should
you wish to exit this business by selling your
subscriber base. Each of your subscribers is an
asset that can be sold!
So what is the value of a
The shortest answer we have seen is from
Christopher Knight, author of "ISP Marketing
Survival Guide." On page 22, he suggests that a
subscriber base of 1,000 with a retail price of
$19.95/month is worth $500 each. However,
although this may be accurate, we feel it is a
little too simplistic. So allow us to give you a
more detailed answer.
There are four key factors
that determine the value of a virtual ISP's
subscriber base. Each of these factors plays a
very critical role in the value.
- Average Revenue Per User
- ARPU is based upon your retail price for
service. A subscriber base averaging
$19.95/month is worth about three times that
of one that averages only $9.95/month.
Number of Subscribers - The larger your
subscriber base, the more it is worth. It takes
just as much time and legal expense to acquire a
subscriber base of 100 as it does 100,000.
However, the value for the buyer is much greater
with a large subscriber base. For example, a
subscriber base of 1,000 is worth four times as
much as a subscriber base of 500. Imagine the
value of several thousands!
Expectancy - The subscriber average life expectancy
of a low-priced, low-end virtual ISP is about 90
days while the average life expectancy of a high-end,
high-quality virtual ISP is about 18 months.
Average life expectancy is determined by the virtual
ISP's ability to control subscriber churn. If a
buyer can expect they will enjoy the revenue for
a longer period of time, the subscriber is
obviously worth more. So a subscriber base with a
life expectancy of 18 months can increase the
value by as much as six times that of just 90 days.
Buyer Demand - The last critical factor is
the industry climate. If an ISP has raised funds
to build a large ISP they can do so far quicker
by buying out other ISPs then securing the
subscribers themselves. So if a virtual ISP is
fortunate to find two buyers willing to bid
against each other, it can dramatically impact
the price a virtual ISP can secure for their
subscribers. And without a buyer, the
subscribers have no value other than the cash
flow to the owner. So the marketplace and the
timing of a sale can have a major impact on the
price you receive.
Having shared all of this
information, the $500 per subscriber quoted by
Christopher Knight can be high or very low.
Information on recent industry sales is
available upon request. The key point from this
exercise is to understand that the
Alliance Virtual ISP
Success System is designed in all
aspects to maximize each of these key factors.