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VoIP Subscriber Asset Values

What is the asset value of each subscriber I secure, should I wish to sell my VoIP business 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 subscriber?
The shortest answer is that it is worth whatever someone is willing to pay. Companies become larger by acquiring smaller companies and it happens every day. Those that get into the business early will be ripe for acquisition when the larger companies come courting.

There are four key factors that determine the value of a VoIP provider's subscriber base. Each of these factors plays a very critical role in the value.

  1. Average Revenue Per User - ARPU is based upon your retail price for service. A subscriber base averaging $29.95/month is worth about three times that of one that averages only $19.95/month.

  2. 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 thousand!

  3. Life Expectancy - The subscriber average life expectancy of a low-priced, low-quality VoIP service is very short while the average life expectancy of a high-end, high-quality  service is very long (it is too new now to know how long). Average life expectancy is determined by the branded reseller's ability to control subscriber churn. If a buyer can expect to enjoy the revenue for a longer period of time, the subscriber is obviously worth more. So a subscriber base with a longer life expectancy can increase the value by as much as six times that of a low-priced, low-quality service.

  4. Buyer Demand - The last critical factor is the industry climate. If a VoIP provider has raised the necessary funds to build a large base they can achieve it far quicker by buying out other providers then if they secured the subscribers themselves. So if a branded reseller is fortunate to find two buyers willing to bid against each other, it can dramatically impact the price they 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.

Keeping these four key factors in mind, it would not be unreasonable to expect hundreds of dollars per subscriber for a high-end, high-quality provider with thousands of subscribers!

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