You need to ask your accountant. I know it was a huge phantom income for us.
From: Tushar Patel
Sent: Saturday, August 22, 2020 2:36 PM
To: AnimalFarm Microwave Users Group
Subject: Re: [AFMUG] Buying and selling ISP’s
I am very curious on the subject of depreciation recapture. So, were you
depreciating CPE?
Even when you sold the company as $x /customer?
What happens on the fully depreciated CPE that is in still service? Is the full
amount is captured?
What would have happened if you had expensed those CPE?
The reason I am asking this is because accountant always says depreciate so you
can look good to the bankers because you now have a large assets to show on the
books, but it sounds to me if you ever plan to sell it can come and bite you
with a large tax bill.
Tushar
On Aug 22, 2020, at 1:30 PM, ch...@wbmfg.com wrote:
They assume if you ever took depreciation for anything, it was used as an
offset for income tax you would have paid. They want that back. I presume
stuff you junked does not count.
From: Ken Hohhof
Sent: Saturday, August 22, 2020 12:04 PM
To: 'AnimalFarm Microwave Users Group'
Subject: Re: [AFMUG] Buying and selling ISP’s
Any WISP that has been around for 10+ years has probably expensed or
depreciated several times as much equipment as is currently active in their
network.
Do you have to identify which expensed or depreciated equipment is still in
use and which went in the dumpster years ago? And how do they determine what
the sale price is for the purpose of seeing if it exceeds the depreciated cost?
Do they assume the entire sale price of the business was to acquire equipment?
Seems like you would be taxed twice, first for capital gains, then for the
expenses you used to offset revenue for tax purposes.
I know most buyers prefer an asset sale to a stock sale, in case there are
ghosts in the closets. But would a stock sale avoid this problem? Does it
matter C Corp, S Corp or LLC?
From: AF <af-boun...@af.afmug.com> On Behalf Of ch...@wbmfg.com
Sent: Saturday, August 22, 2020 10:51 AM
To: 'AnimalFarm Microwave Users Group' <af@af.afmug.com>
Subject: Re: [AFMUG] Buying and selling ISP’s
One concept that was new to me in my sale was depreciation recapture. If you
fully expense or 179 expense or if your equipment is old enough to have fully
depreciated, all the depreciation expense comes back to bite you in the ass.
You will be taxed on it.
From: Ken Hohhof
Sent: Saturday, August 22, 2020 9:39 AM
To: 'AnimalFarm Microwave Users Group'
Subject: Re: [AFMUG] Buying and selling ISP’s
That is very dependent on whether the business is being run as “milking the
cash cow” or “reinvesting to grow the business”. Especially since section 179
allows a lot of capital purchases to be expensed in the first year.
I suspect many WISP owners prefer to add staff and equipment and towers and
customers, rather than declare profits and pay taxes. That doesn’t mean their
businesses are worth less to a buyer. Back when I worked for corporate
America, I remember around 1990 working for a public high tech company and at
stockholder meetings the CEO would be asked why the company at every earnings
statement would just break even or a little more. He would answer they were in
business to grow, not to pay taxes.
I am sometimes puzzled by competitors who seem to have crappy service, are
hated by their customers, and have high churn. Then I realize they are milking
the cash cow, spending as little as possible, and probably making as much or
more profit as I am. In the case of big, crappy companies, they probably don’t
sweat the churn because there are millions more suckers out there, you just
need advertising to rope some of them in to replace the cancellations. Like
when asked about Frontier, I describe them as the slum landlord of phone
companies.
From: AF <af-boun...@af.afmug.com> On Behalf Of Chuck McCown
Sent: Saturday, August 22, 2020 10:02 AM
To: AnimalFarm Microwave Users Group <af@af.afmug.com>
Subject: Re: [AFMUG] Buying and selling ISP’s
Whatever 5x your earnings are. Not sales or revenue or gross profit but
bottom line earnings on your income statement/ pl. Your taxable income.
Sent from my iPhone
On Aug 22, 2020, at 8:16 AM, Mike Hammett <af...@ics-il.net> wrote:
What does the revenue multiplier end up being, though?
5x EBIDTA / revenue gets you what, in purchases that have been made?
-----
Mike Hammett
Intelligent Computing Solutions
Midwest Internet Exchange
The Brothers WISP
----------------------------------------------------------------------------
From: "Chuck McCown" <ch...@wbmfg.com>
To: "AnimalFarm Microwave Users Group" <af@af.afmug.com>
Sent: Friday, August 21, 2020 8:20:47 PM
Subject: Re: [AFMUG] Buying and selling ISP’s
5 x ebidta
Revenue multiples are of no value.
Sent from my iPhone
On Aug 21, 2020, at 5:30 PM, cjwstudios <cjwstud...@gmail.com> wrote:
1x annual revenue and hope the customers stay on
On Fri, Aug 21, 2020 at 5:43 PM Matt Hoppes
<mattli...@rivervalleyinternet.net> wrote:
This is the issue I’ve always had when I’ve looked at buying an ISP. It
always seems like a lot more money I would have to put out to buy then I could
just build and take the customers if something is wrong with the current
network.
> On Aug 21, 2020, at 12:43 PM, Seth Mattinen <se...@rollernet.us>
wrote:
>
> On 8/20/20 8:13 PM, Steve Jones wrote:
>> I think you either buy or sell, isp isnt really a flip thing
>
>
> There is/was someone in my part of the country buying up ISPs and
trying to package them all together as a flip. My ISP customers tell me it's
far easier to get the flipper's customers to cancel and switch than buy their
company.
>
> --
> AF mailing list
> AF@af.afmug.com
> http://af.afmug.com/mailman/listinfo/af_af.afmug.com
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