(avg.) $499 $12.5 25,000 Internet, Choice Dot Net* Voyager/MichWeb, Internet (avg.) $41 30,000 Connection Services* Assumed yearly revenue per subscriber 19.95x12 1.787 (ratio of yearly revenue to value) Assumed yearly revenue per subscriber 15.95x12 2.236 (ratio of yearly revenue to value) Assumed yearly revenue per subscriber 29.95x12 1.190 (ratio of yearly revenue to value) *Composite figures: Prices and subscriber counts for individual acquisitions were not available. A.3 Modeling Item #3 The material that follows is cited from Christopher M. Knight, "How to Price Your ISP When It Is Time to Sell," July 12, 1999, http://www. isp-planet.com/business/knight_valuation.html The key to maximizing return on your years of investment and hard work is finding the buyer for whom your assets have the highest value. You have made the big decision. After years of building your successful ISP busi- ness, it is time to bail out, cash out, get out, and burn rubber down the road into the sunset but how do you put a price tag on your ISP? How much should you ask and how much can you get? For a market to exist, a willing seller must be matched with a willing buyer. It does not matter how much you want if there is no one in the market willing to pay what you're asking. So the goal is to look for the buyer that can maximize, leverage, utilize, and value your ISP most highly. Advances and Opportunities in Next-Generation SONET A.3.1 ISP Industry Idiosyncrasy Outside of the ISP industry, many nonpublic businesses are valued based on some percentage of annualized sales revenue (typically one to five times annual earnings). Historically, however, the ISP industry appears to prefer to price companies based on a value per subscriber, which is then multiplied by the number of subscribers to arrive at an asking price. That is the theory. In practice, buyers' contracts often specify that the seller gets paid only for the subscribers that remain with the new ISP after the deal. Typically, if you get more than 80 percent to convert to the n