Is it Time to Leave?

It seemed like a good idea when you expanded into that small community a year or so ago. Although you have a few customers, are they enough to justify staying there? What do you do? How do you decide?

by Brock Henderson Principal, Henderson & Associates [January 5, 2008]

Assuming you have done everything but stand on your head to entice people to sign up with you, here are the options available to you.

Option One
Stay put, and pray that over time more and more people will become dissatisfied with cable and switch to you. This involves spending more time, energy, and money on a market that has not rushed to you with the open arms you expected.

However, it may be less costly to stay put rather than cancel connectivity contracts and face early termination penalties from the Telco. It might be better to wait until the end of your contract on the circuits. At that time you can re-evaluate the situation. If it has then great, of course you'll stay, but otherwise it might be wise to withdraw from the market.

Option Two
Sell those customers to another ISP or even possibly the cable company. Don't expect another ISP to be excited about buying an unprofitable portion of your business. You still face potential liabilities with the Telco if the buyer isn't interested in assuming your leases, since they may already have circuits in place.

A variation on this theme is to buy the cable company, and thus their customers. I know of one ISP that was once approached by the city fathers asking the ISP to either buy the cable company or open a competing cable service. I don't know what the owner ever decided to do, but it clearly shows that there are times when it is possible for an ISP to get into the cable business. Could buying the competitor be right for you?

Option Three
Pull the plug. Give your customers a reasonable amount of time (two to four weeks) to find a new service provider, and then turn off the switch and walk away.

While this may seem to be the best option, there are some serious issues you need to think about.

Contracts As mentioned, you will have contracts for your circuits and may face penalties for terminating the contract early. You also have customers who have signed T-1 (and potentially other) contracts with you for your services. What do you owe them for early termination? Could they sue you for failing to provide the agreed connectivity? Don't forget any contracts for space or equipment you may have leased.

Your total penalties for broken contracts could cost you more than just staying put.

Non Payment You will have customers that will "forget" to pay you once you have announced you are leaving. What are you going to do, disconnect them? You're doing that anyway. It might be less frustrating to just tell your customers that the last two weeks are on you and don't worry about paying the bill. It's not a very profitable solution, but certainly less frustrating than trying to collect from customers that you have already dropped.

Community Good Will If the local community has welcomed you with open arms, embraced you, and said welcome to the neighborhood, expect some bad feelings when you leave. That's understandable. If you leave, it will be very difficult to come back. People will naturally be skeptical that "this time" you'll stick around. When you pull out of a market, you are burning the bridge behind you.

What's best for you?
There are two major points to consider: (1) How much red ink are you bleeding; and (2) How much time, energy, and frustration is it costing you?

Have your bookkeeper, accountant, or CPA look at all the costs and make a recommendation. If you are hemorrhaging red ink, then the answer becomes obvious and it's time to move on. If you are right around the break-even point then you need to decide if you want to invest the time, energy, and money to keep things going and hopefully improve the revenue stream.

Note: Just because you are losing money today doesn't mean you will be losing money three months from now. Your decision to leave or stay should be based only in part on your current financial situation. A very important element to factor in is the potential of the market.

T-1 sales can seem to take forever because prospects may be under long-term contracts that they are not willing to break. You may have to wait two or more years to get your contract in place with that client. If you have a reasonable expectation that you can secure a number of customers when their contracts expire then it may be wise to wait it out.

If you know an industrial park will be opening in the community soon, or you know of new residential developments, this potential new business could make all the difference. Even if you don't get all the new customers, you will have just as much a chance at this new business as your competition.

Finally, is it worth that much time and energy from you and your staff? That's more an internal value judgment than a spreadsheet analysis. If it's causing you a disproportionate amount of worry, frustration, or headaches then just from an emotional health perspective it may be best to get out as quickly and with as little financial cost as possible. But if the frustration level is low, then this simply may not be important when making that final decision.

Making the announcement
If, for whatever reason, you have decided to cut the cord and get out of that market, you need to be completely open and honest with your customers. Tell them exactly why you are leaving, the last date of service, and any other information that would benefit them (such as a list of ISP's servicing the community).

If you are selling the customer base to another ISP, do everything in your power to ensure a smooth transition of service from you to them.

Either way, most will understand and some won't. Such is life. Be as sympathetic to the customer's plight as possible, they are losing their connection to the internet … their connection to the outside world, and they will be disappointed, confused, frustrated, sad, and possibly angry. Be as helpful as possible and make their transition to a competitor as painless as possible. They may never be your customer again, but let their last memory of you be a good memory. That's good business.

—End