The US economic recession is biting hard – so much so it is being compared to the famous Japan recession that put the country into the doldrums for many years. The fact that the current bad economic times took so long to be labeled “recession confirmed” is small comfort. It screams out for focus of small business administration to look into buying cheap unlocked cell phones and thereby take full advantage of opportunities the US cellular arena offers; especially in digital GSM 3G wifi options. Decisions made can materially affect obtaining small business loans and grants, as cash flow and business profitability goals become critical considerations. Small business ideas today cannot exclude unlocked mobile phones as a viable option; certainly not when one is computing business profitability and working on the loan calculator to access scarce funds.  

The ROAM in ROAMWISE is an acronym for “Return on Assets Managed” measured by Earnings before deducting interest and tax (EBIT for short) as a percentage of Assets Employed  (AE for short).

The dual onset of computer advances and the wireless Internet has been joined at the center by a third force, namely: GSM 3G cell phones as a digital interactive medium. ROAMWISE thinking helps small businesses to be versatile enough to navigate this sea of opportunity.

Case Study

A small business (we will call Smallco) employs 20 people including fourteen commissioned sales people. Fast, reliable connection between all people in the business, customers and suppliers - within departments and between different departments is essential; requires at least 20 cell phones to keep the communication wheels rolling. Smallco has a large international client base and sources a lot of its inventory from Europe. Analysis of Smallco call activity showed there are hundreds of wireless communications daily in aggregate.

Smallco faces the following dilemmas: Cell phones range from $100 - $1000 per unit depending on brand and model. Examples: Nokia n96, Nokia 2330, iphone, LG Prada phone, Blackberry Storm to name but a few; whether locked to companies like AT&T, T mobile or Verizon or unlocked with one of the numerous independent servers.; finally, deciding to go prepaid, postpaid or combination of both. Upfront investment can be $2000 on the low end or $20,000 on the high end, or somewhere between. The monthly running costs can be structured to be at $4000 per month with low initial outlay on traditional long term contracts, or $700m pm with higher outlay at around $10,000. How does a ROAMWISE thinker figure this out? In a small business administration the owner cannot afford to fly by the seat of his pants.

The ROAMWISE yardstick = EBIT/ AE focuses on cause and effect. So if AE is increased it carries an obligation to raise EBIT to warrant an acceptable return on AE, and conversely releases pressure on EBIT if AE is reduced. To understand this a little better, EBIT when broken down = Sales – Cost of Sales (or Gross Profit) - Operating Expenses. Operating expenses can be microscopically viewed by individual cost item – and should if the best ROAM up-effect is to be realized. So in a nutshell cause and effect can be calculated on all these sub-items. Examples are:

• Apply better cell phone technology to increase Sales and buy better (in essence pushing Sales up and Cost of Sales down);
• Obtain faster, more versatile connections to cut out secretaries, receptionists, landline; substitute SMS texting for calling – especially abroad (Impacts the Operating Expenses and EBIT);
• Cut down outlay by giving everyone in the business the cell phone they need to do the job (affecting AE) and the service that suits the job best (affecting Operating Expenses). Getting the AE down without putting pressure on EBIT is surprisingly common in this type of analysis;
• Get services that remove the fear of uncontrolled costs from the equation so revenue generators like salesmen can use their mobile phones freely;

ROAMWISE thinking resulted in the following changes for Smallco:

     1. SMS (text messaging) replaced calling to a large extent:

-         International call limits and roaming charges were killing Operating Expenses and EBIT. SMS text messaging and unlocked service arrangements reversed this.

-         SMS created readiness to use the mobile without cost concern. This paid big dividends with both customers and suppliers; sales people simply sold more at better prices; better discounts on purchase resulted in higher Gross Profit

2. Unlocked cell phones with short term service arrangements replaced long term contracts on all units. Long term contractors (e.g. ATT, Verizon), while lower on initial outlay for the cell phone, were actually blurring the distinction between the service charge and monthly amortization of the mobile unit. When you separated them out, it was clearly better to buy an unlocked cell phone and then seek out the lowest cost service.

-         A long term commitment was not essential; you could leave with zero penalties – with your mobile unit unlocked – at any time.

-         Some employee needs were optimized with prepaid pay as-you-go mobiles. Prepaid can be accessed by acquiring prepaid phone cards from almost any provider today.

-         The tendency to buy a new phone every two years as a new contract was re-entered was blown away; looked after them better and cut down on outlay.

-    Making good use of the New Nokia USA prepaid cost control solution for unlocked phones

Bottom line:

Sales went up raising EBIT and creating upward ROAM effect; Cost of Sales from lower procurement cost reduced Cost of Sales, also with increased EBIT and an upward ROAM effect; Operating Expenses from all decisions dropped from $3500 per month to $1200 per month – a saving of more than $24,000 per year; all told with increased Sales and Cost of Sales improvement EBIT shot up much more than this; Assets Employed increased from $2000 to $8,000 – a one time $8000 increment, but was insignificant when viewed against EBIT in $ and percentage gains. ROAM overall increased significantly but when you looked at each contribution alone the differences before and after were small. ROAMWISE thinking is a prime example of the whole being greater than its parts, and it carries a lot of valuable tools when one is investigating how to write a business plan.