Simonds says he can continue to underbid national services like America Online, which are now offering Internet access. "They would never look at us as a competitor," Huyler says. "To them, we're basement guys." Big players like AT&T or cable companies are not only moving slowly, says Simonds, but focusing on corporate leased-line accounts. If national Internet service providers like Netcom shoulder into his market, he figures his local-guy image and customer service will give him an edge.
It's still anyone's guess how the Internet industry will shake out and who will wind up with the most cash and market share. Simonds projects 9,000 and hopes for as many as 20,000 customers by May 1995, but Huyler is more ambitious. "This town is ready for it," he says. "We're going to be the Wal-Mart of the Internet." It's only one of many start-ups gripped with growth fever. Smart decisions will make the difference between striking it rich or being left holding fool's gold.
THE COMPANY: INTERACCESS, CHICAGO, ILL.
The founder: Thomas Edward Simonds, 24, started the company -- of which he holds 50% -- in the spring of 1993, armed with a B.A. in history from Yale, $31,000 in cash, and a borrowed personal computer and printer. His previous job? Part-time delivery person for Pizza Hut.
The concept: Provide Internet access to consumers with personal computers, offering a user-friendly software interface. Emphasize exemplary customer service and technical support at a reasonable flat monthly price. Build image and enough name recognition to "own" the Chicago market before competition increases.
Projections: 9,000 customers by May 1995, with revenues of just over $1 million and a net profit of $287,855.
Hurdles: Keep costs of customer acquisition and customer service low. Iron out bugs in the installation of the interface. Develop market strategy to grow the company once Internet access becomes a commodity.
Financials
|
Actual |
Projections |
|
4/30/93-4/30/94 |
5/1/94-4/30/95 |
| Revenues |
$88,551 |
$1,223,753 |
| Cost of goods sold |
| Depreciation of computers and modems |
8,802 |
39,000 |
| ANS fees |
42,490 |
64,000 |
| Customer phone lines |
9,805 |
111,305 |
| Tech support |
12,000 |
180,000 |
| Miscellaneous costs |
8,231 |
-- |
| TOTAL |
81,328 |
394,305 |
| Gross profit/(loss) |
7,223 |
829,448 |
| Operating expenses |
| Supplies and equipment rental |
12,676 |
31,800 |
| Wages and salaries |
13,623 |
302,682 |
| Rent, utilities, insurance, office phones, etc. |
11,080 |
67,631 |
| Advertising |
6,858 |
122,000 |
| Postage, bank, and accounting fees |
5,291 |
17,480 |
| TOTAL |
49,528 |
541,593 |
| Net profit/(loss) |
(42,305) |
287,855 |
WHAT THE EXPERTS SAY
Competitor
Barry Shein, founder and CEO of Software Tool & Die, one of the oldest and largest dial-up providers in the country;
Brookline, Mass.
InterAccess's service will be very popular priced at its flat rate. And the product is right. I think it has some potential. But I wonder if it's charging enough. One problem in this business is that people get a little mesmerized by what the customer asks for instead of looking at what the costs are. The customer says, "I want X, and I want to pay $20 a month." It may cost more than $20 to supply X, and then the company has to bail out.
My service is priced by the hour, so I have the incentive to offer new features to keep people on-line all month. I have to keep dancing to keep them happy. Simonds is running an all-you-can-eat buffet, and people are bringing in shopping carts. Eventually, he's going to have to say, "No more," and customers won't like that. One of the worst enemies is success, because you have to expand to be able to take in the business. With any kind of success, in 18 months you need a quarter of a million dollars in equipment, plus staff and phone services. We spend money like that quarterly.
And the ANS deal, oh God. It's a diamond-mine deal in which ANS gets a royalty on the business from now until the end of time. ANS gives you the ice-cream maker, but you have to buy all the ice cream from it. That just skims the margins more. If InterAccess had lots of money to start with, it would have just bought the connection service straight out.
This market is heating up. There's almost enough money in it for us to start seeing some blood and guts soon.
Customer
Edward Stickle;
Oak Ridge, Tenn.
Right now my family uses America Online at home for E-mail, stock quotes, and flight reservations. I'll probably switch to the Internet at home once a few access providers start up in my area.
InterAccess is offering exactly what I'm looking for. I like that it provides the utilities on Plug n' Play. That's exactly what people need for easy access to the Net. I wouldn't get a Unix account; I'd sign up for Plug n' Play right off the bat. It's a reasonable price for T1 access.
