5 ms·

Telecom geek here: why do you have low margins? Where are you buying your DIDs and Routes? What switch are you using? I'd love to help, I literally eat sleep

Telecom geek here: why do you have low margins? Where are you buying your DIDs and Routes? What switch are you using? I'd love to help, I literally eat sleep and breathe this stuff. There's no way your margins should be skinny unless you're playing LCR games, in which case you make it up on volume. Source: I work at 2600hz, the bootstrapped open source telecom cloud company. We've bootstrapped to 30+ employees on a pure telecom business so I have some experience here.

sologoub 13y ago
What margin range would you consider healthy?
- josh2600 13y ago
  It depends on the business. $MAJORWIRELESSOPERATOR on accessory sales has obscene margins (like 1000%). Things like minutes are skinny with gross margins of 60-100%. There are costs so if you're playing the LCR game you're likely making 4-10% net margin. It all depends on volume and cost to deliver. Some of the biggest providers have the highest costs to deliver service. Does that help? Edit: for example, a hosted PBX provider, pricing at $35 all inclusive per seat, should have gross margins north of 150% and net margins above 40%, assuming at least 10,000 seats. There are, of course, huge variations because of management style, frugality and a myriad of other factors, but there's money to be made. The easiest money in telecom, with the highest margins, are the Analytics, billing and operations tools (of which there are many but finding quality ones is a YMMV proposition).
jhuckestein 13y ago
Nice, I'm a big fan of 2600hz! I'm currently on Twilio's first tier volume discount (I assume there's further volume discounts that aren't on the website), paying .8 cents/min IIRC. I looked into buying voice minutes and DIDs and running my own freeswitch boxes. Any provider that had listed prices charged upwards of .4 cents/min or had unlimited minutes per DID with a $4 or something fee per channel. A lot of them also limited the number of channels on a DID. Another reason I have low margins though is because my free plan and free trials also cost me real money. There is no way I can get around that. While we're at it: Another reason I looked into self-hosting was because I'd like to host conference calls with up to 5000 participants (think earnings calls, public forums, classes etc), most of which are mute. THAT is a high margin business, with companies charging up to 20 cents/minute/caller for those kinds of calls. I read this may be possible with freeswitch on beefy hardware. What do you think? Do you know any way I could get around hosting my own freeswitch servers, load balancer, redundant backups etc?
- patio11 13y ago
  Another reason I have low margins though is because my free plan and free trials also cost me real money. There is no way I can get around that. Have you considered rolling back or sharply limiting your free trials? With the exception of people you've made commitments to, if they aren't accomplishing a business goal for you, you don't owe the world them. There is nothing intrinsic about SaaS that says there has to be a free plan. (Additional options: aggressively using the free plan as a viral spread mechanism. Your free competitors do this, as I learned the other day when on a sales call organized by somebody who would have happily dropped $50 to remove the external branding for that single phone call if they were aware of your option existing.) We also run on Twilio, and have a 30 day free trial with CC required upfront. While we still have marginal expenses to service free trials in a way that many SaaSes do not, the costs are not terrible and easy to justify as a cost of customer acquisition. (We shoot for, and mostly get, 80%+ margins on the paid plans.) If you're ever in the mood to chitchat about this, drop me an email. I'd be happy to share about how e.g. moving a bit upmarket and doing a bit of enterprise sales has worked for us.
  - josh2600 13y ago
    Quick question: Do you have some kind of monitoring setup on HackerNews for the keywords "Free Plan" or "Free Trial" or are you just that active? You always get to these topics so quickly. Thanks for chiming in!! :) I always find a lot of value in your advice.
  - jhuckestein 13y ago
    Big thanks for the offer, just sent you an email. I started out asking for a CC before the trial, but on a small adwords test campaign that converted exactly zero out of a few hundred people. Then again, that may have been because the entire site was a single signup/cc form and had very little information otherwise.
  - akumen 13y ago
    I can sympathise with the OP. Free accounts also costing us money but if we strip them of the key feature (NLP) or limit them, the conversion drops because it is a service that takes some time to learn and people tend to be lazy.
pc86 13y ago
I was just thinking about 2600hz the other day! I've recently started learning Erlang and you're one of the few startups I can think of that uses it (I'm sure there are some others, though).
- josh2600 13y ago
  We <3 Erlang. Lots of startups use it including what's app, Goldman Sachs and even the big FB. Erlang was basically built for telecom so it made sense for us to build kazoo on top. Keep your eyes open over the next 60 days, we've got some fireworks coming out.
borplk 13y ago
Hey since you mentioned you ear sleep and breathe this stuff I thought I'd ask a question. Do you know how easy/hard it is to start a "international calling card" service? I see lots of random ones popping up every day and they mostly look unprofessional so they remind me of email/web-hosting resellers. I was wondering if reselling "international calling card" is a thing? or do you actually need your own infrastructure? I was hoping that I can resell these services and make some passive income that way (I can directly market to low-competition markets in my home country).
- josh2600 13y ago
  International calling card services are cheap to implement. The main issue people run into is fraud. I think that after DNS reflection, SIP attacks have to be one of the most common assaults. In addition, I've never seen a prepaid calling company that didn't get defrauded, you just build the losses into your margins. The typical way this is is done is to get a carrier route to a specific country and then arbitrage between that rate and the expected rate from say AT&T. There's usually a lot of margin when you compare it to AT&T costs, but you'll find the business is ultra competitive. We call voice the race to zero.

sologoub 13y ago

What margin range would you consider healthy?

josh2600 13y ago
It depends on the business. $MAJORWIRELESSOPERATOR on accessory sales has obscene margins (like 1000%). Things like minutes are skinny with gross margins of 60-100%. There are costs so if you're playing the LCR game you're likely making 4-10% net margin. It all depends on volume and cost to deliver. Some of the biggest providers have the highest costs to deliver service. Does that help? Edit: for example, a hosted PBX provider, pricing at $35 all inclusive per seat, should have gross margins north of 150% and net margins above 40%, assuming at least 10,000 seats. There are, of course, huge variations because of management style, frugality and a myriad of other factors, but there's money to be made. The easiest money in telecom, with the highest margins, are the Analytics, billing and operations tools (of which there are many but finding quality ones is a YMMV proposition).

jhuckestein 13y ago

Nice, I'm a big fan of 2600hz! I'm currently on Twilio's first tier volume discount (I assume there's further volume discounts that aren't on the website), paying .8 cents/min IIRC. I looked into buying voice minutes and DIDs and running my own freeswitch boxes. Any provider that had listed prices charged upwards of .4 cents/min or had unlimited minutes per DID with a $4 or something fee per channel. A lot of them also limited the number of channels on a DID. Another reason I have low margins though is because my free plan and free trials also cost me real money. There is no way I can get around that. While we're at it: Another reason I looked into self-hosting was because I'd like to host conference calls with up to 5000 participants (think earnings calls, public forums, classes etc), most of which are mute. THAT is a high margin business, with companies charging up to 20 cents/minute/caller for those kinds of calls. I read this may be possible with freeswitch on beefy hardware. What do you think? Do you know any way I could get around hosting my own freeswitch servers, load balancer, redundant backups etc?

patio11 13y ago
Another reason I have low margins though is because my free plan and free trials also cost me real money. There is no way I can get around that. Have you considered rolling back or sharply limiting your free trials? With the exception of people you've made commitments to, if they aren't accomplishing a business goal for you, you don't owe the world them. There is nothing intrinsic about SaaS that says there has to be a free plan. (Additional options: aggressively using the free plan as a viral spread mechanism. Your free competitors do this, as I learned the other day when on a sales call organized by somebody who would have happily dropped $50 to remove the external branding for that single phone call if they were aware of your option existing.) We also run on Twilio, and have a 30 day free trial with CC required upfront. While we still have marginal expenses to service free trials in a way that many SaaSes do not, the costs are not terrible and easy to justify as a cost of customer acquisition. (We shoot for, and mostly get, 80%+ margins on the paid plans.) If you're ever in the mood to chitchat about this, drop me an email. I'd be happy to share about how e.g. moving a bit upmarket and doing a bit of enterprise sales has worked for us.
- josh2600 13y ago
  Quick question: Do you have some kind of monitoring setup on HackerNews for the keywords "Free Plan" or "Free Trial" or are you just that active? You always get to these topics so quickly. Thanks for chiming in!! :) I always find a lot of value in your advice.
- jhuckestein 13y ago
  Big thanks for the offer, just sent you an email. I started out asking for a CC before the trial, but on a small adwords test campaign that converted exactly zero out of a few hundred people. Then again, that may have been because the entire site was a single signup/cc form and had very little information otherwise.
- akumen 13y ago
  I can sympathise with the OP. Free accounts also costing us money but if we strip them of the key feature (NLP) or limit them, the conversion drops because it is a service that takes some time to learn and people tend to be lazy.

pc86 13y ago

I was just thinking about 2600hz the other day! I've recently started learning Erlang and you're one of the few startups I can think of that uses it (I'm sure there are some others, though).

josh2600 13y ago
We <3 Erlang. Lots of startups use it including what's app, Goldman Sachs and even the big FB. Erlang was basically built for telecom so it made sense for us to build kazoo on top. Keep your eyes open over the next 60 days, we've got some fireworks coming out.

borplk 13y ago

Hey since you mentioned you ear sleep and breathe this stuff I thought I'd ask a question. Do you know how easy/hard it is to start a "international calling card" service? I see lots of random ones popping up every day and they mostly look unprofessional so they remind me of email/web-hosting resellers. I was wondering if reselling "international calling card" is a thing? or do you actually need your own infrastructure? I was hoping that I can resell these services and make some passive income that way (I can directly market to low-competition markets in my home country).

josh2600 13y ago
International calling card services are cheap to implement. The main issue people run into is fraud. I think that after DNS reflection, SIP attacks have to be one of the most common assaults. In addition, I've never seen a prepaid calling company that didn't get defrauded, you just build the losses into your margins. The typical way this is is done is to get a carrier route to a specific country and then arbitrage between that rate and the expected rate from say AT&T. There's usually a lot of margin when you compare it to AT&T costs, but you'll find the business is ultra competitive. We call voice the race to zero.