New Series: FBO Survival - Survival Tip #1: Keep Your Customers Close...and Your Margins Closer

By Ron Jackson and John Enticknap, Aviation Business Strategies Group

Welcome to the first installment of our new AC-U-KWIK FBO Connection Series: FBO Survival. This series will focus on the various strategies and tactics needed to survive the daily rigors of running a successful FBO operation.

Our first survivor tip, ‘Keep Your Customers Close … and Your Margins Closer’, is inspired by dialogue in the film, The Godfather: Part II. It means, in order to survive today’s economic FBO climate, you need to focus on your two most important revenue generators: your valued customers and your fuel margins.

Keep Your Customers Close

At the beginning of 2013, we made our yearly FBO Industry Business Forecast by issuing a news release at the Annual NBAA Scheduler’s and Dispatchers (S&D) show and convention in San Antonio. The headline read: FBOs to Compete on Service, Not Price in 2013.

To recap, FBOs which compete on price will find it difficult to carve out a true Unique Value Proposition (UVP) in today’s competitive environment. Competing on price accomplishes two things - both negative:

1. It attracts the bottom feeders. This type of customer is only interested in the best price on any particular day and they often flit from one FBO to another in their quest. They are not ‘loyal customers’ and are often the ones who complain the most.
2. You compromise your fuel margins. Not only are you practically giving away your fuel, you’re setting yourself up for fiscal ruin. We’ll discuss this topic more in this blog.

When you compete on a customer service level, you start to create value for your own brand. You establish a UVP. Customers begin to take note and over time, become loyal.

Loyal customers complain less. They tend to pay a reasonable price in return for a good customer service experience. And, more importantly, they like your brand and are willing to recommend your FBO.

These are the types of customers you want to hold close, making sure everything goes well during their customer service experience. A repeat, loyal customer is more valuable than trying to go after a new customer based on price.  And, when they are willing to recommend your FBO to other pilots and flight departments, there is only one word for this … priceless!

Therefore,  train your employees in the art of delivering unique customer service, like the one we subscribe to at Aviation Business Strategies Group called, Don’t Forget the Cheese!©.

And above all, keep your customers close by building long-term relationships at all levels of your organization. Be the restaurant owner and lead by example. Create a working climate where every employee is customer service oriented. Let the customers know you appreciate their business.

Amazingly, only one in 25 customers will ever tell you there is a problem, so empower your employees to ensure any dispute is taken care of at the time of transaction. Up to 95 percent of disgruntled customers will return if disputes are handled in a timely fashion.

Keep Your Margins Closer

When we say ‘keep your margins closer’ we are recommending that you protect your fuel margins in order to survive. Often FBOs are under stress by customers, third party fuel providers, etc. to cut fuel prices thus eating into your fuel margins and your potential profit.

At our industry acclaimed FBO Success Seminar we conduct for the National Aviation Transportation Association (NATA), we have a session called ‘Seeking a Silver Bullet’ where we discuss maintaining healthy but fair fuel margins. Like the Lone Ranger, we are all seeking a silver bullet solution. Question is, does it exist?

Often times we run across FBOs that don’t really know what their actual operating costs are - which causes their fuel prices to be set arbitrarily. When your fuel truck hooks up to a customer’s aircraft, each gallon of fuel pumped should be priced to not only cover your set costs, but also yield a reasonable profit.

Therefore, you should have at least three desires or goals in mind when you set fuel prices:

1. Be competitive within your marketplace
2. Make a reasonable gross profit
3. Retain customers

In order to reach these goals, we should understand the relationship between price and cost:

• The obvious -prices must exceed costs or we will ultimately fail
• Costs include all the normal items such as leases, equipment, labor, training, loan repayments, etc.
• But don’t forget to add costs of mark downs, shortages, discounts, marketing, overhead, etc.
• Treat profit as part of your costs - we don’t want to be in business for a hobby!

Now, let’s look at a real world pricing evaluation for pumping a gallon of JET A at our fantasy facility – we’ll call Ron/John’s FBO:

Cost of Jet A Platts 2/12 thru 2/18/2013:
LAPM                   3.3876
Differential                .15
Fed Tax                   .244
Lust                        .005
Flowage                    .10
Transportation          .06

Total Cost of Jet A $3.9466/gal.

However, the above cost of fuel does not include our operating costs.

What does it really cost to pump a gallon of fuel? Here are our example numbers for Ron/John’s FBO:

• FBO X Pumps     584,910 gallons per year
• Annual revenue     $2,278,000
• Cost of Sales           1,665,000
• Expenses                   409,904
• Net Profit                    203,000

Therefore, under this scenario, the cost to pump a gallon of fuel is $0.7007/gallon.

Now let’s take a look at True Cost Evaluation:

• Cost of Fuel               $3.9466
• Cost to Pump             $0.7007

      Total Cost per Gallon     $4.6473

In order to determine what your actual posted price should be, there are several cost pricing models to consider including, cost plus pricing, mark-up pricing, demand pricing and competitive pricing. At our NATA FBO Success Seminar we discuss each of these methods in detail. However, for this blog, let’s just keep it simple.

Think of a flat added-on margin of $2.00. It used to be $1.00, but we all know what time and inflation has done to our economy.

• For every gallon of fuel sold, you should have a goal of a $2.00 plus gross margin.

Sell a gallon - $2.00 in the bank!

• Conversely, think for every $2.00 in expenses; labor, cookies, papers, coffee, etc. you need to sell a gallon of fuel - $2.00 plus out of the bank!
• Therefore, our Ron/John's FBO example sale price would be $6.65/gal.
• Guess what the chain FBO’s are charging?

Earlier we talked about ‘Seeking a Silver Bullet Solution’? The solution is KNOWLEDGE. Therefore, in order to Keep Your Margins Closer, we should take into consideration the following:

• All prices must cover costs and profits
• The most effective way to lower prices is to lower costs
• Review prices frequently to assure that they reflect the dynamics of cost, market demand, response to the competition and profit objectives
• Prices must be established to assure sales, but don’t give it away

And lastly, remember to add value to your fuel transactions by providing the best customer service, and don’t just drop the price. Keep your customers close, and your margins closer. That’s our FBO Survival tip No. 1.

Let us know what you think about our comments on FBO Survival!

John Enticknap: jenticknap@bellsouth.net

Ron Jackson: rjacksongroup@earthlink.net

About the authors:

Ron Jackson
Ron Jackson is Co-Founder of Aviation Business Strategies Group and President of The Jackson Group, a PR agency specializing in FBO marketing and CSR training. He has held management positions with Cessna Aircraft and Bozell Advertising and is the author of “Mission Marketing: Creating Brand Value” and co-author of “Don’t Forget the Cheese!” the ultimate FBO Customer Service Experience. Ron co-developed NATA’s acclaimed FBO Success Seminar Series and writes an industry blog for AcUKwikAlert.com titled: The FBO Connection. 

John Enticknap
John Enticknap founded Aviation Business Strategies Group in 2006 following a distinguished career in aviation fueling and FBO management, including President of Mercury Air Centers network of 21 FBO locations. He is an ATP and CFI rated pilot with more than 7,800 flight hours and is the author of “10 Steps to Building a Profitable FBO”. John developed NATA’s acclaimed FBO Success Seminar Series and writes an industry blog for AcUKwikAlert.com titled: The FBO Connection.

There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things

FBOs Face a Changing Environment in Fuel Supplier Relationships: Exploring the New Norm

By John L. Enticknap, Aviation Business Strategies Group

“Everybody has accepted by now that change is unavoidable. But that still implies that change is like death and taxes — it should be postponed as long as possible and no change would be vastly preferable. But in a period of upheaval, such as the one we are living in, change is the norm.”
— Peter Drucker- Management Challenges for the 21st Century

Over the last several years we’ve seen some major changes in fuel supplier relationships within the FBO industry. It wasn’t that long ago when most FBOs had a fuel supply agreement directly with the oil company.

Then the landscape changed. Prominent industry brands like Texaco, Exxon, Air BP, Chevron, Mobil and Gulf Oil, if you remember that far back, have been acquired by other oil companies and then the majors have withdrawn from the retail marketplace.

These actions beg many questions. Why has this happened? Who is replacing the oil companies? Is it good for the FBOs selling to the end user, and is the FBO the only business selling to the end users?

First, let’s get to the bottom of why this happened. Basically, it comes down to economics. It costs the oil companies quite a bit of money to support the FBO marketplace. As much as we all love the FBO business, General Aviation is a small market segment for oil companies, considering the huge auto market they have to support and, closer to home, the commercial airline marketplace. On top of this, Avgas is a small percentage of the world aviation fuel market, and most oil companies would miss it on their ledger if they blinked.

In short, the support of an FBO takes much effort and expense. As we’ll discuss in our NATA FBO Success Seminar next week in Las Vegas, the fuel suppliers provide a number of services to FBO’s, in addition to the fuel:

• Truck Leasing Programs
• Quality Control Inspections
• Over the Road Carrier certification
• Credit Facilities
• Marketing Support
• Credit Card Processing
• Into-plane programs for corporate aviation
• Airline into-plane support

Changing Pricing Policies and Business Model

Most of the aviation fuel pricing policies have changed over the past 20 years. The basis has changed from rack prices at the loading point to Platts based national/international indexed pricing. The result may reduce the profit margin for the fuel supplier who also faces increasing costs for support and, in recent years, a shrinking marketplace.

Another change oil companies have encountered is the advent of a new type of FBO fuel supplier like Avfuel, who was one of the first. They purchase the product directly from the refiners and, as wholesalers, remarket the fuel supply to the FBO marketplace. Avfuel provides a high level of marketing and support to the FBOs including other necessary support like fuel trucks, credit card processing, credit facilities, etc. They do a good job and at a lower cost than the oil companies.

Because of this metamorphosis in the FBO fuel supplier landscape, we have an almost complete change where the oil companies have very few direct accounts. We have observed the rise of firms such as Eastern Aviation Fuels, representing Shell, and Epic Aviation as a direct fuel supplier to FBOs after termination of the Air BP relationship. Others include Avfuel - which we previously discussed - Arrow Energy, Perry Brothers, World Fuel and others.

World Fuel is a very special case. Just a few years ago they were in the wholesale Jet fuel business and marine markets. Within the last few years they have grown into the retail fuel supply business by purchasing Hiller Aviation (who acquired most of the Chevron Oil business when they exited the FBO business), Western Petroleum (large Exxon wholesalers) and Ascent. Now they are one of the largest providers of fuel and support services to the FBO business.

World Fuel, through their various wholly owned affiliates, can provide credit cards, accounting software, contract fuel and branding opportunities for a range of different sized FBOs, along with competitive pricing programs.

Is Change Good or Bad?

Is all this change good or bad for the FBO industry? In a nutshell, we would have to say it’s good. The fuel supply and support FBOs need is available from a number of different firms. They’re all doing a great job for the FBOs. They each have their own competitive market position in the business and aggressively price their services to knowledgeable FBO firms.

The marketplace needs these services. Large FBO chains have the financial capacity to provide for many of their own FBO back office services. The medium and small FBOs need value added to help with such things as fuel truck leasing programs, credit card processing, contract fuel programs to assist in selling fuel and, in many cases, help with government into-plane services.

What about Contract Fuel?

As we mentioned, the “new” fuel suppliers help the FBO in marketing their fuel with contract fuel programs. This leads to the discussion about who will be the main contact for the customer under a contract fuel program? Is it the FBO, the contract fuel supplier or the wholesale fuel supplier?

It is my belief that the FBO needs to be the contact for the customer. After all, it’s the FBO who controls the customer service experience, as it should be. When the customer’s aircraft arrives on your ramp, it’s your employees who spring into action providing your brand of service.

More than anything, it’s the customer service experience that will determine the amount of fuel to be purchased. The fuel supplier can assist you and your firm with all the support services, marketing, good purchasing power, etc. However, where the “rubber meets the road” is on your ramp and with your people. Therefore, invest in proper customer service training and use the resources of your fuel supplier. After all, it’s a changing business environment … and it’s the new norm.

Thanks, and let us know your thoughts and feedback. Please, contact me at jenticknap@bellsouth.net.

About the authors:

Ron Jackson
Ron Jackson is Co-Founder of Aviation Business Strategies Group and President of The Jackson Group, a PR agency specializing in FBO marketing and CSR training. He has held management positions with Cessna Aircraft and Bozell Advertising and is the author of “Mission Marketing: Creating Brand Value” and co-author of “Don’t Forget the Cheese!” the ultimate FBO Customer Service Experience. Ron co-developed NATA’s acclaimed FBO Success Seminar Series and writes an industry blog for AcUKwikAlert.com titled: The FBO Connection. 

John Enticknap
John Enticknap founded Aviation Business Strategies Group in 2006 following a distinguished career in aviation fueling and FBO management, including President of Mercury Air Centers network of 21 FBO locations. He is an ATP and CFI rated pilot with more than 7,800 flight hours and is the author of “10 Steps to Building a Profitable FBO”. John developed NATA’s acclaimed FBO Success Seminar Series and writes an industry blog for AcUKwikAlert.com titled: The FBO Connection.

There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things

FBOs to Compete on Service, Not Price in 2013 - Steady 6% Growth Forecast for FBOs

By John L. Enticknap and Ron R. Jackson
Principals, Aviation Business Strategies Group

Recently, we attended the National Business Aviation Association’s (NBAA) Schedule and Dispatchers (S&D) Conference in San Antonio. While there, we had the opportunity to address a group of FBO leaders regarding the present state of the industry and where we saw the future headed in 2013.

Throughout the year we have many opportunities to talk with FBOs from various parts of the country. At the NATA FBO Success Seminar, we conduct twice a year, we network and exchange ideas and information with FBO owners, operators and managers. Also, we receive feedback from this blog we write for AC-U-KWIK FBO Connection.

In addition, we attend various aviation shows including the annual NBAA Meeting and Conference as well as the S&D, and we review industry information and forecasts released by a number of companies and organizations including:
•  Honeywell’s Global Business Aviation Forecast
•  FAA  Aerospace Forecasts
•  GAMA
•  JETNET
•  ARG/US
•  NBAA

2013 Forecast

To summarize our findings, the FBO industry has not fully recovered from the economic downturn of the past several years. Yes, 2012 was a better year than 2011, but there has been a modest shakeout of FBOs who have been operating marginally.

Going forward, airframe manufacturers are starting to see a recovery in their orders for new aircraft and used aircraft inventories are starting to shrink. The industry is forecasting a slight uptick in the number of hours flown by corporate flight departments and charter operators. However, more efficient aircraft and the practice of tankering will make 2013 another challenging year for the FBO industry.

In general, what we find is a more positive business outlook for FBOs. To be sure, confidence in the economy is rising. Many are seeing more activity on their ramp than a year ago and a slight increase in the number of gallons being sold.

We feel most FBOs have an opportunity to grow their business in the range of 4 to 6 percent this year. If an FBO achieves a growth of 6 percent or more, they will be a star performer.   

One of the biggest challenges for FBOs in 2013 will be competing for business aviation transient traffic. Although being competitive with fuel prices is important, FBOs can’t afford to heavily discount Jet A and then give away their ancillary ramp services - while trying to maintain a first class facility.
 
As we discuss during the FBO Success Seminars, FBOs competing on an aggressive fuel discount pricing strategy is an archaic way of doing business. In today’s tough business climate, FBOs are operating on very thin margins, yet the cost of doing business continues to rise.

Therefore, in order to stay in business, FBOs can’t afford to sell fuel at heavily discounted prices. No one wins with this strategy.

Competing on Service

Many FBOs have gone out of business by lowering their prices over an extended period of time. Yes, FBOs need to be price competitive, but they must maintain healthy margins and find other ways to compete through differentiation. One of the best ways to differentiate is to offer an outstanding and memorable customer service experience.

Therefore, for 2013, we see a shift in the FBO industry away from a price sensitive business model to one based on providing exceptional customer service.

More and more FBOs are taking customer service training very seriously. Just as FBOs don’t tolerate mishaps on the ramp, they are becoming more conscious of eliminating miscues with the way they deliver customer service.

Research indicates that loyal customers don’t stop doing business with a company solely because of price, but rather because of a poor customer service experience. However, most will return if you recognize and correct the problem.

One way to improve customer service is to standardize training and aim to motivate employees in a way that encourages them to take ownership of problems when they arise.

Here are suggestions for improving your customer service experience:
•  Standardize your customer service training.
•  Empower your employees to own their mistakes.
•  Teach employees to deal with customer dissatisfaction.
•  Motivate your employees to work together as a team.
•  Measure your customer service delivery with a short survey.
•  Ask the customer the really tough question: Would you recommend us?
•  Monitor your loyal customer database. If you haven’t seen a regular customer in a while, find out why.

Just like a restaurant owner, you have to be there for the customer. Empowering your employees to own their mistakes at the time of transaction is crucial. Teaching them to effectively deal with customer dissatisfaction helps make for a long-term profitable customer relationship.

At our next NATA FBO Success Seminar, March 11 and 12 in Las Vegas, we go into detail regarding each aspect listed above in developing an effective customer service training program. If you would like more information on this acclaimed seminar, please click here.
If you would like more information on our Don’t Forget the Cheese© Ultimate Customer Service Training Program, please click here.

Your feedback is important to us. Please, let us know your thoughts on subjects covered in our blog by emailing John Enticknap at jenticknap@bellsouth.net or Ron Jackson at Ron@thejacksongroup.biz.

About the authors:

Ron Jackson
Ron Jackson is Co-Founder of Aviation Business Strategies Group and President of The Jackson Group, a PR agency specializing in FBO marketing and CSR training. He has held management positions with Cessna Aircraft and Bozell Advertising and is the author of “Mission Marketing: Creating Brand Value” and co-author of “Don’t Forget the Cheese!” the ultimate FBO Customer Service Experience. Ron co-developed NATA’s acclaimed FBO Success Seminar Series and writes an industry blog for AcUKwikAlert.com titled: The FBO Connection. 

John Enticknap
John Enticknap founded Aviation Business Strategies Group in 2006 following a distinguished career in aviation fueling and FBO management, including President of Mercury Air Centers network of 21 FBO locations. He is an ATP and CFI rated pilot with more than 7,800 flight hours and is the author of “10 Steps to Building a Profitable FBO”. John developed NATA’s acclaimed FBO Success Seminar Series and writes an industry blog for AcUKwikAlert.com titled: The FBO Connection.

There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things

Part 2: Making the FBO Customer Your Fan

By Ron R. Jackson, Co-Founder, Aviation Business Strategies Group

In a previous blog, we talked about making the customer your fan. It’s a reversal of roles … a conscious change in attitude by your customer service staff.

Keep in mind, your customer service staff consists of anyone that comes in contact with the customer. This would include customer service representatives (CSRs), line service technicians, flight instructors, charter pilot and the FBO owner or manager.

For this blog post, we’ll talk about making an impression in a way that prompts the customer to be your fan. In a nutshell, it’s all about making an impact on the customer in a way that he or she will not forget. In turn, the customer recommends the FBO by sharing their customer service experience to their staff or peers.

Here’s an example: Recently, I became a fan of a hotel in the Indianapolis, IN area. One of our clients, Montgomery Aviation, arranged for my partner, John Enticknap, and myself to be lodged at a local hotel.

As a student and teacher of exceptional customer service, I often observe the customer service habits of places we frequent while traveling, whether it’s a hotel, restaurant or commercial store. At this hotel, I was impressed from the time we checked in, until we left after a two day stay.

After checking in, I came down to the lobby to see if there were any newspapers left. It was already evening and the manager apologized for having run out. However, he mentioned the next day’s paper would be delivered at 4 a.m. I laughed out loud and said I probably wouldn’t be getting up that early.

The hotel representative said no problem and asked if he could arrange to have a paper slid under my door by 6 a.m.?

I know some hotels provide this service on a daily basis, but this was not the case at this location. So, I said please and thank you, and retired to my room. As my 6:30 a.m. wake up call sounded, my feet hit the floor and I noticed the paper had arrived as promised.

The second morning, I forgot to ask for a paper delivery, but just like the day before, my wish was granted and I was a very happy camper. Obviously, the hotel staff made the time to look at all customer service requests and took pride in following through.

Besides the newspaper request, I found I had not packed my razor. So, I went to the front counter to see if I could purchase one - as some hotels keep spares. Not only was I not charged, they gave me the best razor that ever whisked my whiskers. No kidding. It was the latest wiz-bang, multi-bladed model on the market. I joked that from now on I would forget my razor whenever I stayed there.

To say the least, I was hooked. I became their fan. Not only did I tell the good folks at Montgomery Aviation about their fine selection of a hotel, I use this as an example in our Don’t Forget the Cheese© Customer Service Training classes.

And now, I’m telling everyone who reads this blog, which begs the question: What was the true value to the hotel with the newspaper under-the-door gesture and the great razor I received?  As the commercial says, PRICELESS!

For FBOs, it’s easy to put these types of gestures into play. It starts by everyone on the staff ‘being there’ for the customer, anticipating their needs, wants and desires. Every day the FBO staff should be looking for an opportunity to help a customer along the way - even before the customer asks.

It’s being the ‘restaurant owner’ and taking pride in ownership of your job and the place where you work. It’s also being able to ask the really hard question: Would you recommend us? If a customer hesitates in answering this question, you should find out why and fix the problem.

Ultimately, if everyone on staff has a great attitude about their job, about their FBO and about delivering a great customer service experience, customers can’t wait to become your fan!

Please tell us how you make your FBO customer your fan. Send me an e-mail to Ron@thejacksongroup.biz. Also, learn more about providing exceptional customer service at our next NATA sponsored FBO Success Seminar to be held March 11 and 12 in Las Vegas. Click here to register.

About the authors:

Ron Jackson
Ron Jackson is Co-Founder of Aviation Business Strategies Group and President of The Jackson Group, a PR agency specializing in FBO marketing and CSR training. He has held management positions with Cessna Aircraft and Bozell Advertising and is the author of “Mission Marketing: Creating Brand Value” and co-author of “Don’t Forget the Cheese!” the ultimate FBO Customer Service Experience. Ron co-developed NATA’s acclaimed FBO Success Seminar Series and writes an industry blog for AcUKwikAlert.com titled: The FBO Connection. 

John Enticknap
John Enticknap founded Aviation Business Strategies Group in 2006 following a distinguished career in aviation fueling and FBO management, including President of Mercury Air Centers network of 21 FBO locations. He is an ATP and CFI rated pilot with more than 7,800 flight hours and is the author of “10 Steps to Building a Profitable FBO”. John developed NATA’s acclaimed FBO Success Seminar Series and writes an industry blog for AcUKwikAlert.com titled: The FBO Connection.

There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things

Is Selling Your FBO A Perilous Process?

By John Enticknap, President, Aviation Business Strategies Group

“There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things.” - Niccolo Machiavelli

According to Machiavelli, selling your FBO can be a perilous process. But in my experience, you can even out the bumps and curves by developing a logical plan, well enough in advance, that will lead you to a successful transaction.

Let’s start at the beginning

There are many reasons why, after numerous years of dedicated work, you have decided it’s time to sell your FBO:

• Retirement is the number one reason.
• Harvesting your business for the next investment.    
• Partnerships Issues.
• Illness or death.
• Becoming overworked.
• Boredom—looking for a new change.
• An uncertain future.

Before we move forward and discuss the sale process, we need to make some basic business management decisions. We need to review the business as a buyer would, i.e.: Will my investment be worthwhile--short term and long term?

Here’s a buyers view:

• What is the ROI?
• Will the value of the deal enhance my existing business?
• Is this a new business venture and add value?
• What alternatives do I have to invest elsewhere for better returns?
• Does the deal satisfy my business, financial & emotional ideals?

In addition, we need to review the business and make necessary adjustments to enhance the profitability and make the business more attractive to potential buyers. We do this by increasing the term of the lease, removing excess debt or amounts due to the owner/partners and removing excess owner expenses.

In addition, we need to pay attention to:

• Increasing profits.
• Maintaining consistent income figures.
• Retaining a strong customer base.
• Major contract(s) that span several years.
• Meeting with your tax folks and discussing capital gains and a sale structure that will minimize your tax consequences.

Although we’re asking you to put in a lot of up-front time and preparation, these concepts and business practices will benefit you and your business and position it for a sale to maximize the value, not only for you, but the buyer.

Before we look at valuation, we should examine the timing of the sale. To effectively complete the items we discussed previously, the decision to sell should be planned well in advance, at least a year or two out. The preparation will improve your business and make the business records appear to be in order in addition to the basic structure of the FBO.

These improvements also will allow you, as the owner, to transition out of the business. Like many small businesses, the FBO owner is intrinsically invested in the business, not only financially, but emotionally as well. The business has become your life. By separating yourself slowly from the business, you will be in a better position to sell and view the transaction as a business deal.

Valuation

As an FBO owner, you have seen what has been going on in the industry with the continued consolidation of the FBO business over the last 15 to 20 years. You’ve also undoubtedly been exposed to the term ‘multiples’ when it comes to evaluating the sales price of an FBO.

I’ve written in a previous blog about valuations as a multiple of your earnings before depreciation (EBIDTA). Say your FBO has earned $850,000 on average the last couple of years (before depreciation). If you were to value the business at a 7.5 multiple, then your FBO would be worth $6,375,000. Or to look at it another way, if a buyer bought your business it would take 7.5 years to make the investment back, assuming all business aspects stay the same!

Now, we need to look at the value of your lease. Generally, the longer the term of the lease, the better the value. If you only have 5 years to go, the above scenario would not work!

Here, in general, are the various line items that add value:

• The length of your lease term must be at least 10 years. Twenty plus years is ideal.
• Physical assets: hangars, real estate, option years, terms in your lease, minimum standards--all these items affect value.

Get an expert to help you. We would not recommend hiring the local commercial real estate appraiser as they usually do not understand how to correctly appraise an airport property.

Airport leases are unique and the major value in your business. It outlines what you can and can’t do; establishes fees and charges; the rules of competition; capital investment requirements, and in many cases, determine whether or not your business is going to be successful.

Preparing Your Documents

Once you have determined what your selling price will be, you’ll need to put together a list of the documents a buyer will want to review prior to making an offer. In today’s electronic environment, you can establish an electronic document “room” where you have put several years worth of profit and loss statements, balance sheets, listing of assets, lease documents, etc. These should all be easily accessible and ready for review.

A Non-Disclosure Agreement should be prepared by your attorney or broker. Once a prospective buyer signs the agreement he can have access to your financial data. Remember to give a specific time frame to review and make an offer and don’t let the sale process drag out too long. If a buyer reviews the data and is not interested, you need to move on.

Finding a Buyer

Whether you use a broker, or you find prospective buyers yourself, the process can be challenging. Selling your business is like any other business deal; if you’re lucky it can be done in months. However, in most cases, a deal will take anywhere from six months to a couple of years.

In today’s business environment, deals are tending to take longer. Buyers are being more diligent and making sure their investment will be the correct decision. Once you have prospective buyers, keep the process moving along:

• Line up two to three potential buyers, just in case the initial deal falters.
• Stay in contact with potential buyers throughout the process.
• Find out if potential buyers prequalify for financing. Don’t do a deal and then find out the buyer can’t close!
• Allow for negotiations, but keep in mind your end goal both financially and emotionally.
• Put agreements in writing. Get a professional attorney to assist with the development of a Purchase and Sale Agreement.
• Be very cognizant of the terms of the assignment clause in your airport lease.

Closing the Deal

Note: Keep the sale process moving along! We’ve seen many a deal come apart due to the negotiating parties getting tied-up in the deal process. They want to do a deal for the deals sake! Your goal is to sell your FBO on reasonable terms and conditions. If your buyer gets too demanding and bogs down the negotiations, end the discussion and move on to another buyer.

Keep your Goal in Mind

Selling your business is time consuming, difficult and can be as stressful as running your business. Keep in mind some of the concepts we have discussed in this article.

You have planned for change throughout all stages of the ownership of your business. Finding the right professionals to facilitate the process is essential. It will ensure you’ll get the most from your business and secure the retirement you’ve worked for all your life.

Please give me your comments on this article or other subjects you would like to discuss. Contact me at jenticknap@bellsouth.net. Please note: Many of these topics are discussed in our NATA FBO Success Seminar. The next seminar is scheduled for March 11 and 12 in Las Vegas. Please go to http://www.nata.aero/Events/Spring-Training-Week.aspx

About the authors:

Ron Jackson
Ron Jackson is Co-Founder of Aviation Business Strategies Group and President of The Jackson Group, a PR agency specializing in FBO marketing and CSR training. He has held management positions with Cessna Aircraft and Bozell Advertising and is the author of “Mission Marketing: Creating Brand Value” and co-author of “Don’t Forget the Cheese!” the ultimate FBO Customer Service Experience. Ron co-developed NATA’s acclaimed FBO Success Seminar Series and writes an industry blog for AcUKwikAlert.com titled: The FBO Connection. 

John Enticknap
John Enticknap founded Aviation Business Strategies Group in 2006 following a distinguished career in aviation fueling and FBO management, including President of Mercury Air Centers network of 21 FBO locations. He is an ATP and CFI rated pilot with more than 7,800 flight hours and is the author of “10 Steps to Building a Profitable FBO”. John developed NATA’s acclaimed FBO Success Seminar Series and writes an industry blog for AcUKwikAlert.com titled: The FBO Connection.

There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things

The Future Of Insurance Rates: Good News or Bad News? How to make the most of what’s to come!

Editors Note: From time-to-time, FBO Connection bloggers John Enticknap & Ron Jackson invite aviation industry professionals to write a guest blog. For this post we invited Jim Gardener, President of James A. Gardner Company, Inc. - an independent aviation insurance specialty broker based in Atlanta, GA.

By Jim Gardner

As the saying goes, there is good news and there is bad news. Which would you like to hear first?

First, let’s look at the good news for the FBO Operator. We are in the continued midst of a soft aviation insurance market that began in 2006. Since then, aviation insurance rates have declined to their lowest point in history.  

Now, the potentially bad news, beginning in the winter of 2010, many in the aviation insurance industry are predicting a return to a Hard Market.  

What is a Hard Market? It is generally characterized by fewer underwriters bidding on a particular risk - resulting in fewer options, increased rates and premiums, decreased limits of liability and less ancillary coverage offered. In addition, there are more stringent underwriting requirements on training with less flexibility for the operational managers.  

To this point it has been wishful thinking (by the insurance companies) that we are returning to a Hard Market

Needless to say, there isn’t a single underwriter from any aviation insurance company who wouldn’t like to see premiums rise. The consensus is there are two major factors keeping premium rates down:

1.    The poor economy, which has shrunk demand for insurance.
2.    Too much capacity for the market conditions.

Even with the economic recovery that many feel is underway, there is agreement in the industry, unless there is an unforeseen event or outside force which alters the landscape, the soft market will continue.

Absent a catastrophic event, the likely scenario for increased rates may be more pragmatic. The change would be characterized by an improving economy combined with a reduction in capacity through merging aviation underwriting companies; or a further departure from some or all markets by some insurance companies. Rate increases and underwriting restrictions would be less severe, but more selective as to whom and what type of risk each underwriter would be willing to rate.

Either way, every insurance buyer needs to think about the impact on their budget and what can be done to mitigate the increase in cost.  

Understanding how insurance quotes are generated can help in getting best results at renewal

Unlike auto insurance and other forms of property and casualty insurance, aviation insurance has not been reduced to a commodity. Except for light pleasure and business aircraft, most aviation quotes, including those for FBO operators, are generated manually by an underwriter using a rate book based on a “best guess according to historical experience” of that insurance company. The underwriters must follow a created scale of rates with the goal of making an underwriting profit (premiums, minus claims and administrative costs).

The big unknown is the dollar cost of claims which may not be clear until years after the premium has been set and collected. What makes it more difficult is the different insurance companies do not share trends, claims or rate information with one another, so it’s harder to generate accurate rates consistent across all classes of risk. And each insurance company has a different appetite and therefore puts a different priority on each class of risk.  

The underwriters manually apply these rates to generate the quote based on the information sent to them by the broker. One of the keys to getting the best quote is to help the underwriter get a better understanding of the risk they are rating and to find a comfort zone which will allow their pen to move down the scale of rates, instead of up.  

At the NATA FBO Success Seminars, the facilitators talk about the “Insurance Story.” This is telling your broker all about your business including: training, internal and external operational audits, and risk mitigation. The key is making your broker part of the business process.

The quality of the submission by the broker is the only thing the underwriter has to determine the quality of the risk presented

There are two parts that make up a quality submission:

1.    Accurate/full description of the risk.
2.    The appearance and organization of the submission itself.  

For the individual aircraft operator, gathering the proper information needed for a quote is a relatively simple process. Most good brokers have a detailed quote form they use to gather information from the insured, which includes FBO information, insured value, liability limits requested, basic pilot information (for charter and rental), purpose of use, territory, home base and other basic information.  

However, as the market hardens, more underwriters may require additional information to determine which risks they are willing to offer higher liability limits, as well as their best rates. This would include more information about the following:  

FBO Owner and Operator: Who are the partners, shareholders, LLC members, etc? Who makes the business decisions? Is there an operations (SOP) manual and is it endorsed by management and the employees to include line service training, fire suppression systems, fuel farms, etc.?

Aircraft: More detail about the total time on the engine(s), airframe, rotor blades/propellers and other time compliance components. More detail about the avionics and maintenance schedule.

Mission: More detail about when and where the aircraft is flown and number of hours per year, especially if it involves international flight or flights into hazardous conditions or unprepared airfields.  

Pilot Information: A good pilot history form provided by your broker and properly completed by all employed pilots should answer all the questions an underwriter should have.  

Commercial operator is much more complex  

Appearance Matters

This may seem like a small point, but unless an underwriter can visit your facility or operation, they can only rate based on what they read.  Therefore, your website can be an important front porch to display the quality of your company or operation. However, the biggest asset you can have is a broker who properly represents your risk with a well polished, accurate and professional submission.

Substance Matters Most

To an underwriter, the quality of an operation can be defined by many different parameters.  

More experience, better training and the employment of other risk reduction practices that addresses the inherent risks of an operation all play a major role in judging the overall risk of an insured. What is so wonderful about aviation, and frustrating to the aviation insurance industry, is every aviation operation is unique. While all like operations (FBOs, charter operators, or part 91 operators, etc) share some common risks, each  have unique characteristics requiring it to be rated individually.  

Operational Improvements and Risk Management measures can turn an average risk into a good risk

For instance, if your operations use older aircraft, make sure your maintenance program is excellent. And, make sure this is communicated to the underwriters.

If you have low-time or inexperienced pilots, make sure the training program is geared to getting them the experience they need, while addressing your operational needs.  

An FBO which has a fully implemented and documented training program for their line techs will always be looked at favorably and it will show in their year-over-year loss ratio. Criteria will include initial and periodic training, plus a safety awareness program designed to create a culture of operational excellence.

A picture is worth a thousand words: An invitation to the underwriter to visit the operations can erase many doubts

Safety Saves

It’s no secret, the best operators with a clean claims history and a safe operation are going to continue to get the attention of most underwriters. In the end, the number of underwriters who want your business will determine how much negotiating leverage there is when it comes time for policy renewal. If you want to get the best premiums in your rate class, be the best risk.

About the author:

Jim Gardner is a retired U. S. Air Force officer, a former commercial pilot and President of the James A. Gardner Company, Inc., an independent aviation insurance specialty broker based in Atlanta, GA. jim.gardner@jagardner.com

Want to insure your FBO construction project will be successful? Start with having ‘reasonable’ expectations!

Editors Note: From time-to-time, FBO Connection bloggers John Enticknap and Ron Jackson invite aviation industry professionals to write a guest blog. For this post we invited Mercer Dye, President of Dye Aviation Facilities, an aviation design and construction management company.

By Mercer Dye

The truth is, most of us in the FBO design and construction business can’t afford the luxury of a guaranteed perfect project - and frankly, no one ever gets one anyway.

As in any endeavor, successful FBO construction projects depend on the owner, or in this case, the FBO owner having reasonable expectations and willingness to participate in the equitable sharing of risks.

I’ve been in the design and construction industry all of my working life.  For the past 30 years, my firm has been devoted to the design and construction management of aviation support facilities. These projects range in size from very modest renovations to totally new greenfield projects for FBO’s, aircraft OEMs and large corporate operators. In the hundreds of projects completed, there has never been a lawsuit filed against anyone involved. Not an owner, construction manager, architect, engineer, contractor or material supplier.

I know you can’t see me, but I am knocking on a big piece of wood right now because there is a smidgeon of luck involved in this perfect record. Also, having world class clients who all have become friends really helps.

These successful projects all have a few things in common:

1.    Very careful and systematic early project analysis was orchestrated by a General Aviation, Design and Construction Management (DCM) expert.

A.    Goals were set based on real needs and the ability to generate a return on investment. Questions included: What is really needed now? How much is it likely to cost? How will it be paid for? How can the project be expanded later?

B.    Budgets were NOT set up by the local pre-engineered building contractor. Understandably, this person is in a sales mode and does not have the ability to foresee all potential cost impacts. Remember, a metal building can be less than 50 percent of the total construction cost. Don’t let the tail wag the budget dog.

C.    There were careful evaluations of the site conditions by the DCM. Site work can, and often does, cost more than the buildings. Utility availability, soil conditions, storm drainage, pollution control requirements, fire codes, building codes, FAA building limits, zoning or architectural requirements all affect cost and were vetted early. Obviously, this list is very long and overlooking one element can become an ugly surprise later. This is where good industry specific DCM’s can save much more than they cost.

a.    The site work and buildings were designed by experts in airport construction and specifically, General Aviation support facilities.

b.    A limited list (+/-4) of highly regarded General Contractors was selected to price the design development (75 percent completed) drawings. 

c.    Contractor selection began with an interview of GC’s, bidder selection and post bid interviews. Then, the selected GC priced the final construction documents. After the pricing was approved, a final contract for construction was negotiated. With the assistance of the DCM, a fair contract was developed between the owner and General Contractor (Cost-Plus Contracts with a Guaranteed Maximum Price [GMP] are most common).

d.    The owner had set aside a realistic contingency account established with the advice of the DCM to cover unforeseen costs or extras. Note: There are always change orders, ALWAYS! Well designed and managed projects can have very few.

2.    The project, budget, quality and schedule were monitored at regular intervals by the DCM to address issues before they were built into the project or created misunderstandings.

3.    The DCM assisted the owner from very early in the design concept stage all the way to turning the key. Through careful team selection and fair contracts, designers and contractors were in partnership with the owner - insuring success.

4.    Price was not the leading factor in selecting the General Contractor. A post bid grading matrix was used to rank bidders, and aided in making the correct selection. Here is an example:

                             

Therefore, having a successful project is dependent upon:
•    Setting appropriate functional and financial goals.
•    Selecting the appropriate Design team. Design and Construction Manager (DCM) recommended.
•    Conveying your expectations accurately.
•    Selecting the right General Contractor.
•    Having good weather.
•    Not having code officials messing with you too much.
•    Not expecting any miracles.
•    Having enough contingency money.
•    Paying enough attention through the entire process.

Then you can reap the rewards:
•    You will have the right facility …
•    … of the expected quality
•    … at the right price
•    … within the expected time frame.
•    Your family will still love you, and your employees will still adore you. In short, SUCCESS!

Through all of this, having a General Aviation industry-specific Design and Construction Manager (DCM) is a low or no cost way to get closer to a no risk FBO construction project.

About the author:

Mercer Dye
Mr. Dye is President of Dye Aviation Facilities, an aviation design and construction management company. His experience includes serving as Chairman, CEO and owner of Airway Aviation, a large, Atlanta FBO where he administered the rapid growth and ultimate sale of the FBO to Signature Flight Support PDK.

Mr. Dye is an active member of the National Business Aviation Association and the Flying Rotarians. He is a past board member of the Fulton County Airport Association and currently sits on the NFPA 409 Technical Committee for airport facilities. He is the recipient of an American Institute of Architects international honor award presented in Washington, DC by HRH Prince Charles. Mr. Dye is an instrument fixed wing and rotary pilot and is an Army National Guard veteran.
Web site: www.dyeaviation.com

Is Your FBO Data Driven? If not, how do you know what's really going on?

By John Enticknap, Aviation Business Strategies Group

“The goal is to transform data into information, and information into insight.” - Carly Fiorni: President Hewlett Packard, 1999-2005

Do you really know what’s going on at your FBO? It seems many businesses operate on a day-to-day, crises-to-crises basis with the managers just along for the ride.

This has validity in numerous market segments, not just in the aviation services industry. During our NATA FBO Success Seminar, scheduled in Dallas on September 12, 13 and 14, we will discuss this and many other topics. However, for this blog post, let’s concentrate on data collection and what we can do to improve our financial numbers. Then, turn it into insight we can act on to operate our businesses more profitability.

We think it is fair to say most owner/operator FBOs provide a range of services. These may include fuel sales, flight training, aircraft rental, aircraft sales, maintenance and real estate rental. Now, maybe you don’t do all of these, but it’s safe to assume your FBO offers multiple services. So, how do you keep track of everything?

Many FBOs started their business by offering a variety of flight services, because their owners were flight instructors and/or flight examiners. Others started FBOs because of their A&P background and providing aircraft maintenance services. Still, others may have started working in line service and are now FBO managers.

Regardless of your background, you have an accounting system to keep track of billing and expenses. However, the big question is: Does your current system give you data that can be used to properly manage your business?

Data without understanding is useless! At our FBO Success Seminar, we suggest a number of Simple Strategies, as well as a number of Simple Tactics, to assist you with data management.

Here is the data we suggest you collect and utilize on a daily basis.

Start by using Dashboard Reports

So, what constitutes a Dashboard Report? While flying, you check and scan the dashboard/instrument panel repeatedly to monitor what is happening and adjust accordingly. Financial Dashboards do the same thing for your business. They’re a quick snap shot you take on a regular basis to make sure the engine of your company is running smoothly.

Just as you set up way points when you are flying, with a financial dashboard you set up data points you can use on a daily basis.
     
Here are some suggested data points to set up on your dashboard:
 
Line Service Business
Review your previous day’s retail fuel sales
Contract fuel sales
Airline fuel uplift
Month to date retail fuel sales
MTD contract fuel sales
MTD airline fuel uplift
Budget retail fuel sales, contract and airline fuel sales
Number of customer contacts yesterday

Maintenance Business
Mechanic hours billed yesterday
Mechanic hours paid leave, vacation
Mechanic hours paid
Yesterday mechanic productivity
Month to date productivity
Budget productivity
Parts sales dollars
Budget parts sales
Support staff hours paid
Number of customer contacts
Number of annuals/100 hr./inspections bid

Flight Operations
Flight instructor hours billed yesterday
Flight instructor hours paid
Flight instructor productivity
Charter hours billed
Charter hours available
Charter productivity
Customer contact - flight instruction
Sale contacts for charter
 
    
So, what kind of data are we collecting? You’ll notice a variety of sales data, labor data and marketing data. Why are these three data points the major drivers of your business?

1.    If you’re not getting a good, regular snapshot of fuel sales, plus flight hours and/or maintenance hours, you’re managing blind.

2.    After cost of sales, labor is your biggest expense. Labor hours must be reviewed and managed to assure you maximize productivity.

3.    You must continually market your business, retain existing customers and gain new customers. If you don’t grow - you go out of business.


If, after reviewing our list of data points you are saying, “well it’s going to take all day to gather that information,” then you need to examine your accounting system. It should be able to produce these reports.

We know from experience that programs such as TotalFBO®, one of the most popular FBO accounting and operating systems, provide these types of reports. Although the reports may not be in the exact format as we showed above, they’re in a readily manageable format. If you have a different accounting system, aviation specific or not, you should still be able to generate these daily Dashboard reports.

Make the adjustments with your accounting personnel, as well as department managers, to collect this data and start reviewing it on a daily basis. Now, that we have the information, it’s time to act on it.

One of the best ways to look at your statistics is to compare it to your history and your budget. (You did put a budget together at the beginning of your fiscal year, right?) By completing the budget process, it forces you to review and forecast sale levels in all departments. Then, you can plan your labor, expenses and other data points within your business.

Now, that we have current information, we can analyze and proceed accordingly. If our fuel sales are going well and above budget, we are able find out why. It could be a result of increased traffic or increased uplift per aircraft, etc.

As for aircraft maintenance, we can determine if productivity was at least 85 percent or meeting our budget goals? How many annuals/100hr/inspections have been quoted? We want to keep the shop busy! The same analysis should be completed for your flight school, charter department and any other activity within the business.

Now that you have insight, it will be easier to manage your business and you can relax knowing you have information systems in place to keep track of your progress. It’s a win-win for all involved.

Let us know what your think. We appreciate your input and comments. Please contact me at jenticknap@bellsouth.net

About the authors:

Ron Jackson
Ron Jackson is Co-Founder of Aviation Business Strategies Group and President of The Jackson Group, a PR agency specializing in FBO marketing and CSR training. He has held management positions with Cessna Aircraft and Bozell Advertising and is the author of “Mission Marketing: Creating Brand Value” and co-author of “Don’t Forget the Cheese!” the ultimate FBO Customer Service Experience. Ron co-developed NATA’s acclaimed FBO Success Seminar Series and writes an industry blog for AcUKwikAlert.com titled: The FBO Connection. 

John Enticknap
John Enticknap founded Aviation Business Strategies Group in 2006 following a distinguished career in aviation fueling and FBO management, including President of Mercury Air Centers network of 21 FBO locations. He is an ATP and CFI rated pilot with more than 7,800 flight hours and is the author of “10 Steps to Building a Profitable FBO”. John developed NATA’s acclaimed FBO Success Seminar Series and writes an industry blog for AcUKwikAlert.com titled: The FBO Connection.

An MRI for Your FBO — Improving the Vital Parts of Your FBO

By Ron Jackson and John Enticknap

“Business is never so healthy as when, like a chicken, it must do a certain amount of scratching around for what it gets,” - Henry Ford

How healthy is your FBO? Is it running on all cylinders? Or is it in need of doing what Henry Ford suggests, “a certain amount of scratching around,” to find the golden nuggets buried in the business?

If you’re ailing, chances are you’d go to a doctor. If it’s serious enough, the doctor may order an MRI to aid in the diagnosis.

The financial and operational health of an FBO is no different. Sometimes we need a better look at all the vital parts in order to create a remedy that puts us on the path to prosperity.

At Aviation Business Strategies Group, we’ve put together our own version of an MRI to help FBOs become more successful. It’s based on years of working in the industry and helping ailing FBOs find a better way to run their businesses.

When we consult with FBOs, we break down the vital parts into an MRI review:

M = Maximizing Profits
R = Reducing Expenses
I = Improving FBO Productivity and Bottom-Line Performance

It’s a well-balanced, three-pronged approach to doing discovery work.

M= Maximizing Profits

When we look at the “M” part of the equation - Maximizing Profits - we want to see the various checks and balances an FBO has in place in order to understand their overall perspective of the business.

It all starts with what we call dashboard reports. These are the daily - sometimes hourly - reports set up by management to get a feel for what is being transacted at the FBO.

A good dashboard report is an FBOs virtual window or snapshot of the operation. Included should be fuel reports on each refueling; add the volume and price charged per gallon.

Other profit centers should be reported such as catering and requested line services including APUs, lav service and cabin cleaning. If you’re giving any of these services based on fuel volume, you should be able to see your margin on these transactions. If you’re not adding enough margin to the cost of your fuel to cover volume discounts and ‘freebies’ then you are not maximizing profits.

For those FBOs that have a maintenance shop, another dashboard should identify what jobs you have in the shop, the time allotted for the job and a detail of the parts being sold. And ultimately, it also should tell you the productivity of your technicians.

Same goes for any other services you offer - from rental cars to flight school operations.

Speaking of fuel margins, we find many FBOs don’t keep track of what’s in their tank. With today’s rapidly fluctuating fuel costs, it’s imperative FBO managers keep track of the price of each load that has been added to their tank and keep the margins steady throughout the dispensing cycle. If not, FBOs can find themselves upside down very quickly, and at the end of the month they may be wondering what happened to projected profits.

At the FBO Success Seminars we conduct for the National Aviation Transportation Association (NATA), we cover fuel margins, dashboard reports and other metrics in detail. We also cover timed purchases of fuel including the potential benefit of fuel hedging.

R = Reducing Expenses

There are many things an FBO can do to reduce expenses. Again, we cover this subject in detail at the FBO Success Seminar but here are a few things an FBO should consider:

• Negotiate a better fuel contract with your fuel provider. When it’s time to renew, there are things you can do to add value to your retail operation.        
• Negotiate a better agreement with the airport authority. You don’t have to wait until your agreement is about to expire. Put together a plan that will not only benefit your FBO but also benefit the service and facilities being offered at your airport.        
• Take a look at your credit card expenses. You may be surprised at the amount of money that’s going to the credit card processing service.  You have the right to negotiate a better fee/rate. After all, it’s your money.        
• Reduce your insurance premiums. Believe it or not, your insurance broker can become your best ally. Are you doing all you can to better this relationship? Do you have a good insurance story to share?        
• Take a look at outsourcing some of your services. Sometimes the internal fixed costs of providing aircraft detailing, cleaning and customer car washing - just to name a few - don’t add up to positive cash flow.        

I = Improving FBO Productivity and Bottom-Line Performance

The key to improving FBO Productivity is a workforce that is fully trained, motivated and dedicated to creating the best customer service experience.

Many FBOs have good technical training in place and subscribe to valuable programs such as NATA’s Safety First Professional Line Service Training (PLST) curriculum.  This kind of training not only gives the technician the proper tools to complete various tasks safely and efficiently, it also gives customers a heightened sense of comfort, knowing their aircraft is being looked after by professionals.

But just as FBOs don’t tolerate incidents on the ramp involving customer aircraft, they should not tolerate incidents involving poor customer service. Therefore, it’s equally important all FBO employees undergo customer service training that includes a customer service manual customized for their operation.

By standardizing the customer service experience, FBOs can begin to measure their productivity through:

• Repeat business.        
• Referrals.        
• Better bottom-line performance.        

At Aviation Business Strategies Group, our client FBOs have reached out to us in helping them not only provide customized customer service training, but also help with a team building program in order to bring employees closer together for the benefit of serving the customer.

The result is our memorable, Don’t Forget the Cheese!© Customer Service Training program and Soar Like and Eagle, Fly Like a Goose©, team building module. As you can tell by the program titles, we have a lot of fun with this which helps the employees in the learning and retention process.

If you would like more information on either of these programs or anything in this blog post, please contact ron@thejacksongroup.biz or Jenticknap@bellsouth.com

Also, if you would like to meet us in person, come to our next NATA FBO Success Seminar, September 12-14 in Dallas, TX. It’s being hosted at the award winning FBO Business Jet Center at Love Field.

About the authors:

Ron Jackson
Ron Jackson is Co-Founder of Aviation Business Strategies Group and President of The Jackson Group, a PR agency specializing in FBO marketing and CSR training. He has held management positions with Cessna Aircraft and Bozell Advertising and is the author of “Mission Marketing: Creating Brand Value” and co-author of “Don’t Forget the Cheese!” the ultimate FBO Customer Service Experience. Ron co-developed NATA’s acclaimed FBO Success Seminar Series and writes an industry blog for AcUKwikAlert.com titled: The FBO Connection. 

John Enticknap
John Enticknap founded Aviation Business Strategies Group in 2006 following a distinguished career in aviation fueling and FBO management, including President of Mercury Air Centers network of 21 FBO locations. He is an ATP and CFI rated pilot with more than 7,800 flight hours and is the author of “10 Steps to Building a Profitable FBO”. John developed NATA’s acclaimed FBO Success Seminar Series and writes an industry blog for AcUKwikAlert.com titled: The FBO Connection.

Mid-Point 2012 FBO Gut Check … It’s Wheels-Up for Remainder of Year

By John L. Enticknap

“All growth depends upon activity. There is no development physically or intellectually without effort, and effort means work.” - Calvin Coolidge

We’re halfway through 2012, so let’s do a gut check to see how the FBO industry faired for the first six months of the year. Then, let’s take a look at what we can do to help our bottom line for the remainder of the year.

At the beginning of 2012, we wrote three blog posts that I encourage you to review.

Part 1: 2012 Business Outlook for FBOs

Part 2: Decreasing FBO Costs in 2012

Part 3: Improving FBO Productivity in 2012

To summarize our 2012 FBO economic forecast, in January we said if your FBO has a five percent growth for 2012, your firm will be a star! That is still very true. We thought for a while that the growth rate may be greater in the first quarter of the year, but growth was a meager 1.9 percent. There was a slight up-tick for the second quarter that may push us past 2 percent. However, our overall prediction for the year of a 2.2 percent growth rate will most likely be the norm.

As predicted, volatility on several fronts kept growth in check. Some of the newspaper headlines told the story:

—“Consumer confidence dwindles”

—“Fourth-straight drop as concerns linger”

—“Despite some relief from gas prices, joblessness still a worry”

In fact, the unemployment rate has been stuck at 8.2 percent for the past three months and only 80,000 jobs were added during June. In addition, wage income has grown 1.4 percent on an annual basis, which is less than the anticipated inflation rate.

However, the business and general aviation industry held its own for the first six months. Business flying appears to be maintaining a small increase over 2011 activity according to information from TraqPak.

“Business aircraft flying activity last month in the U.S. increased again year-over-year, with traffic rising 1.6 percent,” according to TraqPak data released July 1 by aviation services company AR/GUS. “Notably, Part 135 charter flying moved into positive territory for the first time in 16 months, climbing by 0.9 percent from a year ago. Part 91 activity still dominated by operational category and increased 4.3 percent from a year ago. However, activity at fractional providers appeared to worsen, falling 6.9 percent year-over-year.”

Another leading industry indicator is the pre-owned aircraft inventory which saw some positive movement.

“Pre-owned business jet and turboprop inventories eased further in April with more sales transactions thinning the herd,” according to business aviation market information firm, JetNet.

Inventory of used business jets fell to 13.6 percent in April, down by 0.7 percentage points year-over-year. Pre-owned business jet sales transactions rose 4.1 percent in the first four months of 2012 versus a year ago, while asking prices remained nearly flat, eking out a 0.1 percent gain to an average of $4.22 million. Average number of days on the market for a business jet dropped to 340 days, down 70 from the January to April period last year.

Meanwhile, turboprop inventory fell to 9.2 percent or 1.3 percentage points below April last year. JetNet thus considers the turboprop segment a seller’s market since it has moved below the 10 percent mark. Turboprop sales transactions climbed 3.1 percent in the first four months of the year, while average asking price rose by 1.7 percent, to $1.28 million. However, the amount of time on the market for used turboprops ticked up by 46 days to 345 days. This is not a great report and continues to support marginal growth predictions.

Looking Ahead

As most of us are aware, Jet A fuel prices have fallen from a high of $3.3624 GCPM in April to a low of $2.6600 for the week of July 2.

Now, in the middle of July we are starting to see Jet A fuel prices jumping back up. Therefore we think our discussion in the beginning of the year still holds true: fuel prices will remain volatile.

What are others saying?

“Crude has dropped 25 percent since late April so it’s possible we are oversold in the short term but risk to the downside remains. Analysts and participants have finally started to notice China may have serious issues. Consistent information is increasingly difficult to obtain but signs continue to point to a potential hard landing,” said Kirk Howell, Chief Operating Officer of SunGard Kiodex.

What FBO Operators Can Do

It is imperative that FBO operators manage their fuel inventory in terms of margin. By watching the changes in fuel prices, you should keep track of the cost of inventory in the fuel farm with the goal to purchase fuel to minimize high cost inventory. Holding your margin steady is critical as gas prices fall. Equally important is maintaining your margin as gas prices rise.

Are lower prices at your FBO stimulating extra sales? Based on what we are seeing from the industry, FBOs are maintaining their sales levels from last year. Any increase in sales activity is only slight. This is supported by the data on flight operations previously discussed.

Besides properly managing fuel inventory and future fuel purchases, FBO operators should continue to look for ways to run their businesses more efficiently. There are several resources available to get help - including attending an NATA FBO Success Seminar. The next seminar is scheduled for September 12-14 in Dallas, Texas.

Subjects include cost saving measures for insurance and credit card fees, and how to negotiate a favorable fuel supplier agreement. Other topics include; how conducting an external audit can save you money; and how to turn a marginal customer into a long-term profitable customer. Additional sessions will discuss appraising your FBO for leases, mortgages and M&A activities as well as legal issues that affect your business.

For the remainder of the year, let’s get our wheels up and make sure we are flying in the right direction. Let’s be active by putting effort into running our businesses as efficiently as possible. And along the way learn something that will add value to our business.

Let us know what you think----Please e-mail your thoughts and comments to: jenticknap@bellsouth.net

About the authors:

Ron Jackson
Ron Jackson is Co-Founder of Aviation Business Strategies Group and President of The Jackson Group, a PR agency specializing in FBO marketing and CSR training. He has held management positions with Cessna Aircraft and Bozell Advertising and is the author of “Mission Marketing: Creating Brand Value” and co-author of “Don’t Forget the Cheese!” the ultimate FBO Customer Service Experience. Ron co-developed NATA’s acclaimed FBO Success Seminar Series and writes an industry blog for AcUKwikAlert.com titled: The FBO Connection. 

John Enticknap
John Enticknap founded Aviation Business Strategies Group in 2006 following a distinguished career in aviation fueling and FBO management, including President of Mercury Air Centers network of 21 FBO locations. He is an ATP and CFI rated pilot with more than 7,800 flight hours and is the author of “10 Steps to Building a Profitable FBO”. John developed NATA’s acclaimed FBO Success Seminar Series and writes an industry blog for AcUKwikAlert.com titled: The FBO Connection.

Want an FBO Customer for Life? Try Making the Customer Your Fan

By Ron Jackson

“Being a fan doesn't mean being there from the start. It means being there ‘till the end.”
-Anonymous

It’s time for a role reversal in the FBO customer service industry.

Ever since the term “customer service” was first used, our corporate view has been to put the customer on a pedestal and do everything to make them happy. That’s all fine and dandy, as Forrest Gump would say, but it’s a rather dogmatic and reactive approach that can make your customer relationship fragile and leave your employees feeling frustrated.

Here’s something new to think about. It’s a complete role reversal. Instead of you and your team thinking the customer is king, invite the customer to think of your employees the way we think of Babe Ruth, Lou Gehrig, Hank Aaron and Cal Ripkin, Jr. There isn’t a red blooded American alive that doesn’t look upon these four with awe. We are their fans.

Baseball not your sport? Think of someone you truly admire for doing something extraordinary. That’s being a fan.

So, why not create an environment at your FBO where the customer becomes your fan!

It’s really a new mindset that takes place in in the process of molding your customer service deliverable. Let’s start by visiting an old axiom, “Go the extra mile?” Where did this come from, and what does it really mean?

It’s actually biblical in nature. During the height of the Roman Empire, a soldier could force someone to carry his backpack one mile. Think how heavy pack must have been? It contained everything a soldier would need while marching for possibly months-on-end. Perhaps a change of clothes, probably food, knapsack and extra spear heads, among other things.

In those days, it was the law. However, it also was forbidden to force someone to carry the pack for more than one mile.

In the biblical account of Sermon on the Mount, Jesus proclaims if someone forces you to go one mile, go with them two. A modern day interpretation of this verse is to do the unexpected and go the extra mile. Give them something extra, something not required.

In the FBO business, we often see customers come onto our ramps and not purchase any fuel - not even a courtesy load. I’m sure this upsets most FBO managers and their service team.

So, how can we change the mindset of the customer? How can we catch them off-guard and give them something unexpected - something to ponder?

In other words, how can we invite them into experiencing our best customer service?

Can you imagine what would go through a reluctant customer’s mind when you offer to take out their trash, put ice in their galley or clean their lavatory – for free?

“But why would you want to do that?” the customer might ask. “I’m not buying any fuel.”

“I know!” your line service person responds. “That’s just how we do business here at Ajax. Now, how about some fresh brewed coffee for your galley?”

If the customer doesn’t respond with a fuel purchase at this point, chances are a fuel order will be placed the next time they return.

It’s all part of making the customer your fan by going the extra mile. It’s an open invitation to keep doing business with you and make an indelible impression that won’t fade anytime soon.

In today’s social networking climate, chances are that customer will tell others about their experience at your FBO. On the ‘buzz meter’, I think we all would rate this as priceless!

This is just an example of going the extra mile with a reluctant customer. What about the regular customer? What can you do to go the extra mile and make the next fueling a memorable experience? I’m sure you can think of a few things.

As mentioned, it’s all a change of mindset on the part of your employees. You may need to conduct some team-building exercises that help create a culture that rewards them for doing a good job. However, the reward is not monetary. It should be something as simple as a pat on the back from both FBO management and other team members.

At Aviation Business Strategies Group, the discovery work we do with clients indicates that most employees aren’t looking for money or prizes in order to do a better job. What they are really looking for is recognition.

“That was the best galley service I’ve ever seen,” an FBO manager might say to a line service technician. “Way to go. Keep up the good work.”

At Aviation Business Strategies Group, we’ve developed a complete FBO customer service training system called “Don’t Forget the Cheese!” It’s memorable program that can help mold and change current company culture, including your employee team dynamics.

If you’d like some more ideas about making the customer your fan, please give me a call at 972-979-6566 or e-mail me at Ron@thejacksongroup.biz.

Also, please join me and business partner John Enticknap for our next NATA FBO Success Seminar, September 12-14 in Dallas, Texas. In addition, we’ll be hosting a NATA Webinar on June 28 titled: The Most Important Question to Ask a Customer.

About the authors:

Ron Jackson
Ron Jackson is Co-Founder of Aviation Business Strategies Group and President of The Jackson Group, a PR agency specializing in FBO marketing and CSR training. He has held management positions with Cessna Aircraft and Bozell Advertising and is the author of “Mission Marketing: Creating Brand Value” and co-author of “Don’t Forget the Cheese!” the ultimate FBO Customer Service Experience. Ron co-developed NATA’s acclaimed FBO Success Seminar Series and writes an industry blog for AcUKwikAlert.com titled: The FBO Connection. 

John Enticknap
John Enticknap founded Aviation Business Strategies Group in 2006 following a distinguished career in aviation fueling and FBO management, including President of Mercury Air Centers network of 21 FBO locations. He is an ATP and CFI rated pilot with more than 7,800 flight hours and is the author of “10 Steps to Building a Profitable FBO”. John developed NATA’s acclaimed FBO Success Seminar Series and writes an industry blog for AcUKwikAlert.com titled: The FBO Connection.

Want to Deliver a Better Customer Service Experience? Start with External Operational Audits

By John L. Enticknap

What does an external audit program have to do with delivering a better customer service experience? Let’s explore the possibilities.

One of the most popular events at the National Air Transportation Association (NATA) FBO Success Seminar, conducted by the Aviation Business Strategies Group, is a discussion on lowering FBO insurance rates through better operations management. This includes training the CSR and executive staff on safety, customer service, technical procedures and practical application of quality aircraft ground handling techniques.

­­As part of the seminar, we discuss having a good “insurance story” – which essentially tells your insurance agent how the FBO strives to be proactive in preventing costly mishaps. It all starts with a comprehensive safety and training program. Your “story” includes the positive efforts of proper training with programs such as NATA’s Safety 1^st. 

One element of your safety program is an internal or self-audit of: your training, standard operating procedures, ramp operations and fuel quality control. Internal or self-audits are a positive part of your standard operating procedure. However, as you are aware, your FBO also is subject to external audits from airlines, FAA, airports and your insurance carrier, among others. 

Suffice to say, self-audits are necessary, but are not enough. When you do a self-audit, the problem is, you have a built in “human fudge factor”. It’s like giving yourself an annual physical and pronouncing yourself fit, instead of going to the doctor. 

Therefore, external operational audits need to be a part of your standard operating procedures and not just under the line service section. External operational audits also need to be a part of your Customer Service Program. Yes, we said Customer Service Program. What better way to demonstrate to a customer that you are concerned about their total customer service experience than by delivering: 

• Excellent marshaling of their aircraft
• Parking directions
• Proper chocking
• Ramp safety cones
• Marshaling into hangars with two wings walkers
• Fueling the aircraft with wing mats, without fuel spills, with the proper amount
• And yes, with the proper grade of fuel 

Superior customer service is all about earning the customer’s trust in your operation. It is not just about the fancy FBO facilities, or the smiles and pleasant greetings at the front counter. It’s also about your ramp operation and the customer’s perception that their aircraft is secure and out of harm’s way. 

External Audit Programs are the best way to assure your operation is running in accordance with your high standards. Not only safe operations, but conducting operations in such a manner that the customer has confidence that you’re doing things right! Some of the benefits and advantages of external audits include: 

• Providing a true validation of your internal or self-audit program
       – Self-audits are not enough
       – Need an unbiased ‘third party’ audit
       – Eliminates ‘fudge factor’
• You become a more efficient and safe FBO
• Verifies your Standard Operating Procedures
• Follows-up and benchmarks your training programs
• Keeps you in compliance with regulatory standards
• Enables you to establish a Safety Award Program
• Helps build a positive insurance story for your  brokers
• Can result in lower premiums, less costly accidents 

So, what kind of external audits should you conduct and who should you hire to complete the program? Having done numerous audits over the past several years and recently completed the NATA Accredited Auditor Training, my recommendation is to hire someone with proven experience and good references.

One of the newest audit programs available is the NATA Safety 1^st Ground Audit Standard. This program has two primary objectives:

1. To create a consistent operational safety standard for FBOs, airports, and others while increasing the overall safety level of these operations.
2. To provide on-demand charter, fractional and corporate aircraft operators with an alternative to costly proprietary audits of FBOs, airports and others.

So what does the Ground Audit cover? The audit screens seven separate operating areas within an FBO: Management Systems, Safety Management Systems & Quality Assurance, Training, Standard Operating Procedures, Security, Occupational Safety & Health and Environmental Policies & Procedures.

Who conducts the audits? NATA Safety 1^st manages the audit standard, but does not actually conduct the audit. For third party external audit certification, the FBO contracts with a NATA Safety 1^st trained Accredited Auditor. You may also do a self-certification, but the Accredited Auditor must be trained by NATA Safety 1^st.

For more information on this program visit www.nata.aero/groundaudit.

In conclusion, here is a recap of benefits from conducting an external audit: 

1. Safety. Not only for the customer, but for everyone involved in delivering the end product.
2. Better Customer Service Experience. A customer watches how an FBO works and determines, through perception, whether or not the FBO is taking care of business.
3. Lower Churn and Better Margins. A happy customer is a loyal customer. One willing to recommend your FBO, and also willing to pay a higher price to receive a better product delivered in a professional way.
4. Benchmarks Your Deliverables. Quality external audits will help measure your success in delivering a quality customer service experience. Utilized consistently, it will provide a benchmark for your service deliverable. It will reveal whether or not you’re on the right track - that your systems are operating well and if quality control is being maintained to its highest level. 

Tell us what you think!! E-mail us at jenticknap@bellsouth.net 

Accredited Auditor

Look for our next FBO Success Seminar in September 2012—Dallas, TX

http://nata.aero/Event.aspx

Ron Jackson
Ron is Co-Founder of ABSG and President of The Jackson Group, a public relations agency specializing in aviation and FBO marketing. He has held management positions with Cessna Aircraft and Bozell Advertising and is the author of Mission Marketing: Creating Brand Value and co-author of Don’t Forget the Cheese! the ultimate FBO Customer Service Experience. 

John Enticknap
John founded Aviation Business Strategies Group in 2006 following a distinguished career in aviation fueling and FBO management, including as president of Mercury Air Centers. He is the author of 10 Steps to Building a Profitable FBO and developed NATA’s acclaimed FBO Success Seminar Series. 

NATA’s FBO Leadership Conference: A Gathering Worth Attending!

By John L. Enticknap

 Take the attitude of a student, never be too big to ask questions, never know too much to learn something new.          —Og Mandino 

As a principal of Aviation Business Strategies Group, I’m always tuned into the FBO industry and attend various workshops and seminars to keep abreast of our ever-changing industry.

At the National Air Transportation Association (NATA) Leadership Conference and Day On-the-Hill, which I just returned from, I had the opportunity to rub shoulders with more than 200 industry leaders and get a sense of what is happening to the FBO business on a macroeconomic scale.

As a result, I’m ever more convinced that our industry is heading down the right road to economic recovery, with the caveat that a few steep hills have been placed in our path which from time to time may obstruct our visibility.

High Price of Fuel

One of the biggest obstacles we all face is the uncertainty of the price of fuel, the topic which dominated most of the conversation. We’ve all seen the run up in fuel costs in the last six months—it’s having an effect!

Avgas is now over $5 a gallon. Jet A will go up this coming week to $3.26, from $2.90 GCPM in December. Our flying community continues to feel the strain. The FBOs we talked to, in general, have seen a flat first quarter. The good news is most FBOs have seen their fuel uplift grow since the down trend of 2008/2009. However, the business has since flattened out. Most do not foresee any major growth this year because of the continued price pressure. 

During the Thursday morning seminar, “Oil Company Perspective”, it was very interesting to hear the discussions on fuel supply, both avgas and Jet A. 

With regards to avgas, the suppliers reaffirmed availability is OK. However, as they noted, only a limited number of refineries in the U.S. make avgas, and there is only one supplier of the lead that is used in the refining process. That vendor has assured the aviation community they will continue to make the lead additive. 

On the horizon, however, is the issue of lowering or eliminating the lead from avgas. Then there is the recently filed lawsuit, “Friends of the Earth” vs. the EPA. 

In addition, there is the lawsuit that was filed in California. NATA is already involved and assisting our members. This all adds much uncertainty to the future of avgas for high performance piston engines. For the short term we’re OK, but the future is not clear at this point.

Jet A is not in short supply, but is under pricing pressure from the same factors as overall mogas price speculation and other petroleum products. There are regional price differentials due to a number of factors, according to the oil company speakers, among them Marty Hiller from World Fuel, Joel Hirst from Avfuel and Bryan Faria from ConocoPhillips. 

Of particular note was the information that in North Dakota there is an excess of crude due to recent successful exploration. In addition, there is plenty of crude from other new sources in the U.S. Therefore, pricing of fuel today is not related to crude issues today. 

The fuel suppliers further discussed the FBO fuel marketplace, and the consensus is fuel costs will remain relatively high. Corporate customers are going to continue to seek contracts and discounts from posted pricing and, most of all, good value. 

The European FBO business model, where FBOs charge a la carte fees, will not be a major factor for American FBOs. 

Customer Service Training 

The Disney Institute gave a presentation on customer service which was one of the highlights of the conference. Experienced managers had a chance to hear and learn from one of the premier customer service providers in the country! 

All the attendees know that customer service is the real differentiator when it comes to good FBOs vs. great FBOs. If you missed this seminar, we strongly recommend you attend one in your city and train all your staff on Customer Service. It’s key to your success. 

A couple of thoughts we’ll pass along are about the use of name tags. All your employees should have a quality name tag, with their first name being prominent and including the city where they live. The tag should be engraved with your logo and your Unique Value Proposition or UVP. And always use the customer’s name when you engage them. 

Day On-the-Hill

More than 100 of the attendees also were part of the Day On-the-Hill. We met with our respective House and Senate representatives and discussed the prominent political issues affecting our industry. I encourage you to talk to your U.S. Representatives. Since they are up for re-election this year, they should listen. Talk to your Senator as well. Many of them are also up for re-election.  Some of the issues we discussed included:     

• Fuel Fraud Provision
• Freedom from Government Competition Act
• Temporary Flight Restrictions
• Large Aircraft Security Program
• Flight Management IRS Excise Tax 

If you need help, contact NATA and talk to Eric Byer, Vice President, Government & Industry Affairs. 

This conference was well worth the time for the attendees. The best feature was the opportunity to be able talk to our peers and learn from each other. The FBO business is a dynamic and ever-challenging business. NATA provides a unique forum to allow us to enjoy our great aviation heritage and opportunity. We are all aware of the upcoming changes in the leadership at NATA and trust the future will allow our organization to continue to flourish.

Congratulations to all the award winners. Attendees toasted the industry's best at NATA's annual Industry Excellence Awards dinner and presentation. Top honors went to Mary M. Miller, Vice President, Industry & Government Affairs for Signature Flight Support/BBA Aviation; and Kenneth C. Ricci, Chairman of the Board of Flight Options and CEO of Nextant Aerospace.

Thanks and look forward to hearing from you.  Send your comments to John L. Enticknap   jenticknap@bellsouth.net

Ron Jackson
Ron is Co-Founder of ABSG and President of The Jackson Group, a public relations agency specializing in aviation and FBO marketing. He has held management positions with Cessna Aircraft and Bozell Advertising and is the author of Mission Marketing: Creating Brand Value and co-author of Don’t Forget the Cheese! the ultimate FBO Customer Service Experience. 

John Enticknap
John founded Aviation Business Strategies Group in 2006 following a distinguished career in aviation fueling and FBO management, including as president of Mercury Air Centers. He is the author of 10 Steps to Building a Profitable FBO and developed NATA’s acclaimed FBO Success Seminar Series. 

Improving FBO Productivity in 2012: Business Strategies for Better Success

(Part 3 of a 3-Part Series: Planning a Successful 2012 FBO Business Strategy)

By John L. Enticknap and Ron R. Jackson

 Productivity is never an accident. It is always the result of a commitment to excellence, intelligent planning, and focused effort.          —P. J. Meyer 

In the first two installments of this three-part series, we discussed “Our FBO Business Outlook for 2012”  and “Decreasing FBO Costs in 2012.” In this third part of our series we discuss ways to improve FBO productivity in 2012.

First of all, the key to executing any business initiative is to set realistic and achievable goals supported by workable strategies to accomplish these goals. As the P.J. Meyer quote suggests, intelligent planning and a focused effort are required. Here are three goals and supporting strategies we recommend to put you on the right productivity track for 2012:

1. Increase Line Service Productivity
        a.  Avoid ramp and hangar mishaps
        b.  Create a credible audit system
        c.  Increase fuel sales at point of connection
2. Produce Better Financials 
        a.  Fine tune your financial dashboard
        b.  Watch your fuel margins
        c.  Cash flow analysis and financial ratios
3. Build Long-Term Profitable Customer Relationships
        a.  Be the restaurant owner
        b.  Communicate your Customer Value Proposition
        c.  Don’t forget the Cheese

Goal No. 1: Increase Line Service Productivity
Strategy a: Avoid ramp and hangar mishaps  

In the FBO business, there is perhaps nothing more perplexing than a mishap on a ramp or in a hangar involving a customer’s aircraft. It not only costs the FBO money and possible loss of business, it costs the customer valuable time and causes, needless to say, customer dissatisfaction. 

The truth is, most mishaps can be avoided through proper training and adherence to a comprehensive Standard Operation Procedure (SOP) manual or document. Initial line service training and diligent recurrent training programs are essential. Following simple rules such as always using multiple wing walkers, especially in hangar situations, is vital. We recommend the NATA Line Service Training (LST) program as a great way to train your line service employees. 

Strategy b: Create a Credible Audit System

As we noted previously, extra training keeps ramp and hangar mishaps to a minimum.  However, we need to make sure training and management systems are monitored, utilized and policies and procedures maintained. An internal audit is one way to evaluate your training programs, but it’s hard to eliminate bias.  Only an external audit can give you a true benchmark measure of policy adherence and performance.

There are a number of qualified professionals you can hire to evaluate your training programs and review OSHA compliance as well as environmental, SPCC plans and other internal/external operational procedures. In addition, an outside audit can verify and establish your business’s credibility with your insurance underwriters, which can often result in lower premiums. It also aids in keeping your line service team sharp and focused on safety and quality.

Recently, NATA established an industry-leading Ground Audit program. It is a nationally recognized audit program developed by and for the FBO industry. It uses trained and accredited auditors, including this blog post’s co-author John Enticknap. It’s a good program, but not easy to qualify for or complete. You may want to be one on the first FBOs to register and use it in your marketing campaigns.

Strategy c: Increase Fuel Sales at Point of Connection

Since your line service personnel are often the first FBO employees to come in contact with customers, they all should take part in any customer service training afforded to Customer Service Representatives (CSRs). In addition, they should be totally aware of any fuel promotion you have in place and should be capable of “suggesting” extra fuel at perhaps a volume discount.

Once you have your refueler hooked up to the aircraft, there are no additional fixed costs. Therefore, this is a great opportunity to pass along a fuel volume discount and add more fuel to the sale. Incremental sales of this type really add up and help improve the bottom line.

Goal No. 2: Produce Better Financials
Strategy a: Fine tune your financial dashboard 

When you review your daily sales and productivity reports or dashboards, do you act on the information or just take it in stride? You should make sure the reports are giving you the information you need to make your business more efficient. 

When you review your maintenance shop productivity, do you make sure the numbers match your targets? If you want 89% productivity from your technicians and don’t achieve it, even for a day, do you act on the information? If you lose even a few days out of the month, it’s easy to lose a month of reasonable profitability. 

It’s the same thing on your fuel sales. If you’re having a soft month, run a fuel promotion. Use some demand pricing to stimulate sales.

Strategy b: Watch your fuel margins  

During our NATA FBO Success Seminar we talk about fuel margins. This is no doubt one of the most popular subject matters at our seminars! Without a decent fuel margin your business doesn’t go anywhere. 

With requests or demands for lower prices from your customers and contract fuel programs, there is increased pressure on your margins. We would like to recommend you institute our $2.00 management plan, another strategy we teach at our NATA FBO Success Seminars. 

It works like this. When you price your retail Jet A fuel, set a two dollar margin as a goal. For example, in today’s market the price build-up would be approximately $3.30 GCPM-Platts—plus 65 cents for Federal taxes, transportation, and flowage fees, etc.—plus a $2.00 margin.  Therefore, the total retail price would be $5.95. Most FBOs are above this retail market price already!  Remind yourself, every time you have to spend $2.00 on overhead, you have to pump another gallon of Jet A. We suggest you keep a $2.00 bill on your desk to stay focused! 

Strategy C: Cash Flow Analysis and Financial Ratios 

We think it is fair to say most of your financial reviews involve looking at your profit and loss statement and balance sheets.  As a reminder, you should also look at your Cash Flow Statement. This statement summarizes the operating, investing and financing activities of your business as it relates to inflow and outflow of cash. This translates to either positive or negative cash flow. With a focus on liquidity rather than profitability, it’s one of the single most important financial tools for your business.  The statement provides a clear picture of how quickly cash is leaving the business compared with how promptly it is coming in.  Have your bookkeeper/accountant provide this statement at least monthly. 

There are two types of financial ratios which generally measure two areas within a company:

• Liquidity ratios indicate your company’s ability to meet current obligations on time. With problems in this area, you have trouble paying your bills on time. It helps identify needs for more capital, more sales, better management or all of the above.
• Profitability ratios measure your performance regarding your ability to generate revenues, net income and acceptable return on investment. 

These are handy tools to use in your business to spot trends both good and bad.  With these tools, you can have a better handle on cash management and forecast the effect on operations and profitability. 

Goal No. 3: Build Long-Term Profitable Customer Relationships
Strategy a: Be the restaurant owner 

In a previous blog, we discussed in length the concept of being the restaurant owner in managing your FBO business.  Simply, this means getting out from behind your desk and managing by wandering around.  Observe the workings of your FBO first hand. Praise your employees for the job they are doing. 

But most importantly, just like the restaurant owner, meet and greet your customers from time to time. Show your CSRs and Line Service personnel, by example, how to create long-term profitable customer relationships by listening to the customer, calling them by name, and above all, thanking them for their business. 

Strategy b: Communicate your Customer Value Proposition 

Do you know what your Customer Value Proposition (CVP) is?  It’s basically what you would tell someone about your business in a short ride on an elevator.  It’s usually no more than a sentence, but it becomes your business mantra, your call to action. 

As an example, here is one we developed for one of our clients, Heritage Aviation in Burlington, VT: 

At Heritage, we are committed to quality service, the comfort of our customers 
and a safe environment for their aircraft…and that’s Service You Can Fly On! 

Not only is the CVP important for customers to understand, it also serves as a short, daily reminder about the level of service and commitment requested of all employees. In other words, it’s a service standard. Don’t be afraid to display the CVP in your FBO, publish it on your website and post it on your Facebook page. 

Strategy c: Don’t forget the Cheese! 

One of the customer retention strategies we touch on at our FBO Success Seminar is the concept of developing a memorable way for FBO employees to deliver an exceptional customer service experience. While most FBOs don’t tolerate mishaps on the ramp, why should they tolerate miscues with customers? 

By standardizing your customer service training, you can consistently meet the needs of your customers, increase retention, and build the long-term profitable relationships you value. 

At Aviation Business Strategies Group, we’ve developed a standardized training approach we call Don’t Forget the Cheese!  

Simply, it’s a memorable way to help employees remember to do the simple things, like smile, even when they answer the phone; be professional yet personable; and above all, add a little something extra to each transaction. That’s the power of not forgetting the cheese! 

Read Part 1: Our FBO Business Outlook for 2012
Read Part 2: Decreasing FBO Costs 2012

Let us know what you think!  Please email John Enticknap at jenticknap@bellsouth.net or Ron Jackson at ron@thejacksongoup.biz. 

Ron Jackson
Ron is Co-Founder of ABSG and President of The Jackson Group, a public relations agency specializing in aviation and FBO marketing. He has held management positions with Cessna Aircraft and Bozell Advertising and is the author of Mission Marketing: Creating Brand Value and co-author of Don’t Forget the Cheese! the ultimate FBO Customer Service Experience. 

John Enticknap
John founded Aviation Business Strategies Group in 2006 following a distinguished career in aviation fueling and FBO management, including as president of Mercury Air Centers. He is the author of 10 Steps to Building a Profitable FBO and developed NATA’s acclaimed FBO Success Seminar Series. 

Decreasing FBO Costs in 2012

Cash Flow and Controlling Expenses—Managing Your Business
(Part 2 of a 3-Part Series: Planning a Successful 2012 FBO Business Strategy)

By John L. Enticknap, Aviation Business Strategies Group

 The buck stops with the guy who signs the checks.
                                                                —Rupert Murdoch 

In the first installment of this series, we discussed our FBO Business Outlook for 2012. At the recent NBAA Schedulers & Dispatchers Conference held in San Diego, we had a chance to discuss this outlook and the current business climate with a number of FBOs in attendance.

Many we talked to agreed with our forecast of a slow uptick of around 2.5 percent average industry growth in 2012, with some individual FBOs experiencing up to 5 percent growth or even possibly more.  We met a number of FBO owners and managers who indicated they were ahead of the 2.5 percent growth rate for 2011 and expect to do better than the 5 percent growth projection for 2012.  And of course, some indicated 2011 was a flat year and they didn’t expect to do much better for 2012.

For this installment, part two of our three-part series, we want to discuss ways FBOs can better manage and even decrease their costs in 2012.

At our National Air Transportation Association (NATA) sponsored FBO Success Seminars, we talk in-depth on ways to generate more bottom line revenue. From growing fuel margins to lowering credit card interest rates, we analyze every operating element in order to maximize the efficiency of each transaction.

The basis for these seminars is our Aviation Business Strategies Group proprietary 10 Steps to FBO Success. You can review these steps on or website www.ABSGGroup.com.

For the purpose of this blog post, we will concentrate on the subject of Cash Flow.

Cash is King

Most business managers or consultants will tell you , “in my opinion, your business can increase cash flow by 5 to 10 percent by reducing operating costs.” Or maybe the “big boss" simply tells you to reduce costs—then walks away!!

The obvious way to do this is to cut overhead and the easiest way to cut overhead is to cut back on the number of employees. However, if you read one of our earlier blogs on this subject, you would understand why this is not such a good idea. 

Instead, let’s look at your cash flow situation as one way to better manage your costs. Not to overstate the obvious, but cash is king. Without cash you can’t pay your employees or pay your bills! And depending on your credit situation with your fuel supplier, you may have to pay cash for your fuel deliveries.

Interestingly, a survey completed in 2009 by Intuit (the software company that makes QuickBooks) indicates that 22 million small businesses have overdue accounts for at least $1,500. That equates to 33 billion dollars in overdue cash!!

Cash Flow Case Scenario

Consider a hangar tenant with an overdue payment of $2,500 for a one-month rental. However, the tenant has not paid their hangar bill for 60 days and you’re now owed $5,000.  (To make things worse, in good faith, you originally gave the customer a discount on the hangar in exchange for fuel sales this new customer would generate.)

Your accounting procedure calls for 30-day terms but you really didn’t worry about the bill until it hit the 60-day period! So after 60 days you are really owed $7,500 because you’re tenant is now behind two months, plus the current month you just billed. By the time you collect the original $2,500, the overdue amount can easily be five to six months past the original due date, which means the amount due should really be $15,000. Overdue accounts mount up fast!!

No one wants to offend a customer, or so goes the conventional wisdom. But we need to get over that notion. It is outdated and not part of today’s competitive business environment. You may fear hurting the feelings of those who owe you money, but you don’t need them for new business. That’s because they haven’t even paid for the old business! A business transaction is not completed until you get paid and the money is in the bank.

So what do we do about our overdue hangar tenant? As the owner of a multimillion dollar aircraft, one would think our hangar tenant is a business savvy corporate owner and is familiar with large financial transactions, borrowing money, and paying on time. So find out who pays the bills. Most likely it is not the pilot, although he may approve them.  Talk to the CEO or the CFO, the person who signs the checks. It does no good to just talk to the pilot, who has no authority to sign the check. Just like our quote from Rupert Murdoch—the buck stops with the guy who signs the check!

Don’t be concerned with threats like “I’ll take my airplane to your competitor,” or ”I won’t buy any Jet A,” or “I’m leaving,” etc. This so-called customer is not really a customer because they don’t pay their bills.  By the way, they’re most likely not purchasing any fuel either.  If you have to, park the aircraft in the back of the hangar and demand full payment with a certified check or wire transfer. You can then move on to the better customers who value quality service at a fair price. 

Want an idea to get attention for overdue bills? Rather than send these delinquent customers a regular overdue invoice notice, send them a vacation-style postcard. Put on it, “Wish we were here, but we can’t afford it since you haven’t paid your bill.” The card is public while it goes through the mail system of the company—it will get attention.

Collect your money—stay in business for the real customers.

Expense Management

How about expenses? It’s easy to say, let’s cut 10 percent!  I’ve had bosses tell me that, or call me and say, “cut 5 percent of your employees.” This is no way to run a business.

When it comes to expenses, look at Zero-Based Budgeting. Zero-based budgeting requires that your budget requests be re-evaluated thoroughly, starting from the zero-base. This process is independent of whether the total budget or specific line items are increasing or decreasing.

Another tool is to competitively bid all your expenses. For example, simple office supplies purchases. Put a list together of what you need and send an e-mail or fax to all your local suppliers, like Office Depot, Office Max, Staples or better yet, your local small business office supply firm. They all want your business.

Note: Take the lead from your own customer base. Aren’t they seeking the best deal on fuel prices every day? You need to do the same thing with your vendors.

Here are a few actions you can take to cut expenses and maximize yours profits:

• Put your own expenses up for competitive bids and use your best judgment
• Create a monthly expense budget and stick to it
• Never let expenses become routine
• Benchmark your expenses to see trends from various vendors
• Put systems in place to control expenses
  • Set approval levels by expense category and employee
  • Set the authority to approve all expenditures
• Watch expenses by adding and tracking three key financial metrics weekly in your flash report
  • Cash Balances
  • Payables Balances
  • Receivables Aging 

Management Flash Reports

Now let’s talk about your Flash Report, Dashboard or Daily report, whatever you call it. First and foremost, you should have a Dashboard Report you can refer to in order to get real-time information on the metrics of your business. We discuss this in detail in our FBO Success Seminar.

Your report should include fuel pumped on the previous day, MTD and Budget MTD. It should also include the productivity of your maintenance shop, charter department and flight school. In addition to the financial metrics we mentioned above, you can include other easy to print reports from your accounting system. Let your bookkeeper be your “virtual CFO” who can regularly produce these reports—on-demand and without visiting your office.

Are your eyes on the money? If not, how can you be sure that you’re making any?
                                                                                                                —Sam Frowine

Next in the Series:
Part 3: Increasing FBO Productivity in 2012

Read Part 1: Our FBO Business Outlook for 2012

Let us know what you think!  Please e mail us at jenticknap@bellsouth.net 

Ron Jackson
Ron is Co-Founder of ABSG and President of The Jackson Group, a public relations agency specializing in aviation and FBO marketing. He has held management positions with Cessna Aircraft and Bozell Advertising and is the author of Mission Marketing: Creating Brand Value and co-author of Don’t Forget the Cheese! the ultimate FBO Customer Service Experience. 

John Enticknap
John founded Aviation Business Strategies Group in 2006 following a distinguished career in aviation fueling and FBO management, including as president of Mercury Air Centers. He is the author of 10 Steps to Building a Profitable FBO and developed NATA’s acclaimed FBO Success Seminar Series. 

Planning a Successful 2012 FBO Business Strategy: A Three Part Series

Part 1: Our FBO Business Outlook for 2012

By John L. Enticknap and Ron R. Jackson, Aviation Business Strategies Group

 Get your facts first, then you can distort them as you please.                                                                                                                                          —Mark Twain 

Recently we received a call from one of the major business aviation publications asking for our outlook for the FBO business in 2012. As writers, practitioners and consultants to the business aviation community, we are often contacted by the aviation trade press for our views on various industry subjects.

We have our ears and eyes glued to the FBO market, and recently completed one of our FBO Success Seminars for the National Air Transportation Association (NATA), so we have a pretty good pulse on the health of the industry.

Looking into the FBO Crystal Ball for 2012

First of all, in today’s political environment—especially with an election year upon us—it’s hard to get a good read on what’s going to happen in 2012 on a national level that will affect our FBO industry either positively or negatively. If you’ve watched any of the debates, you probably think ‘ol Mark Twain hit the nail on the head. You might as well wet your finger and hold it up in the air to see which way the economic wind is going to blow.

We can start by turning our attention to the cost of fuel because it’s one of the most watched components to running an FBO. 

For 2011, the Platt’s (what fuel suppliers use to price Jet A) pricing index at the beginning of the year saw the Gulf Coast Pipeline Mean (GCPM) at $2.4738. By the time December rolled around, the GCPM posting was $2.4866 with the highest price occurring in May, when the GCPM topped out at $3.3239 per gallon. It is interesting to note that in the first week of 2012, the Platt’s index is up a little over 7 cents per gallon. 

For 2012 we think it’s fair to say fuel prices are going to remain somewhat volatile and a range of $2.50 to $3.00 per gallon is going to be the norm. With nothing new to report on that front, expect more of the same general course for 2012. (Of course, a caveat is that the world economic situation needs to remain reasonably stable.)

Outlook for FBO Operations

As to actual operations, the best information comes from the FBOs themselves without all the filters from so-called experts.  As mentioned, we recently completed another effective FBO Success Seminar in November. We gained a wealth of data from a diverse group of more than 25 attendees representing 20 various sized FBOs.

So what did they have to say?

They all experienced a reasonably stable business environment in 2011 with incremental growth in fuel sales as well as solid aircraft maintenance bookings. If you were to benchmark their growth with the National Gross Domestic Product (GDP) index for 2011, you would see similar numbers to what the attending FBOs experienced, which is a 1.9% increase on average.

Historically, the FBO business suffered significant lows in the 2008/2009 timeframe and since that period has seen small but steady growth. Of course, we’re still seeing some industry fallout from those lean and tough years, so keep in mind FBOs will not be getting back to the 2007/2008 business levels in the near term. This, again, tracks national business trends.

The Market for New Aircraft

Another leading indicator for aviation business recovery is industry forecasts for new business aircraft sales. Traditionally the demand for new aircraft picks up when companies operating business aircraft start to fly more hours and thus feel the need to either replace or expand their current fleet.  Obviously, more flying hours equals more airplanes on the ramp equals more fuel sales. So tracking new aircraft bookings is a good idea.

Both Forecast International and Honeywell do not predict business aircraft sales to return to 2008 levels (1,313 units sold) until 2018! However, just for reference, the business aircraft production forecast for 2011 was 683 units with a rise to 728 units for 2012. Again, only a slight uptick, but an incremental increase is better news than a recessionary market.

The companies attending our FBO Success Seminar had similar concerns for the coming new year. They are not expecting anything new or earth-shattering that would help increase business growth.

Other Areas of Concern

Besides a less than robust business environment, the FBO community also has concerns about other areas which might adversely affect their profitability. These concerns include national business trends such as increasing regulations from the EPA and FAA; increasing labor costs including healthcare; and a national election year leading to sustained political gridlock.

In addition, FBOs are concerned about a potential trend of airport boards and authorities getting into the aviation service business and competing against existing firms, or not extending leases with reasonable terms.

So what’s our 2012 FBO business prediction? If your FBO sales increase 5 percent, you are a star! Based upon what the general business trends seem to be, a 2 to 2.5 percent increase would appear to be normal business growth. At the same time, most FBOs will not be adding new employees but instead replacing those lost to attrition. In addition, cost control will remain a high priority as will be increasing productivity. (Stay tuned for Parts 2 and 3 of this series for more on that.)

What about the big FBO networks? In 2011, every chain made some major expansion moves and worked to increase efficiency. (Signature just announced another FBO acquisition as we go to press.) It is reasonable to assume the chains will continue to consolidate the FBO industry. Remember, our national FBO industry includes fewer than 3,000 FBOs while the FBO chains combined represent a group of about 250 locations. Consequently, plenty of acquisition targets remain.

Decrease in Number of FBOs

Another industry trend we should all be concerned about is the continued loss of FBOs within the US. The most recent NATA Fact Book indicated in the year 2009 there were 3,138 FBOs in the US. In November 2010, that number decreased to 2,987. Now, at the end of 2011, there are reports of three more FBOs going out of business and no doubt there will be more to come. Will this be a continuing trend?

As mentioned earlier, there is still fallout from the massive 2008-2009 downturn coupled with the continued unsettled economy. In addition, bank loans have been called, credit has been tightened, leases have not been renewed under reasonable terms, and, to a minor extent, FBO consolidation continues.

Unfortunately, the business pressures FBOs have been under will continue in the coming years and managing a profitable FBO won’t get any easier. However, there are things we can do to affect the bottom line by decreasing costs and increasing productivity. Parts 2 and 3 of this series will discuss these opportunities.

Next in the Series:
Part 2: Decreasing FBO Costs in 2012
Part 3: Increasing FBO Productivity in 2012

Let us know what you think!  Please e mail us at jenticknap@bellsouth.net 

Ron Jackson
Ron is Co-Founder of ABSG and President of The Jackson Group, a public relations agency specializing in aviation and FBO marketing. He has held management positions with Cessna Aircraft and Bozell Advertising and is the author of Mission Marketing: Creating Brand Value and co-author of Don’t Forget the Cheese! the ultimate FBO Customer Service Experience. 

John Enticknap
John founded Aviation Business Strategies Group in 2006 following a distinguished career in aviation fueling and FBO management, including as president of Mercury Air Centers. He is the author of 10 Steps to Building a Profitable FBO and developed NATA’s acclaimed FBO Success Seminar Series. 

Not All Customers are Created Equal

Or, Sometimes You’ve Got to Tell Them How the Cow Ate the Cabbage!

 By Ron Jackson

 Recently we completed our fall NATA FBO Success Seminar in Atlanta and we had a great turnout of FBO attendees representing locations from as close as the Atlanta area to as far away as Grand Rapids, Michigan, and points in between. We were fortunate to have as one of our sponsors AC-U-KWIK, and Jodi Espinoza made a very informative presentation.

One of our discussion topics at the FBO Success Seminar is how to work with customers who want everything but are not willing to pay for anything. Sound familiar?

The old adage “The Customer is Always Right” is usually true. However, every once in a while you run across customers who break this general customer service axiom. They seem to know everything, want everything, and want it now. Unfortunately, these customers usually don’t purchase a lot fuel, if any. Yet we manage to spend an exorbitant amount of time, resources and energy trying to make them happy.

My business partner in Aviation Business Strategies Group (ABSG), John Enticknap, knows all too well that a customer is not always right, and that sometimes you just have to take matters into your own hands. In one case, the customer was an Army Lieutenant Colonel (LTC) and John was the pilot of a Huey Helicopter doing Command & Control (C&C) reconnaissance during the Vietnam War.

“We were out flying, doing some C&C work, and I kept checking the fuel gauges when the yellow caution light went off indicating 20 minutes of fuel remaining,” John recalled. “I told the LTC we needed to get to the fuel dump to refuel. He said we’ll go in just a minute.” 

Warrant Officer John Enticknap, center, with his Huey Crew in Vietnam, 1969John said five minutes went past and they’re still on the C&C point, and so he reminded the LTC of the fuel situation. “Just give me another minute or two and we’ll go,” the LTC told John.  After five more minutes, John told the LTC “We need to go now,” pulling the ship’s nose around for a dead-head run to the fuel dump, while the LTC was yelling expletives from the rear of the aircraft. 

“As we approached the fuel dump, I radioed for a direct approach instead of the customary routing,” John said.

 “Good thing. We were flaring to a landing point, and we’re about 10 feet off the ground when poof, the engine quit and we went straight down doing a hovering autorotation.”

“What the heck happened?,” the LTC exclaimed, picking his jaw up off the floor of the Huey. “We ran out of fuel, sir,” John exclaimed.

After refueling and going back on C&C again for another two hour sortie, John told the LTC it’s time to get fuel. To which he replied, “Let’s go now…I can’t handle another one of them landings.”

Of course, this is an extreme situation, but as my dad always said, “sometimes you just have to tell someone how the cow ate the cabbage.” (Read the origin here.)

I wasn’t sure about the origins of this saying, but the way Dad used to say it, I knew exactly what he was talking about. Sometimes, you just can’t afford to put up with all the nonsense. 

When John was President of Mercury Air Center’s chain of FBOs, he would tell his General Mangers not to put up with the non-paying habitual complainers. “It’s not worth it,” John explained. “I told my GMs to invite these types of customers to take a walk across the field. These folks are not really customers. I’d rather have my competition deal with these types of individuals so I can concentrate on wowing my really faithful, as well as profitable, customers.”

Giving up a customer sounds contrary to good business sense. But sometimes it is the best business decision. Your goal should always be to seek out and nurture long-term profitable customer relationships. They key word here is “profitable.“ 

I'd like to hear from you regarding how you handle these types of customers. Please email me at Ron@thejacksongroup.biz

Ron Jackson
Ron is Co-Founder of ABSG and President of The Jackson Group, a public relations agency specializing in aviation and FBO marketing. He has held management positions with Cessna Aircraft and Bozell Advertising and is the author of “Mission Marketing: Creating Brand Value” and co-author of “Don’t Forget the Cheese!” the ultimate FBO Customer Service Experience. 

Your Airport Lease: The Lifeblood of Your FBO

by John L. Enticknap

If you build that foundation… the business foundation, and the experience foundation, then the building won't crumble.—Henry Kravis

Like most FBO owners and operators, you probably wonder what your FBO is worth. To answer this question, you should start by asking another important question: What is my lease worth? That’s because they are inherently linked. 

If you are thinking about capitalizing your investment or looking to sell your business, the first thing a banker or a buyer will assess is the value of your lease, especially the length and terms. 

That’s why it’s such a critical component when figuring the intrinsic value of your FBO. You may have just put millions of dollars in building a fantastic infrastructure, but unless you have negotiated a long enough lease to amortize your investment, it’s easy to get upside down with little or no wiggle room. 

With a long-term lease of at least 20 or more years, you have great value. However, if you have less than five years you have little or no value. 

(Side Note: One of our most popular courses we conduct at the NATA FBO Success Seminar is “Developing a Favorable Airport Lease”. During this session we discuss many of the important elements of an FBO airport lease agreement. If you’re interested, the next one is in Atlanta November 8, 9 and 10. Contact NATA at www.nata.aero and look under Events, or call 800-808-6282) 

For the purpose of this blog, let’s hit a few of the highlights we discuss in our seminar.  

Length of Lease

First and foremost, the longer term you can negotiate the better. Let’s say you have negotiated a 20 or 25 year lease. You should also negotiate at least one additional option period of five years; two option periods would be even better. The goal should be to have at least 30 years on your lease including the option periods.  

It is not unusual to get longer terms at some airports for large investments in facilities. I’ve seen leases of 40 and even 50 years. ‘The Longer the Better’ should be your mantra. When you are negotiating lease extensions, try to get at least back to this sort of term. You’ll need it to finance capitol projects and have a reasonable depreciation term.  

However, in order to get this type of long-term lease, be prepared to invest in facilities and/or upgrades. Traditionally, the length of term is commensurate with a larger capital investment. 

Big/Commercial Airport Lease Terms 

So why are the big airports giving only five year leases and reliever and general aviation (GA) airports giving longer term leases?  

During the recently held Airports Council International (ACI)–North America meeting in San Diego, there was a session titled “Fixed Base Operators and Airports—Strategies for a More Successful Partnership”. A detailed discussion was conducted concerning lease term length. It seems there have been some divergent opinions between some airports and FBO’s concerning lease terms.  

At a few large airports, five year leases are all that have been granted. Some of the new FBO leases, included existing facilities, have high rental rates and gross revenue fees being paid to the airport authorities. In many of these cases, renovation of existing facilities was all the capital investment required by the FBO. Not surprisingly, General Aviation activity at these selected airports was not the priority for the airport authority. That’s because commercial airline operations took precedent at the vast majority of the operations. 

In all appearances, both the FBO community and the airport community had a very open and fruitful discussion at the ACI conference. The results being that both parties appear to understand the lease term issues from each other’s perspective.  

For the predominantly General Aviation airport sponsors, both parties understand that to get infrastructure built, a long-term lease is required. Fortunately, this was not difficult to appreciate. 

During a recent meeting I had with one Airport Director, he fully understood the issues for the FBO. He realizes that for the FBO to be successful--to provide the high quality services that the airport and customers desire and make a reasonable profit--the FBO must have a good lease with a good term.  

This practice will attract superior FBO operators who can make capital investments in hangars, new business operations and employees.  

The All-important Minimum Standards Clause 

This same airport director also mentioned that one of his first priorities, before commencing lease negotiations with an FBO, was the development of new up-to-date Minimum Standards provision to be inserted into the new lease. 

I’m sure that many (most) FBO operators have Minimum Standards written into their lease—at least we hope you do. Minimum Standards are your basic protection for your business. In addition to your lease, they allow your FBO to operate within defined parameters.  

Minimum Standards allow you to know

• What services you must provide 
• What services you may provide
• What defines a full service FBO  
• What your investment and facilities requirements must be  

More than what defines your business, Minimum Standards protects your business from inequitable competition. If another FBO wants to operate at your airport, they must provide the same services, the same investment and the same facilities.  

Since 1938, Congress has passed laws to improve safety and efficiency at Airports by, among other things, promoting competition among aeronautical users. This includes FBOs.  

In order to promote competition, the Sponsor Assurances lease provision prohibits any party from obtaining or maintaining an exclusive right to perform services at an airport, and requires Airport Authorities (also called Sponsors) to not unjustly discriminate against aeronautical users of the airport. Minimum Standards, therefore, are your safeguard. It allows for fair competition and makes sure that your FBO will continue to be successful. 

Other Lease Issues 

These two issues are just examples of important items an FBO lease covers. Here is a list of other issues we cover at our FBO Success Seminar regarding leases:  

• Term and option years
• Operating rights
• Payments: rental, gross revenue and out years to include escalators
• Building/ramp maintenance responsibilities
• Assignment-sale clause
• Termination-from FBO and Lessor
• Non-discrimination clauses
• Improvements, new buildings, renovations
• Insurance, Indemnity, Hold Harmless
• War & National Emergency
• Right of  Entry
• Environmental Liability 

The airport management and the FBO owners make success together for their mutual benefit. As we mentioned in our premise, the lease is your foundation, your value in the business and ultimately your protection. 

If you have a particular question or would like to discuss a lease issue, please let me know. We would like to hear from you. Contact me at jenticknap@bellsouth.net

John Enticknap

John Enticknap founded Aviation Business Strategies Group in 2006 following a distinguished career in aviation fueling and FBO management, including as president of Mercury Air Centers. He is the author of 10 Steps to Building a Profitable FBO and developed NATA’s acclaimed FBO Success Seminar Series.

Coaching Provides Valuable Seasoned Advice

At some point in our lives, we all need a little coaching to get through the task ahead of us.

I remember when my dad took the training wheels off my bike and encouraged me to keep the handlebars straight as he ran alongside on my first solo ride.

High school football and baseball coaches shaped the way I performed on the field and taught me valuable lessons about life along the way.

As a student pilot, my instructor coached me through turns and stalls and built up my confidence for the eventual solo flight.

After a couple of decades of developing marketing plans for companies such as Cessna and Fairchild Aircraft, I had the opportunity in the year 2000 to create a public relations campaign for the grand opening of a Mercury Air Center location in Burbank, Calif. My client was John Enticknap, who served as president of the 21-location FBO chain. 

I didn’t have a lot of experience in the FBO business back then, but under John’s tutelage, I’ve been spending the last 11 years soaking up his vast knowledge of the FBO business.

When John and I discussed starting an FBO consulting business together, I knew I had a partner that had a lot to offer the FBO community. So in 2006, John laid the groundwork for Aviation Business Strategies Group by outlining his vision for the fledgling company.

Vision of Helping FBOs

He told me he wanted to start a business that would help aviation service companies, FBOs in particular, become more profitable. His vision was to provide an affordable resource to the FBO industry through sharing, teaching and coaching.

As a basis for the new business, I suggested we put together a list of initiatives that would help FBOs run their businesses better and ultimately become more profitable.  There were several marketing projects that John and I worked on together for the Mercury Air Center chain that would make great white papers and teaching strategies.

The result was what we called 10 Steps to FBO Success. It was way more than “FBO Business 101.” It was the essence of years of real-life experience seeking solutions to problems that arise from operating an FBO.

One problem we attacked was the high cost of FBO insurance. After the Sept. 11, 2001, tragedy, insurance companies began dramatically raising FBOs’ premiums. Mercury’s insurance premiums for the 21 FBO locations were escalating exponentially.

We decided to create a strategy for lowering the insurance premiums by developing a better insurance story for the insurance brokers to evaluate. (This is one of the 10 Steps to FBO Success and a subject of one of the sessions we teach at the NATA-sponsored FBO Success Seminar.)

Under John’s coaching, I absorbed what insurance underwriters were looking for in terms of safety and security of all FBO operations. We took this information and built a comprehensive safety audit program. Part of this initiative raised awareness among FBO employees for the need for two wing walkers, especially for aircraft movements inside hangars.

We created some large banners and posters for display in the hangars and then conducted safety classes for employees on a regular basis. One of the banners exclaimed, “Don’t Get into a Tow Jam!” and a supporting poster listed all the steps to safely tow an aircraft.

As a result of this industry coaching initiative, hangar rash went way down, the level of safety went way up, and customers actually liked seeing the banners and posters as a reminder of how carefully the FBOs were treating their aircraft. And, by the way, insurance premiums started to come down.

The business coaching John gave me helped me in understanding what I needed to do to get my job done. It also helped FBO employees improve and FBO owners control insurance costs.

Who Can Benefit from Business Coaching?

Over the past several years, business coaching has come to mean a lot of different things. What I’m talking about is not a personal life coach, which is different from what a savvy business coach can offer an FBO.

FBO owners, operators and managers can benefit from a little or a lot of FBO business coaching. The best candidates for such coaching services are:

• Those seeking to improve FBO business performance and earn a better return on their capital investment.
• Those who are committed to improving the FBO operations and are thus unsatisfied with the status quo.

Working with a coach is normal for many. Musicians, tennis players and golfers, to name a few, work regularly with coaches to improve their performances. In the mainstream population, hiring a personal trainer is not uncommon.

Business coaching can be found through various channels. Find a mentor in your business you can bounce ideas off of, attend seminars and workshops, or even hire a professional coach. The goal is to improve the way we manage and to seek solutions to problems that plague the efficiency of an FBO operation.

Learning Opportunities

If you are interested in some seminars specifically for FBO owners, operators and managers, here are some opportunities:

Florida Aviation Trades Association Annual Meeting

On June 14, John will be a guest speaker at the annual convention for the Florida Aviation Trades Association (FATA) in Sarasota, Fla. Working pro bono, John will be teaching two sessions:

• Session 1: Risk Management & Claims Avoidance Through Better Operating Practices
• Session 2: Developing Your Own Third-Party Fuel Pricing Strategy

FBO Success Seminar

Those seminars are also part of the three-day FBO Success Seminar we will be teaching Nov. 8-10 in Atlanta during the NATA’s first FBO Fuel Summit. 

If you can attend either or both of these seminars, I would encourage doing so. These are opportunities to get some good advice from a seasoned professional.

If you would like to share a teaching or coaching story, please email me at Ron@thejacksongroup.biz.

Ron Jackson

Ron Jackson is co-founder of ABSG and president of The Jackson Group, a public relations agency specializing in aviation and FBO marketing. He has held management positions with Cessna Aircraft and Bozell Advertising and is the author of Mission Marketing: Creating Brand Value and co-author of Don’t Forget the Cheese!, the Ultimate FBO Customer Service Experience.