FBO Best Practices Series #8: Take Time to Develop Your Business Plan
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By John L. Enticknap and Ron R. Jackson, Aviation Business Strategies Group - ABSGgroup.com
- Authors of the forthcoming book: FBO Survival. 10 Tips to Keep Your Operations Lean, Mean & Profitable.
Welcome to our blog series on FBO Best Practices. With each blog post in this series, we’ll discuss “Best Practices” in running an efficient and effective FBO operation.
Best Practice #8: Planning, budgeting and sales forecasting. It’s not exciting; it’s not fun; but it’s essential to running a successful FBO operation.
Peter Drucker wrote, “The manager’s job is to keep his nose to the grindstone while lifting his eyes to the hills.”
We’re all guilty of focusing on the day-to-day grind and forget to look ahead and think, “what if?” Especially when the current business climate seems to be sucking us dry. Sometimes we need a little reality check.
Too often we seem to be obsessed with short-term results in our pursuit of business profit and management goals. If you have bankers, they want to see your monthly and quarterly results to make sure you can support your loan document covenants.
If you’re a public company, you have one eye on the stock market and the other on short-term forecasts. Then you have to listen to critical analysts. “Got to have positive monthly results,” they say.
Now is the time of the year most FBO operators are thinking about what’s going to happen next year. They dream of a 50 percent increase in retail fuel sales, a full maintenance shop, and the end to contract fueling. Now that’s a good dream! Right?
Reality Check
Not so fast. The order of the day is to do a realistic sales forecast that forms the basis for a rational budget. Too many businesses start the planning process based on how much money they are going to spend on budgeted line items. They basically warm over last year’s costs, adjusting here and there.
However, a solid sales forecast drives a solid budget. Base the sales forecast on company history, at least the past two years. Factor in the national and local economy, projected business aircraft flight hours, projected fuel costs, aviation and health insurance.
The fiscal budget is the short-term plan. Now, look to the hills and update the long-term plan. You might start with an examination of your airport lease agreement: Years left, rent increases, lease extension options, terms of extensions, requirement for major capital improvements. It just might be time to negotiate a lease extension.
Other items to review: Business expansion plans, new hangar funding, add to charter fleet, new tug and fuel truck, renovating the terminate building.
Problem is, all of these items compete for cash and capital resources. The trick is to provide a balance between producing current positive results and investing in the future.
This can lead to a confusing management exercise where FBOs find themselves switching between visionary goals, intense investment, “performance-oriented” goal setting and/or retrenchment. The larger firms can even find themselves changing management teams. Instead of keeping their nose to the grindstone, there is too much looking up.
Also, FBO owners must keep in mind that short-term strategies involving cost cuts may be short sighted and will not achieve short-term results or even meet long-term goals. Such as a 10 percent reduction in experienced labor, which can be self-defeating. We’ve even seen FBOs cut hangar rents below costs to attract new customers on the premise and promise of more fuel sales, which never come.
Our Recommendation
Here is a list of action items we recommend:
- Complete a realistic budget for the coming 12-month period.
- Do reviews of the actual financial results and compare against your budget.
- Develop and use metrics that can be used to measure your business.
- Use dashboard reports to look at your business on a daily basis.
For longer-term planning, ask yourself these questions:
- How do we add value to our services and existing customers?
- Who are our target customers and what is our value proposition to them?
- What additional capabilities can we add to our business that adds value for our target customers?
These are fundamental initiatives for current performance and future investment that should serve as a guide for the near future planning. The results should be more sustainable and the company should not have to sacrifice the future for short-term gain.
At our NATA FBO Success Seminar, we discuss these issues in depth as well as a comprehensive examination of FBO operations, marketing, training and best practices.
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Send us an email to Ron@thejacksongroup.biz or jenticknap@bellsouth.net and visit us online at www.ABSGgroup.com.
About the bloggers:
John Enticknap
John Enticknap has more than 35 years of aviation fueling and FBO services industry experience and has served as president/CEO of Mercury Air Centers, a network of FBOs he grew from four facilities to 21 locations. He has international FBO experience including opening the Royal Aviation Terminal in Kuwait. John has held executive management positions with DynAir Fueling and CSX Becket Aviation and holds a Bachelor of Science in industrial management from Northeastern University. He teaches the acclaimed FBO Success Seminar for the National Aviation Transportation Association (NATA) and is an NATA certified safety auditor. John is the co-author of the forthcoming book FBO Survival! Keeping Your Operation Lean, Mean & Profitable. He also writes an industry blog titled FBO Connection for Penton‘s AC-U-KWIK Alerts. He is an active ATP and CFI rated pilot with more than 8,100 flight hours; certified in both fixed and rotary wing aircraft. jenticknap@bellsouth.net, Ph: 404-867-5518 www.absggroup.com
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 customer service training. He has held management positions with Cessna Aircraft, Fairchild Aircraft and Bozell Advertising. Ron developed the strategic marketing communication plan and programs for Mercury Air Centers and consults with numerous FBOs in areas of marketing, promotions and customer service training. He is the author of Don’t Forget the Cheese! The Ultimate FBO Customer Service Experience. and co-author of the forthcoming book FBO Survival! Keeping Your Operation Lean, Mean & Profitable. He is a certified journalist and co-developed NATA’s acclaimed FBO Success Seminar Series. Ron writes an industry blog for Penton’s AC-U-KWIK Alerts titled: The FBO Connection. Ron@thejacksongroup.biz Ph: 972-979-6566 www.absggroup.com