FBO Operations Tip of the Week: Maximize Your Profit Position
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By John L. Enticknap and Ron R. Jackson, Principals of Aviation Business Strategies Group
- Facilitators of NATA’s FBO Success Seminar and Authors of the forthcoming book: FBO Survival: 10 Tips to Keep Your Operations Lean, Mean & Profitable
As FBO operators and managers, one of the most important tasks to keep in mind is maximizing your profit position.
In order to accomplish this, we rely on a standardized fuel pricing method. We think it is fair to say most FBOs use either cost-plus pricing or mark-up pricing. Cost-plus means you want to make a certain “plus” above your cost. For example, your cost today is approximately $2.25 per gallon and you want to make $1.50 per gallon. Therefore, simple math puts the selling price at $3.75 resulting in a profit of 40 percent on sales.
For a mark-up pricing example where you want to make $1.35 per gallon, your selling price would be $3.60 per gallon, or just short of a 60 percent mark-up on cost.
Both of these methods are common in the manufacturing business arena. The variance in these two methods lies in the difference between margin and mark-up. This can be a lengthy discussion, but suffice it to say, a thorough understanding of your costs of operation to include labor, facilities, other income, overhead, etc., affects what margin you use to show a profit. This, in turn, allows you to calculate what mark-up percentage you must use to get to the intended profit level.
We discuss these fuel pricing methods in greater detail at our NATA FBO Success Seminar, which is scheduled for March 9-10 at the Sands Expo and Convention Center in Las Vegas.
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 B&CA Digest. 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 B&CA Digest titled: The FBO Connection. Ron@thejacksongroup.biz, Ph: 972-979-6566, www.absggroup.com