FBO Connection

Follow Us





Pricing Your FBO for Sale

Don't Get into the ‘Multiple’ Trap

As we start to see a small ray of sunshine peeking out from behind the lingering recession cloud, we find some encouraging news in the industry. Flight hours are increasing, used aircraft are starting to sell, and we see a resurgence in the continued consolidation of the FBO industry.

In the last couple of months, we have witnessed chain operators sell a couple of locations and sell one location to a competitor. We also saw the sale of a small chain to a larger chain. Therefore, I pose the proverbial question in the manner Harvard Business School types might ask: Is it time to “harvest” your business?

Only you can determine this. But if you’re getting into the sell mode, here are few things to keep in mind as you move forward.

Begin with the Business Plan

I’ve been involved in many FBO sale transactions over the years — both buying and selling various properties. The first order of business should always be to review your business plan. If your plan is in order, it will reveal the goals and objectives you have set for your business, which will help in the valuation of your assets.

Business plans we write for our clients include a section on exiting the business. Here the plan details a positioning strategy designed to maximize the value of your business whether you plan to leave a legacy to your family, retire with an income or just cash in with an outright sale.

Various sections discuss topics such as:

  • A full- or part-time retirement scenario
  • A succession plan to leave in place a strong management team
  • Capital needs for the future
  • Possible changes in the airport environment
  • New business or personal opportunity
  • Time to “cash in” — business has peaked

As part of the asset evaluation, you should be able to quantify the following:

  • Current condition of your operating systems
    • Fuel operations
    • Accounting function
    • Facility maintenance
    • Ramps and hangars
    • Efficiency of employee team in place
    • Stability and diversity of your customer base
    • Measure of profitability
  • Airport lease considerations
    • More than 10 years left?
    • Upcoming capital requirements for lease extension
    • Current lease is assignable to a new owner
    • Liability after sale on business and environmental issues
  • Tax issues
    • Capital gains tax
    • Taxes on the sale
    • Get advice from tax experts
    • Review tax issues of buyer
  • Legal and regulatory issues
  • Current and proposed airport environment
  • Identifying potential buyers

Sale Price Considerations

When consulting with clients who want to sell their FBOs, one of the first things they ask is: What multiple should I go for? Of course, they are referring to what the industry has conditioned them to expect: the “magic number” times the earnings before interest, taxes, depreciation and amortization (EBITDA). Or is it another magic number, such as EBIT, gross profit or even revenue?

I understand where they are coming from, but I caution not to get hung up on the multiple issue. Throwing around multiples like 5×, 10× and even 15× can quickly become a mental trap that often gets in the way of a true valuation of the business worth.

As our premise for this article indicates, the selling price of your FBO is not about the earning multiple but quantifying many of the questions we asked above. Some recent deals that have been consummated have no multiple. So what does that mean?

As you get into the pricing of your FBO, it’s imperative that you do a full-scale presale evaluation in order to further define and determine the terms gross profit, net profit and EBITDA. Because the eventual buyer will be doing his own due diligence, it’s important you do your own in advance so you can better understand the buyer’s valuation of your business.

Although you, as the owner, can have an understanding of the worth of your business, ultimately you can’t dictate what it is worth. Only the market can do that.

Develop a Selling Strategy

What is important to remember, if you decide to sell your business, is to seek professional assistance to walk you through the process, to help you properly position your business for sale. Also, an experienced professional can help you channel your efforts by identifying and targeting potential buyers.

For instance, one strategy would be to sell to one of your immediate competitors on your airport if one exists. Past experience says this will most likely give you the best deal.

Selling to your competitor allows the buyer to gain one of the most important business success factors: pricing power. (This can be a subject on its own merit and will be dealt with in another blog.) Suffice it to say pricing power will significantly increase the valuation of your business but cannot be so much that you make the transaction noncompetitive.

Ultimately, there are many factors that enter into the valuation decision. Businesses are sold for many reasons, and all those reasons affect the selling price. What both buyers and sellers must realize is that a satisfactory business deal for both parties must be concluded. Translation: Negotiate!

A purchase and sale agreement reached by the parties, if they succeed in reaching one, will be the result of bargaining. Depending on the relative bargaining positions of the buyer and seller, the purchase and sale agreement might reflect either compromise or capitulation, and, as a result, a valuation reasonable to the parties will be reached.

So don’t let the multiple trap get in the way. The multiple of earnings doesn’t really count in the transaction.  

Keep the goal in mind. The mission is not to simply conclude a transaction. The primary mission is to sell the business at a satisfactory price while guaranteeing payment is received when it is wanted and the way it is wanted.

John Enticknap

Before founding Aviation Business Strategies Group (ABSG) in 2006, John Enticknap was president of Mercury Air Centers' network of 21 FBO locations and has held executive management positions with DynAir Fueling and CSX Becket Aviation. He is an ATP- and CFI-rated pilot with more than 7800 flight hours, certified in both fixed- and rotary-wing aircraft, and the author of 10 Steps to Building a Profitable FBO.


Building Long-Term Profitable Customer Relationships, Part 2: Do You Feel Lucky?

While my business partner, John Enticknap, reveals in his blog posts the methods and tools used in building a more profitable FBO, I’ll be writing about the often overlooked but equally important process of building long-term profitable customer relationships.

My first blog on this subject, Part 1: Are You the Restaurant Owner? was published on Feb. 10.

The following is the second installment:

Part 2: Do You Feel Lucky?

We’ve all seen Clint Eastwood’s Dirty Harry scene when he aims his seemingly empty .44 Magnum, “the most powerful handgun in the world,” in the face of the bank robber and taunts, “You’ve got to ask yourself one question: ‘Do I feel lucky?’ Well do ya, punk?”

FBOs shouldn’t have to feel lucky when putting together their marketing plans to attract new customers, yet during our NATA FBO Success Seminars, I often sense the frustration FBO owners and operators verbalize when we discuss this very subject.  

Over the years, FBOs have tried all sorts of things to attract customers. Wine, steaks, bobblehead dolls, free this and free that. Sometimes they get lucky, but mostly they’re just shooting blanks!

Many FBOs, when facing seemingly stiff competition, have done the unthinkable to attract customers. They resort to lowering their price of fuel beyond reason. Yikes! 

To be sure, an FBO should always manage its fuel price in order to be competitive and as a component to provide a customer value proposition (CVP). However, nothing good happens when you subjectively lower the price of fuel just to attract customers.

Attracting the Wrong Customer

Besides messing up your profit margin when you arbitrarily lower your price of fuel, you ultimately attract the wrong customer.

Are there really wrong customers in this trusty world of general and business aviation? You bet your .44 Magnum there are.

In my first blog, I wrote that the lifeblood of any FBO is building loyal customer relationships. The success of these relationships can be measured in two ways:

  1. Are they long-term, and
  2. Are they profitable?

When you randomly lower fuel prices you get neither long-term customers, nor profitable customers. What you get are bottom feeders, looking for the deal of the day. They tend to flit from one deal to the next. Sure, you may increase your fuel volume for a short period of time, but over the long haul, you’ll be scratching your head, wondering where these newfound customers went.

If you divide your available customer base into thirds, you’ll probably find the following:

  • Upper third: Extremely loyal, likes your FBO, knows a good value and pays a fair price for fuel.
  • Middle third: Although loyal, is value-conscious, wants a good deal and keeps you on your toes to make sure this value is received.
  • Lower third: Bottom feeders. Price is everything. Complains about everything. Flits from one FBO to the next. Famous catch phrase: “What have you done for me lately?”

So where should your focus be? Which piece of the pie do you want?

First of all, getting Loyal customers to leave their present FBO is probably not going to happen in the short term. You may flirt with them a little, but getting a loyal customer to try something new is very difficult. An FBO competitor would have to stub its toe pretty hard to get a loyal customer to leave.

(Note: If you currently have a core of loyal customers, make sure you don’t lose them. Remember why they came to your FBO in the first place, and do everything you can to take care of their needs, wants and desires. Be the restaurant owner.)

Second, more than likely, you’ll get most of your customers from the Somewhat Loyal group. If you are looking to expand your loyal customer base, go fishing in the green pond, not the Bottom Feeder pond.

The Customer Value Proposition (CVP)

So how do you attract these Somewhat Loyal customers to your FBO? Give them a sense of delivering a real customer value proposition (CVP). Done properly, the CVP is the right combination of clean and attractive facilities, fair fuel prices/fees, and good old-fashioned knock-your-socks-off customer service. (We’ll further explore the CVP in another blog post.)

Lastly, it’s critical you get the word out about your CVP. And the way to do that is to deliver it consistently to every customer with whom you have contact. Let them soak it up and remember it, and they will faithfully spread the word.

The general aviation industry is relatively small compared to other industries. Word-of-mouth is a very strong channel of communications, and if you are “lucky” enough to have a customer recommend your FBO to another potential customer, you’re on your way.

Someone once told me you create your own luck, that luck is really the result of working hard, of doing something right consistently over the long haul.

I think that’s pretty good advice.

Next Blog: Building Long-Term Profitable Customer Relationships, Part 3: Don't Forget the Cheese!

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 is the author of Mission Marketing: Creating Brand Value and co-author of Don’t Forget the Cheese!, the ultimate FBO Customer Service Experience.


Optimizing Your FBO, Part 1: Pay Your Front Line Employees More

“Hire the best. Pay them fairly. Communicate frequently. Provide challenges and rewards. Believe in them. Get out of their way and they'll knock your socks off.”

-- Mary Ann Allison,
American scholar and futurist

During our FBO Success Seminars we put on for the National Air Transportation Association (NATA) we do a segment called Optimizing Your FBO, particularly helpful during downturns in the marketplace.

By "optimizing," I’m talking about the decisions you make as an FBO owner or manager that can have a positive effect on your physical operations as well as your bottom line.

Often, when FBOs, and other businesses for that matter, are faced with an economic downturn, one of the first places they look to make cuts is their payroll. That might work if you are operating a clothing or grocery store, but take a moment and think about the time that has been invested in training your employees, especially the ones who are out there on what I call The Front Line, marshalling, fueling, and, most importantly, meeting and greeting customers.

These are the employees who have built a relationship with your customers. There is a certain amount of trust and comfort that a flight crew feels when someone familiar is handling the company’s most prized possession, the corporate jet. And if you are looking to increase your fuel sales at the point of transaction, who is in a better position to positively influence the sale: you or the line service technician or CSR?

If we are relying on them to be our front line sales force, why do we, as a group, pay them the least? In retrospect, we should be thinking about paying them more, not cutting back their hours, pay grade or even laying them off.

Ouch! We know this sounds counterintuitive, but let’s step back and look at your business.

Analyze Your Business

For the past several years, we have all seen the significant reductions in fuel sales, lower operations and the serious advent of contract fuel suppliers. These events, much out of our control, have reduced operations, margins and the number of hangar and based tenants. As good managers, we have been trained to analyze our business models, reduced expenses, cut capital improvements and prudently operate our business to maximize revenues and minimize our expenses.

From personal experience, I have seen owners of top-rated FBOs out on their ramps parking airplanes; owners doing what they need to do to continue in business. Yes, fuel sales have dropped on the average of 25 percent to more than 50 percent and more in some cases. No doubt some FBOs will not survive this downturn. So what can we do?

Invest in Your Employees

The key ingredient to your service business is to give the best service. This is not rocket science! We should invest in our employees; not only with a reasonable living wage and benefits, but also to provide a good foundation, training and support to be successful.

When you invest in people, they respond and perform well. In the book Profit at the Bottom of the Ladder, author Jody Heymann presents a “well documented lineup of businesses that have flourished in large part because their management practices include respecting and empowering their lowest paid workers.” For example, Jenkins Brick, a major U.S. brick manufacturer in Alabama, credits higher wages and profit-sharing with increased productivity and quality, as well as reduced turnover and fewer accidents.

Along with paying your front line team a livable wage, train them, and respect them. They will pay you and your business back by taking care of your customers. Ultimately, the customers will welcome the attention.

We know what you’re thinking: “This is a simplistic magic formula.” Of course not! It takes a constant balance of monitoring your business, your team and your customers. But the evidence is clear, pay your employees a living wage, train them, challenge them, and respect them.

And then get out of their way, for they just might knock your socks off!

Next blog post on Optimizing Your FBO, Part 2: Cross-Train and Outsource

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.


Building Long-Term Profitable Customer Relationships, Part 1: Are You the Restaurant Owner?

As part of the FBO Success Seminars we conduct for the National Air Transportation Association (NATA), we discuss how to attract the right kind of customers and how to keep them coming back. 

While my business partner, John Enticknap, reveals in his blog posts the methods and tools used in building a more profitable FBO, I’ll be writing about the often overlooked but equally important process of building long-term profitable customer relationships.

The following is the first installment:

Part 1: Are You the Restaurant Owner?

The lifeblood of any FBO is building loyal customer relationships. The success of these relationships can be measured in two ways:

Are they long-term, and are they profitable?

Studies on consumer behavior show a loyal customer:

  • Keeps coming back
  • Is willing to pay more, thus providing better margins
  • Loves your FBO and tells other pilots, aircraft owners/operators
  • Lowers your customer “churn” rate — you don’t have to replace a satisfied loyal customer
  • Boosts your long-term revenue and prevents profit erosion so you outperform your competitors

In the end, the effort we put into building these kinds of relationships will pay high dividends year after year, so let’s examine the process.

Company Culture and Service Deliverables

Every FBO is unique in its approach to delivering its own brand of customer experience. You should have an idea of your company culture, which is the tone and demeanor by which your customer service is delivered.

Are you warm and fuzzy; cold and unapproachable; or somewhere in between?

Your customer service deliverables are the things you do every day to ensure a great customer service experience, including a provision for the safety and security of the customer and its aircraft.

And it’s not just having these policies and procedures in place. It’s how you choose to carry out the delivery to your customers. Thus, your corporate culture dictates how you deliver services to your customer.

Draw from Your Own Experience

Observe the workings of your favorite local restaurant — not the chains. If you frequent one particular restaurant, chances are the host or hostess knows your name, and the server knows your favorite drink and meal. “The usual, Mr. Jones?”

Chances are the owner or manager is on site and makes the rounds to the tables, checks on the quality of food and service, and personally thanks the customers for their loyalty.

And chances are you have a consistent dining experience and recommend the restaurant to your friends.

Another experience to draw from is when someone moves into your neighborhood. Chances are you or someone will recommend the following:

  • Favorite barber/beautician
  • Favorite car mechanic or service station
  • Personal doctor/hospital system
  • Favorite grocery, hardware store or clothing store
  • Plumber, electrician, pest control company
  • Church or social club

Why Do We Recommend?

Never underestimate the power of recommendation. We do it all the time without really paying much attention to the impact it has on our lives and the decisions we make.

For most of us, when we recommend a product or service, it’s really a way of validating our own process of selection. We all think we make good choices, and having someone else follow our recommendation is affirmation — it boosts our ego, makes us feel good!

We recommend product and service providers because:

  • Their product or service is excellent
  • We’ve always had a good experience
  • We trust them; they offer good value
  • They boost our ego; they know our name
  • They may even know our children’s names, their birthdays
  • We might even consider them a friend

That’s how we should view and nurture every FBO customer relationship we cherish. Know each customer has the power to cast a vote, the power to recommend.

An Investment in Time

Building long-term customer relationships is a process. It’s an investment in time. It’s hands-on customer care and a commitment to understanding a customer’s needs, wants and desires.

At the end of the day, ask yourself, are you the restaurant owner?  Have you made the rounds to the customer lounges, asked if everything is all right, thanked the customer for the business? Have you taken the time to check your FBO for cleanliness, listened to how your employees treat a customer and walked the flight line?

Lead by example. If your employees see you do this, then chances are they will also take ownership — ownership of the customer service experience — thus helping build long-term profitable customer relationships.

Ultimately, you should be able to go up to any customer and ask the question, “Would you recommend our FBO to other pilots, aircraft owners/operators, and schedulers and dispatchers?”

If the customer is hesitant to answer the question and doesn’t say yes right off the bat, you have some work to do.

Next Blog: Building Long-Term Profitable Customer Relationships, Part II: Do You Feel Lucky?

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 is the author of Mission Marketing: Creating Brand Value and co-author of Don’t Forget the Cheese!, the ultimate FBO Customer Service Experience.


FBO Fuel Pricing: Seeking a Silver Bullet

Ever since the Lone Ranger first loaded his trusty six-shooter with silver bullets, I’ve been intrigued with the idea of formulating a single straightforward solution for pricing fuel at FBO operations I’ve managed over the years.

This search for the silver bullet is a subject we discuss at our FBO Success Seminars, and FBO managers in attendance often voice their concerns about how to effectively price fuel. On one hand, they’re concerned about the bottom line. On the other hand, they don’t want to price themselves out of the market and lose valuable customers in the process.

Indeed, it’s a two-edge sword. The trick is to maximize both cutting edges. Let me explain.

Maximize Your Customer Value Proposition

FBO managers are no different than any other business manager that sells a service or product. The same rules apply. Every FBO sells fuel — both Jet A and 100LL are the same specifications from all the manufacturers — so trying to differentiate your business on product is almost impossible. Same goes for quality control: Either it’s done well, or you’re going to be out of business.

What you need to look at is maximizing your Customer Value Proposition (CVP) — the facilities, the delivery (customer service) and the selling price. We’ll discuss the delivery aspect in future blogs. For now, let’s concentrate on the one factor many managers forget, or do not consider enough, and that’s the pricing equation, which requires putting some effort into research and calculations.

So let’s do the math. There are generally four types of pricing:

  • Cost-Plus pricing
  • Demand pricing
  • Competitive pricing
  • Mark-up pricing

Before we decide which type of pricing methodology we use, we need to determine our costs. We need to know what it costs to get the fuel truck with clean fuel to an aircraft on our ramp with a trained line service technician. (Let’s not get into a discussion here on fixed and variable costs. That’s another blog.)

Next, let’s look at our fuel cost from our supplier, including mark-ups over Platts (or rack price), plus transportation, plus fed taxes, plus flowage fees, plus state fees (not sales tax) and any other local fees. In today’s marketplace, that number is greater than $3 per gallon for Jet A.

Now we need to look at your cost of labor and overhead and covert the number to a per gallon rate.

After that exercise, let’s say we have our fuel cost at $3.10 and our cost of labor and overhead of $0.55 per gallon. So our cost is $3.65/gallon. (This example is for Jet A.)

But before we start talking about which pricing method to use, we need to do some research on your FBO marketplace. If we look at various publications and web sites, like, we can determine local and national fuel selling prices.

One current survey for national and regional pricing shows the following:

  • Average high selling price: $6.66/gal. (range of over $7 to just under $6)
  • Average low selling price: $3.64/gal. (range of over $5.40 to a low of $3.16)

This translates to a national average selling price of $5.05. In addition, find out what the local posted fuel pricing is at your competitor FBO and within a 50-mile radius of your base.

The other research question you need to tackle is: What are the contract fuel selling prices in your local area? Once you have this data, then we can look how we put a retail price on the fuel.

Maximize Your Profit Position

One of the most important tasks we must keep in mind is maximizing our profit position.  Profit is our friend. Profit is our goal.

In order to maximize our profit position, 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 is $3.65, and you want to make $1.00 per gallon. Selling price would be $4.65; a profit of 21.5 percent on sales.

Mark-up pricing, on the other hand, says you want to make $0.90 per gallon. Your selling price would be $4.55 or just short of a 25 percent mark-up on cost.

Both of these methods are common in the manufacturing business arena. The difference in these two methods lies in the difference in 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, which in turn, allows you to calculate what mark-up percentage you must use to get to the intended profit level.

Demand Pricing

We might suggest a demand pricing method. Service industries use this pricing methodology consisting of:

  1. Labor & Material
  2. Overhead and
  3. Profit.

You start by knowing what goal you have for gallon sales for the month. Establish your competitive average sale price within the range of the market of, say, 50-100 miles. Look at your fuel sales, each day, each week, and adjust your pricing on a daily, monthly or discount-per-individual-sale basis to meet your goals at the end of the month. Keep in mind, of course, what your financial break-even point is so you don’t end up selling for below cost. Demand pricing models are very complex and are used by firms such as airlines, cruise lines, freight carriers and others who sell perishable services.

Competitive Pricing

Competitive pricing comes into play with the contract fuel market. This trend has accelerated in the last couple of years. It has led to decreased margins on fuel sales. Has it increased your fuel sales to make up for the lost margin? That is always the claim from the contract fuel suppliers, which now include the major retail suppliers — a building dilemma for the FBO. At the FBO Success Seminars, we have a complete class on this important issue.

What’s Your Silver Bullet?

In the end, the Lone Ranger always prevailed and got his man. He did his homework, scouted the trail and, of course, he had his trusty six-shooter loaded with silver bullets.

For the FBO owner and manager, the silver bullet is knowledge. Know your customers, and know your business. It’s a thorough and detailed understanding of your FBO cost structure.

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.